Since the 2008 – 2009 Financial crisis, organizations have been consolidating their supply base in record fashion. The idea of finding and sticking with a supplier that can offer multiple products at an affordable price has resulted in supply chain numbers decreasing across industries. According to market research firm Deltek, since 2010, the government has seen a “25 percent decrease in the number of small business prime contractors since 2010.” This news was revealed around the same time that federal agencies declared that government wide small business goals were met for the fourth straight fiscal year including 2016.
There are a few estimated reasons for the drop but, in my opinion, it starts with the global response to decrease supply chains from a number aspect and the lack of support small businesses have received from large banking institutions since 2010. According to Federal News Radio, a few other issues that have helped in the decrease include rule changes making it easier for pseudo small businesses to enter the market and win multiple contracts.
Steve Koprince, a managing partner of Koprince Lawm explains that the “SBA loosened up the requirements for joint ventures and prime-sub teaming, and the upshot of those changes are coming at the same time as you see these contract efficiencies.” with this the “SBA made it easier for small businesses to team together as well as making joint ventures easier for small businesses to team with large businesses through the mentor-protégé program. So now, no matter how large a mentor is, they can team with a small business and pursue a set-aside. There is both a greater interest by small businesses and there’s a realization that if my competitors are doing this, so should I.”
In addition other rule changes including mergers and acquisitions have made it difficult to smaller firms to compete. This says nothing about the current market which is still as competitive as ever, but with less opportunities, partnering with larger firms to curtail the market is becoming almost necessary which, in some cases, defeats the purpose of being a small business.
In an added interesting bit of news, when seeking to win business with the government it is helpful to know that 71% of contracts come from the Defense department in terms of total contracting dollars available. In addition, “91 percent of all opportunities are considered follow-on contracts”, making it extremely hard for newer small businesses to compete and resulting in a push for joint ventures and mergers / acquisitions.
Still the opportunities are out there but a need to include the tracking of actual prime contractors is necessary. There are already attempts to do this such as in the case of Congress getting “involved in the 2016 Defense authorization bill, by requiring the SBA scorecard to measure the participation rate of small businesses in contracting.”