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May 2013:

Fluid Federal Strategies as Primes, Subs and Team Members

May 6, 2013

Posted in: News

The old rule of thumb in government contracting was that prime contractors were always large businesses, subcontractors were always small businesses and a team was only appropriate in baseball or football.

As recently as five years ago, one was safe operating under that assumption. But business has changed dramatically and, today, successful businesses are prepared to wear multiple hats in the new federal contracting market. Now, a small business may be a subcontractor on contract No. 1, a prime contractor on contract No. 2 and a team member on contract No. 3, all of which are running simultaneously.

What may be even more confounding is that, on the flip side, the typical large business may serve as a prime contractor on contract A, but also could serve happily as a subcontractor on contract B and a team member on contract C.

There are multiple motivators behind this drastic change.

Doing More With Less

Federal spending has grown from about $220 billion in 2000 to more than $550 billion last year. During that time, the acquisition workforce has shrunk from more than 100,000 people to fewer than 40,000. Even with budget cuts and sequestrations, the end result is that individual contract size has grown because there are fewer people to administer the contracts.

$1B Small Business Contracts

Instead of $5 million, $20 million or even $100 million individual contracts, the federal government is competing multi-billion-dollar contracts, and some of those gigantic contracts are set aside for small businesses to be the prime contractor. One recent award was through the Department of Homeland Security, where 29 small businesses were prime contractor awardees for a six-year, $6 billion-dollar-plus contract.

Another example is the Department of Health and Human Services CIO-SP3 SB contract, a 10-year, $20 billion ceiling, multiple-award contract awarded to more than 90 small businesses.

This scenario is in place because the federal government has a mandate to spend 23% of its contracting dollars with small businesses nationwide. Yes, large businesses still win more than 77% of the business, but 23% of $500 billion is more than $115 billion per year, and that’s a huge market in anyone’s book.

In most instances, when a small business wins as the prime contractor, it is required to self-perform 51% or more of the contract. However, it may be allowed to subcontract 49% to any business, large or small. This is why large businesses may be content to be a subcontractor, as garnering 49% of something is much better than getting 100% of nothing.

Teaming

Teams are relatively new to the federal marketplace. When pursuing the mega-contracts noted above, no one small business can self-perform the entire contract. If it could, it would not be small. Therefore, teams of companies are often formed to compete for and win contracts.

Often, these team members have privity with the government agency and are paid directly for the work performed or products provided. Successful companies will plan for a three-pronged strategy in this ever-evolving market; switching between the prime, subcontractor or team member hat then depends on the needs of the upcoming contract.

Check with the winning contractors noted below for subcontracting and teaming opportunities on these, among other, upcoming contracts.

• Airtec Inc., California, won a $12.5 million contract from the Naval Air Warfare Center for intelligence, surveillance and reconnaissance services in support of the Army’s Southern Command. www.flyairtec.com/index.php/airtec-contact

• All About Town, Clinton, won an $870,104 contract from the U.S. Department of Veterans Affairs’ North Florida/South Georgia Health Care System for valet services. www.allabouttown.net

• BAE Systems Technology, Solutions & Services, Rockville, won an $85.5 million contract from the Army Space and Missile Defense Command for research, development, test and evaluation services in support of the Future Warfare Center. www.baesystems.com/article/BAES_019988

• Eclipse Group, Annapolis, won a $22,879,990 contract from The Naval Undersea Warfare Center Division for operational and logistics support for ocean testing and related at-sea projects. www.eclipse.us.com

• Grunley Construction Co., Rockville, won a $43,594,000 contract from Washington Headquarters Services for construction services, including designing and building, to modernize the west power plant at Raven Rock Mountain Complex in order to meet 2N redundancy requirements. www.grunley.com/about/subcontractors

• Hamilton-Pacific-Chamberlain, Laurel, won a $629,000 contract from the U.S. Department of Veterans Affairs’ Medical Center for the stabilization of historical buildings. http://hpcvet.com/contact-us

• Illumina, Beltsville, won a $91,588 contract from U.S. Department of Agriculture’s Agricultural Research Service for Illumina equipment services. www.illumina.com/company/contact_us.ilmn

• Keany Produce Co., Landover, won a $46,619,580 contract from the Defense Logistics Agency Troop Support for fresh fruit and vegetable support for customers in Virginia. www.keanyproduce.com/contact/

• Lockheed Martin, Mission System & Training, Baltimore, won a $17,077,638 contract from the Supervisor of Shipbuilding, Conversion, and Repair for labor and material to perform the post-shakedown availability for U.S.S. Fort Worth.

www.lockheedmartin.com/us/suppliers/bu-info/mst/mst-locations.html

• Phoenix Trading, Rockville, won a $72,750 contract from Defense Logistics Agency’s Defense Supply Center for fluid pressure regulating valves. www.ptimd.com/contact_pti.php

Gloria Larkin is president of TargetGov, which is located at bwtech@UMBC. Visit www.targetgov.com or call 866-579-1346 for more information.

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