As the largest government contracting companies grow and small businesses get an increasingly larger share of smaller contracts, companies in the middle are seeing dwindling opportunities.
For agencies, that situation raises questions about how best to spend the taxpayers’ money. Large firms come with experience and broad expertise — and often a deep bench of partner firms — while small companies have the dual advantage of niche specialization and fulfilling government mandates.
Companies in the middle are “catching the crumbs,” said Trey Hodgkins, vice president of federal government programs at the Information Technology Association of America’s public-sector group. The association represents technology companies of all sizes.
The midsize companies aren’t as large as the mega-contractors. Lockheed Martin handled more than $13 billion in federal business in fiscal 2007, orders of magnitude more than might come to a typical midsize firm even in a good year.
But they’re large enough to not qualify for the Small Business Administration’s contract set-aside programs or fulfill the goals that agencies have for small-business contracting. They’re in the middle tier of the federal ranks, which is becoming an uncomfortable spot.
A decline in the vitality or number of midsize businesses could have an effect on government buyers, said Anne Reed, president and chief executive officer of Acquisition Solutions. That loss would give agencies fewer options, she said, and weaken the power of competition to drive down prices.
Agencies would also lose a tier of companies that might offer broader skill sets than small companies, but with greater agility to adjust to changes than large firms have, she said.
In fiscal 2007, the top 33 companies that get the most federal dollars continued to increase their share of the market for information technology and related services, according to data from FedSources, a market research firm. Those 33 contractors received 52 percent of $149.2 billion the government awarded in contracts for products and services in fiscal 2007. It has steadily risen from 49 percent three years earlier.
Lockheed Martin remains at the top of the Washington Technology’s 2008 Top 100 list, a position it has held for years. From fiscal 2006 to 2007, it increased its incoming federal dollars to $13.4 billion, up 5.2 percent from the previous year, according to how Washington Technology, a publication of 1105 Government Information Group, rates the agencies.
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