Compiling the Numbers
SBA Program Continues to Benefit Small Infotech Firms By Patrick Seitz
Even as the Small Business Administration's 8(a) program comes under increasing political scrutiny, it is still providing a strong business base for many small firms, industry officials say.
The top 25 information technology companies in the 8(a) program received prime contract obligations totaling more than $1.03 billion last year, according to a new report by Input, the Vienna, Va.-based market research firm. That is an 11 percent increase over fiscal 1995 totals in which the top 25 IT-related companies received about $933 million in contract obligations.
In fiscal 1996, the 8(a) program steered agency contracts worth $6.7 billion to 6,115 companies,
according to SBA officials. Authorized by Section 8(a) of the Small Business Act, the program is designed to assist small, socially and economically disadvantaged businesses, including those owned by minorities and women. The program extends to these firms federal government contracting preferences in the form of set-asides and restricted competitions.
Last month, the Clinton administration recently proposed changes to the 8(a) program that would greatly expand the number of white women entrepreneurs eligible to participate; provide 8(a) firms more leeway to team up in bidding on large contracts; and create a mentoring program, in which larger firms can work closely with 8(a) companies. The proposed changes, issued Aug. 14, are now out for public comment until Oct. 14. The SBA will review those comments before issuing final rules, said Roy Jenkins, an SBA procurement analyst.
Such changes will help the program's long-term viability in the face of growing political and legal challenges to federal affirmative action policies, industry officials say.
"They are trying to broaden the [8(a)] program to be more inclusive," said Norman Berthaut, vice president of Input. The administration is liberalizing the program to make it more politically acceptable, he said, even changing its name from a "minority enterprise program" to a "business development program."
Fernando Galaviz, president of The Centech Group Inc. of Arlington, Va., and vice chairman of the National Federation of 8(a) Companies, Arlington, said the new rules should strengthen the program. However, he worries that de-emphasizing race could be a mistake.
"Now the question is: Is it good for the country to have diversity in federal contracts? ... It is not in the country's interest to become lily white from our perspective," Galaviz said. It took race riots to start these programs, he said, adding that he hopes the pendulum doesn't swing too far and force a new uprising.
Galaviz said minority-owned businesses only get about 3 percent of federal contract dollars, even though minorities make up 26 percent of the U.S. population.
The 8(a) program is not solely a race-based program anyway, Galaviz challenged. Companies must prove a social and economic disadvantage to qualify, he said, noting the 18 companies in the program that are owned by white men or women.
Jon Stout, executive vice president for operations at DPC Technologies, an 8(a) company based in Gaithersburg, Md., said the program remains "extremely relevant" despite federal procurement changes that have fostered such contract vehicles as General Services Administration schedules and governmentwide acquisition contracts.
"There are still significant 8(a) dollars set aside," said Frank Derwin, senior vice president in charge of business development at DPC. His systems integration and IT company, which does two-thirds of its business with the intelligence community, sees the 8(a) program as a marketing tool, which provides a way to ease the procurement process for customers.
Patricia Wahying Stout, DPC's president and chief executive officer, said 8(a) status alone does not guarantee success. It provides a launching pad for marketing efforts, she said. DPC received $60 million in revenue last year, of which about 30 percent was from 8(a) contracts. The company is 51 percent owned by Patricia Stout, a Chinese American.
Input's Berthaut said the 8(a) program has been productive in helping small companies develop vendor skills useful in the federal government marketplace.
While procurement reforms have favored large companies, a GSA proposal on modular contracting bodes well for the 8(a) program, Berthaut said. It proposes to break large contracts into smaller chunks, implemented in stages, instead of large complex contracts, which can take years to implement.
The military continues to dominate 8(a) spending on information technology. The Navy was ranked No. 1 in IT spending on 8(a) contracts, with $634.5 million in fiscal 1996, followed by the Army, with $623.4 million, according to the Input report.
Compiling the Numbers
Ranking companies based on government statistics can be a tricky exercise, with a number of variables and limitations to consider.
This list of the top 25 information technology 8(a) companies is no exception. Compiled by Input Inc., a Vienna, Va.-based market research and consulting firm, the list is based on statistics from the federal government's fiscal 1996, which ended Sept. 30, 1996.
Companies are ranked according to contract obligations - the amount the federal government has agreed to pay for a specified product or service. This does not necessarily indicate the amount of money spent or the potential value of a contract.
Input obtained its figures in a computer analysis of General Services Administration data.
The executive branch of the federal government is required to report actions on contracts exceeding $25,000 to the GSA's Federal Procurement Data Center. The agencies categorize the kind of work being performed by assigning it a product service code.
The ranking is based only on prime contracts, so subcontract dollars that go to a company are not counted. The list also does not include 8(a) contract amounts less than $25,000, nor does it include classified business with the intelligence community.