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June 24, 2008

 
 
 

MID-SIZE CRUNCH


 

In Federal IT, is bigger better—does the world belong to the Lockheeds and Northrops? Or is smaller better—as in 8(a)? It seems the only place no one wants to be is in the middle, as regulations make life ever more challenging. The other day (partly as an excuse for a sumptuous lunch at Morton's in Tysons), we brought together several experts on the subject: Angela Drummond, CEO of SiloSmashers, Bob Dinkel, COO and President of FedResults, and Deepak Hathiramami, CEO of Visitronix.

 

Our great sponsors John Chierichella of Shepherd Mullin (left) and Jude Collins and William Tidwell of Cushman Wakefield (framing Angela) joined Angela, Bob and Deepak for (dare we admit it?) filet mignon.

 
Bisnow: Does the size of a company matter when dealing with the Feds?
   
Angela: Yes. Smaller companies seem to have a place as do big companies, but mid-sized companies are getting squeezed.
   
Bisnow: What do you define as mid-sized?
   
Angela: I would say $50 million in revenue to maybe $250 million. They're not small enough to go after the set- aside contracts, but they have trouble competing with the large companies and their resources. Unless some sort of program is started, the mid-tier companies are going to struggle.
 

Angela heads SiloSmashers, which smashes metaphorical silos, aka the "stovepipes" everyone complains about that prevent efficient integration of business processes. For example, they're currently helping FEMA on an asset visibility program

 
Bisnow: The big issue everyone's talking about is the new size recertification. How's that affecting the market?
   
Bob: In the past, smaller companies knew they would lose small business contracts eventually, but were at least able to complete them and exercise options, giving them a couple of years of revenue. Now you no longer have that choice, so that three to five year grace period no longer exists. It's making these smaller companies less valuable.
   
Bisnow: So why did they pass the law?
   
Angela: It was the right thing to do.
   
Bob: What they didn't want happening was large businesses buying small businesses, continuing to underwrite and subsidize them to the detriment of truly small businesses—the ones the small business programs were originally established for.
   
Angela: It cut back on the number of opportunities for mid-sized and small businesses that are now going after set- aside contracts only to increase their purchase value.
   
Deepak: I have a slightly different perspective from Angela. I think we allow the pendulum to swing from one extreme to the other. Congress tends to enact laws based on the feedback of some without understanding all the implications to the industry. I think this law is a disaster and has and will have significant ramifications for the industry. To me it shows that the system used in the government space is flawed.
 

Bob heads FedResults which helps companies break into the federal market. Bob was a senior exec at CA for many years.

 
Bisnow: Which system in particular?
   
Deepak: The way businesses are classified. If you cross a threshold of $23.5 million, you're competing against major players such as Lockheed Martin and CSC, which puts you at significant disadvantages. There's no way a company that size can compete with those larger businesses. There need to be stricter designations.
   
Bob: I agree. It'd be worthwhile for the government to prepare a mid-tier designation to keep mid-sized companies from being squeezed. That would allow companies like Lockheed, SAIC, and General Dynamics to compete among themselves. A new designation wouldn't affect one or two companies, but more than 100.
   
Bisnow: What should the designations be?
   
Angela: Probably a separate range from $23.5 to $100 million.
   
Bisnow: Would that be good?
   
Deepak: Yeah, anything would be better than what we have right now.

10 YEARS FOR METIER!

 

Metier co-founders Doug Clark and Sandra Richardson celebrating the company's 10th anniversary at a rooftop party at the Hay Adams Hotel for 100 colleagues and friends, overlooking some famous scenery. Based in Arlington, Metier is an innovator in project portfolio management software and services.

Story ideas? Send to Dave Stegon:David@Bisnow.com or 703-674-7718.


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