Is the government market in a new era of feudalism?
Gettyimages.com/May Lim
By
Nick Wakeman
The proliferation of self-scoring evaluations has led to a world where small businesses must tie more of their future to large business partners in a joint venture. Is that what everyone should want?
For several years now, the government has been using self-scoring mechanisms as a tool to evaluate proposals on large contracts.
Bidders have to answer a questionnaire of sorts. Give yourself 10 points for each similar project you’ve done. Ten more points for projects exceeding $100 million in value. Companies can assign themselves other points for systems and certifications you and teammates may have. The list of possible points can be very long and diverse.
After submitting the score, you are pretty much at the mercy of the agency handling that contract.
The agency has point threshold to surpass before you move on to the next phase of the evaluation. The threshold can be a source of controversy, as seen in the National Institutes of Health's CIO-SP4 IT contract that we’ve covered extensively.
One main advantage for the agency is in how they can quickly pick a subset of proposals to fully evaluate. Not reaching the threshold means you are out of running. Your proposal doesn’t even get read.
Meeting or exceeding the threshold means your proposal moves on to face more detailed evaluation.
The self-scoring mechanism makes sense when considering the volume of work in all procurement shops and their workforce shortages that are not new, but also not getting better and perhaps getting worse.
Self-scoring is a quick way of picking winners and losers. It frees procurement officials to focus on meatier and more subjective parts of the evaluation process.
But there is a dark side and particularly for small businesses.
I’ve heard multiple complaints that the self-scoring mechanism puts small businesses at a disadvantage because many of them don’t have the back-office systems in place that the evaluations are asking for, such as pricing and cost systems. Small businesses also may lack enough past performance examples to get enough of those points to advance throughout the evaluation.
The answer for many is to form a joint venture and/or enter a mentor-protégé relationship with a large business. These relationships let the small business use the experience and qualifications of their large business partner in a self-scoring submission.
In some cases, a small business submits just one example of a project they worked on and multiple examples from the large business partner.
Small businesses are required to own at least 51% of a mentor-protégé joint venture, but most of the true power lies with the large business partner because of what they bring into the relationship. Without a large business partner, the small business likely won’t be able to submit any kind of bid.
Many executives have described that power dynamic to me as a “feudalism.”
The small business is forever locked into a relationship with the large, and will remain beholden to that larger business for years and years. As the prime, the small business has to make sure enough business goes to the large business to keep them happy and engaged in the relationship.
Small businesses can grow and thrive through many approaches. But to some extent, they remain at the mercy of the large business.
That dependence can limit growth opportunities and the ability to develop as an independent company. Isn't the latter what the government wants from its small business programs?
The ship has sailed as far as the self-scoring evaluations are concerned. It will take another controversy other than that involving CIO-SP4 to break the stranglehold they have on the procurement process.
Once seen as an innovative procurement tool, self-scoring seems to now be an albatross.