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CSIS Study Finds Mid-Sized Firms are Getting Squeezed Out of Government Contracts

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Bill Jaffe
February 27, 2013
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With the mid-tier business concerns put on hold for further study, I wanted to call attention to this 2009 study by Center for Strategic and International Studies (CSIS).

As Washington technology writer Matthew Weigelt reported in March 2011, “Mid-sized firms have faced trouble in contracting through the decades. A 2009 report from Center for Strategic and International Studies said the distribution of contract dollars has squeezed out mid-tier companies. The large contractors continue to merge and acquire smaller companies and the small business have received more attention with the annual contracting goals.

CSIS wrote that middle-tier companies captured 44 percent of the total value of federal professional services contracts in 1995. By 2005, the middle-tier companies were able to capture only 35 percent of that value, and only 33 percent by 2007.”

(Matthew’s article originally appeared in Washington Technology on September 8, 2011 at http://washingtontechnology.com/Articles/2011/09/08/middle-tier-advocacy-group-medium-size-companies.aspx?Page=1.)

CSIS defined mid-sized businesses pretty broadly – those which are too large to be categorized as small in the Federal Procurement Data System (FPDS) and have less than $3 billion in total annual revenue. $3 billion seems pretty darn high to most of us, of course when compared to Lockheed Martin, it might “feel” small.

The reality is that small businesses that are the most successful and rapidly outgrow their NAICS code size standards have to transition into competition against other recently grown out peers, as well as the big companies like BAH, LMCO, SAIC, etc. It is this suddenly increased competition that can be so daunting, and makes the transition so fraught with dangers. After being sheltered in the SB (small business) program for however long, they are now swimming with the sharks.

The net result is that almost no one climbs to being BIG-sized, they mostly grow a little more, get rid of as much SB-set-aside revenue as they can (since the set-aside revenue is heavily discounted in valuation), and then become fodder for the merger and acquisition groups, private equity, or even the big businesses. Is this what the SB program is intended to become – a way to weed out the best and brightest and make them most likely to sell out to the big guys?

Related posts:

  1. A Pilot Program to Assist Mid-Tier Growth
  2. Advocating for Mid-Tier Government Support Services Companies
  3. What the MTA is Doing for Mid-Tier Businesses
  4. Business Growth for All – Take Action Now With the Mid-Tier Advocacy Group
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The All-Small Mentor-Protégé Program

SBA had a well-established mentor-protégé program (MPP) for SBA 8(a) certified firms but lacked an MPP program for other small business concerns and specifically, one for specialized certified concerns such as WOSB, EDWOSB, SDVOSB, & HubZone. The 2010 Jobs Act and 2013 NDAA gave SBA the authorization to address this by establishing an all-encompassing mentor-protégé program. Ms. Sandi Clifford, deputy director of the All Small Mentor-Protégé Program (ASMPP), visited the Mid-Tier Advocacy (MTA) earlier this year to discuss the program. Here are some of the highlights of this candid and informative discussion: As Ms. Clifford explained, mentor services to protégés include: • Management and technical assistance (internal business management systems) • Financial assistance (in the form of equity investments and/or loans) • Contracting assistance (contracting processes, capabilities acquisitions and performance) • International trade education (learn how to export, international trade business plan, finding markets) • Business development assistance (strategy, finding contracting and partnership opportunities) • General and/or administrative assistance (business processes and support) As administrators of the program, SBA provides: • Central HQ as opposed to 8(a) distributive model • Online application – certify.sba.gov • Online course tutorial requirement • Annual review and evaluation • Template agreements, i.e., MPA (Mentor-Protégé Agreement) Other All-Small Mentor-Protégé Program (ASMPP) details: • A protégé may generally only have one mentor at a time; SBA may approve a second (two is the maximum) where no competition exists, or if the protégé registers under a new NAICS or otherwise requires new mentor skills.  • Both protégé and mentor must be for-profit (with exception of protégé being an agriculture cooperative). • A mentor may have no more than three protégés at same time (no lifetime limit). • A participant can be both a protégé and mentor at the same time, if there is no competition or conflict. • The ASMPP is self-certifying and is open to businesses who qualify as small in their primary NAICS code, or who are seeking business development assistance in a secondary NAICs where they also qualify as small.  • SBA will not authorize MPAs in second NAICS in which firm has never performed any work; or where firm would only bring “small” status to Mentor and nothing else. • Existing 8(a) firms in last 6 months of the 8(a) program may transfer their MPA to the ASMPP via the online application process. Coordinate with 8(a) office to fine tune the process but there is no reapplication required. • Application requirements include upload of business plan, but no financial statements or tax returns. • JV agreements: ASMPP will not review and approve joint venture agreements. How to apply for the ASMPP: • Applicants are required to register in the System for Award Management (SAM) prior to submitting their mentor/protégé application. • Complete your business profile in certify.SBA.gov. • Evaluate and select your mentor prior to applying. This is not a matching program. SBA will not find a mentor for you. • Begin the ASMPP application process. • Protégés and mentors must complete the online tutorial and have their certificate of completion and all other required documents ready for upload Thank you to Sandi Clifford, Deputy Director, All Small Mentor-Protégé Program, for this helpful overview. TAPE has mentored several small businesses over it’s life as a large business (we’re large in some NAICS codes, though still small in others) and it has been gratifying, satisfying, and integral to our success. As protégés ourselves, we have benefitted from working with some really classy large businesses, and have also had the experience of being a protégé and really getting no tangible benefits. We are currently working with two small businesses, and negotiating ASMPP agreements. You can learn more about the ASMPP on the SBA site. To join MTA and attend future events like this one, please visit www.midtier.org.
Bill Jaffe
August 23, 2017
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