Set-asides are a double-edged sword

Small government contractors are frequently afforded theopportunity to bid on set-aside contracts. This allows for afaster growth curve and in some cases may be the onlyway to enter a market dominated by larger, entrenchedcompetitors.But limiting opportunities only to thosein the set-aside contract arena can curtail acompany's long-term potential. Firms thatrely on their disadvantaged status as theirkey differentiator and don't develop othercompetitive advantages will limit theirgrowth and, possibly, set themselves up forfailure when their eligibility for such contractsexpires.Some government agencies and othercompanies view set-aside programs as anaffirmative action program for companiesthat do not have the business acumen tocompete on an even playing field withother nondisadvantaged firms. This makesit even harder for the good small businessesto be recognized for their skills if theirpublic image showcases their disadvantagedstatus.Companies graduate from the8(a) set-aside program afternine years, and both 8(a) andservice-disabled, veteran-ownedsmall businesses will no longer qualify forbidding on set-aside work if they exceedspecified size standards. There are numerouscases of disadvantaged companies thatwon enough set-aside contracts to outgrowthe size limits, then couldn't win enoughbusiness without the set-asides to maintainthe growth and had to cut back.By their nature, smaller firms haveunique and competitive characteristics thatcan be used more effectively than by simplypromoting their disadvantaged status.More often than not, such companies canidentify customer opportunities and issuesquickly and respond faster to them thanlarger contractors can respond.Bigger firms usually require that decisionsbe made in a more bureaucraticfashion with longer response times andgreater aversion to business risks. Smallertechnology and research and developmentcompanies can bring an innovative technologyor unique research to bear that alarger firm might ignore because of conflictswith the strategic direction of itsproduct line or perceived inability to generatesufficient profits.Smaller companies can also often competefavorably with larger ones on price,but they must be careful. If a small firmcontinually seeks to be the low bidder bynot pricing for sufficient overhead, it willeventually come to a point where it doesnot have the infrastructure to support anyadditional growth. It will not have the profitsto build that needed infrastructure.In the same vein, smaller companiesmust look for what they can offer beyonda competitive wage. These organizationswill make great strides to attract top talentby trying to find out what peoplewant in life. For some, it's gaining publicrecognition, but for others, it might betaking time off for family, having theopportunity to work with cutting-edgetechnology. A smaller firm can often bemore flexible than a larger firm withregards to working hours, telework andbenefits.A company should plan for long-termrevenue growth without relying on setasidecontracts from the beginning, notafter it has graduated from that status.Developing specific expertise, a talentedteam, market niches, technologies, intellectualproperty and products are critical toany successful business.A disadvantaged firm that focuses on thebusiness basics and actively seeks revenuesfrom non-set-aside contracts will be wellpositioned for growth after the loss of itsdisadvantaged status.