Small businesses win big bucks on NetCents

In just one year, the Network-Centric Solutions program has brought a windfall of $429.7 million to the eight prime contractors allowed to bid on the work.

And while it should come as no surprise that the four large systems integrators on the contract ? Northrop Grumman Corp., Lockheed Martin Corp., General Dynamics Corp. and Booz Allen Hamilton Inc. ? have scored to the tune of $223.4 million, the four small-business prime contractors have more than held their own against these industry giants, earning 48 percent of the dollar value of projects awarded.

The Centech Group Inc., Arlington, Va.; Multimax Inc., Upper Marlboro, Md.; NCI Information Systems Inc., Reston, Va.; and Telos Corp., Ashburn, Va.; have pulled in $206.3 million as prime contractors. In addition, the large companies have subcontracted to small businesses for another $44.7 million of work. In one year, NetCents contracts to small businesses have been worth $251 million, according to Cyndi Crews, NetCents contracting officer.

The Defense Department created NetCents as a five-year, $9 billion, indefinite-delivery, indefinite-quantity contract to provide the Air Force and other federal agencies with IT products and services. In September 2004, the contract was awarded to eight prime contractors.

Small businesses are also winning more in total number of task orders than their large competitors, 63 percent to 37 percent for the large primes.

To date, roughly 3,000 task orders have been issued under NetCents, and about 500 of those were small-business set-asides. The rest were full and open competitions, Crews said.

The success of the small primes should come as no surprise, said Ralph Buona, vice president of business development for Telos.

"The four companies that did win have very powerful proposal machines that can almost rival the machines of the very big integrators," Buona said. "And we're not novices to competing with those big companies. We do it outside of NetCents."

The small companies also have strong business development, capture, sales, marketing and proposal operations, he said.

"We're winning more often than not when we go head-to-head," Buona said.

Being small can be an advantage, Buona said. Often, other small businesses with contracts that are being moved to NetCents will come first to one of the small primes to strike a deal to stay involved with the project, instead of losing the work when it gets re-bid, he said.

"Frankly, they're a little bit scared that the big guys are going to try to cut into work that has been traditionally theirs," Buona said. "So more often than not, they come to us first to try to work with one of us small businesses."

Telos' team has grown from 25 partners to 60, bringing in new business. Close to 75 percent of the NetCents contracts Telos has won have been with new customers, many in new lines of business, such as telephony, Buona said.

Centech has even created a Web site where potential partners can register work that they think is headed to NetCents, said Jim Tindell, senior vice president of Air Force operations at Centech.

"Once they register it, then we can start marketing those customers ahead of time, so that helps us a lot," Tindell said.

Marketing and staying ahead of bid announcements have proved to be crucial in winning NetCents contracts, Buona said. Major Air Force commands have been the driving force behind nearly two-thirds of the dollars spent under NetCents, he said, and that's where Telos has focused much of its promotion.

Telos officials have traveled to each of the Air Force's major command headquarters and tailored their pitches to work known to be on the horizon. That strategy has worked wonders, Buona said.

"If we wait for them to come out [with proposals], we're already too late to win the deal," he said. "We're way out in front. We forecast the deals. We go to every [major command] to try to forecast deals, and then we try to position very, very early on the deals so that we can position ourselves to win.

"We're not going to win every time against these big guys," he said, but we're winning half the time, and that's a good thing."

Being small has other advantages, said Ray Bjorklund of market research firm Federal Sources Inc., McLean, Va.

"Small businesses frequently have lower overhead costs and are more agile in responding to customer needs," Bjorklund said. "For much of the work envisioned in NetCents, the capacity of corporate is less of an issue. Thus, the company that can do a job more quickly and at a lower price is likely to fare better in the competition."

So far, roughly 70 percent of all NetCents contracts have been for products, and 30 percent have been for services or networking solutions.

But that is starting to change, and Buona said he sees more solutions and enterprisewide projects coming in 2006.

Telos is tracking two major opportunities for a telecommunications management system and a vulnerability lifecycle management system. Both would be implemented enterprisewide across the Air Force. Buona said the vulnerability project is worth tens of millions of dollars, if not much more, depending on yet-to-be defined requirements.

Whatever projects come up for bid in 2006, the four small prime contractors will continue their avid chase.

"They've been very successful," Crews said. "I think it shows that, given the opportunity, small businesses do very well in the government sector. And that's probably true outside the government sector as well."

Staff Writer Ethan Butterfield can be reached at ebutterfield@postnewsweektech.com.