20 Dec Procurement Process Problems: Small Business Challenges
This is the third in a series of articles highlighting problems in federal government procurement, with the goal of presenting possible solutions.
I recently wrote about two problems with today’s federal government procurement problems: LPTA vs. Best Value procurement and interminable protests. Today, I would like to talk about how these problems are compounded when you are a small business. Many small businesses start out selling to the federal government by becoming a subcontractor to a prime contractor in order to build their past performance credentials. If all goes well, the small business will eventually become a prime, while still maintaining their small business designation. (Crossing the threshold from small business to large is another challenge altogether).
Government customers are risk averse by nature, relying on tried and true solutions and partners. While there are benefits to this approach — you don’t necessarily want an agency managing disasters or nuclear weapons trying out the latest “must-have” gadget or crowdfunded gizmo – taken to an extreme this leads to outdated legacy systems with enormous support costs that users are unable to effectively use, among other noted problems. Combined with the sheer Byzantium complexity of government procurement processes, this situation creates barriers to entry that are almost impossible for small businesses to overcome, even with set-asides and reserved contracts.
It is easy to feel that the decks are stacked against you.
Let us consider LPTA (Lowest Price/Technically Acceptable) procurements. While an LPTA may lead to a quick and uncontested award, it also usually creates program-related issues for the life of the program in Federal IT contracting. As I previously wrote, this leads to minimally satisfactory (if not mediocre) solutions, leaving out innovative approaches. This is particularly dangerous in the arena of cybersecurity where “satisfactory” quite honestly should not be the threshold. I am confident our adversaries are not taking a low-cost approach with their cyber activities.
There is another issue with the LPTA approach: it is particularly difficult for small businesses. By pricing aggressively in order to win, the contractor will have difficulty hiring the talent needed to satisfy the requirements of their contract – exacerbating the already difficult challenge of hiring competent technical staff in a highly competitive market (not to mention cybersecurity experts with security clearances). This may leave the customer in a situation where they have to offer unplanned levels of assistance to the contractor, leaving them less able to fulfill their missions. This also doesn’t help the small company new to government contracting trying to build the past performance credentials they need to grow.
As I previously noted, small businesses also have significant challenges in the area of procurement protest in terms of lost or delayed revenues and associated legal costs. And given serial protests and the length of time a small business may have to go without revenue, it is a wonder that any small business would want to take the risk of entering government contracting. This deprives the government of innovative and efficient solutions to IT modernization and cybersecurity, to name two priority areas.
There are a variety of solutions to the LPTA vs. best value issue and the protest problems, which I outlined in my previous articles. Solving these two challenges will go a long way towards helping small businesses.