Q: I’m no longer a small business, but I’m certainly not big. Is there any contracting category for medium businesses?
A: No. “It doesn’t matter whether you’re small-large, or large-large, or gigantic-large,” said Chip Mather, senior vice president of Acquisition Solutions, a consulting firm based in Arlington, Va. The federal government recognizes two categories of businesses: Small and everything else.
Experts disagree on what a “medium” category would consist of. In a 2003 study of federal spending on information technology services, the Government Accountability Office said, “Industry representatives differed widely on an upper limit” for midsize businesses.
GAO theorized that midsize businesses have an upper limit of $500 million in annual revenue. The agency settled on that upper limit because it was approximately the midpoint of the industry-suggested ranges. But a 2006 study by the Washington-based think tank Center for Strategic and International Studies (CSIS) states that service businesses with as much as $1 billion in annual revenue could still be considered midsize.
“A healthy market is a diverse market, not just small or large.” – Stan Soloway, president of the
Professional Services Council
CSIS’ study, “Structure and Dynamics of the U.S. Federal Professional Services Industrial Base, 1995-2004,” contends that midsize businesses are squeezed from below by federal small-business preferences and squashed from above by big-service powerhouses. Midsize businesses’ share of the information and communication services market declined from 29 percent of the total in 1995 to 13 percent in 2004, the study’s authors wrote.
“We’re not effectively repopulating the mid tier,” said Stan Soloway, president of the Professional Services Council. “A healthy market is a diverse market, not just small or large.”
Other procurement experts don’t believe midsize businesses need their own contracting category. “You’ve had your incubation, you’ve had your protection, it’s over,” Mather said.
Q: What are the advantages of partnering with a small business?
A: Companies with government contracts valued at more than $500,000 — $1 million for construction jobs — must have a plan for subcontracting to small businesses. They can set the goals on a deal-by-deal basis, or they can institute a corporatewide strategy.
Also, partnering with small businesses can bring benefits beyond complying with federal law. “A lot of the innovation that we see, especially on the IT side, comes from small businesses,” said Mac DeShazer, Lockheed Martin’s small-business liaison. “That’s a significant incentive.”
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