Government Contracting Market Viability and the
Eye Opening Cost of Market Entry
Article for the National 8(a) Association
By Gloria Larkin
There is no dispute with the statement that the U.S. Federal Government is the world’s fortune one customer, spends more money than any other single entity in the world, and purchases goods and services of all kinds. However, we have seen budgets eroding and spending decreases which leads to the next question: is this still a viable market?
A quick snapshot form USASpending.gov tells us that in fiscal year 2014, spending with contractors of all sizes totaled $443 billion, down from $462 billion the year before. Even under a worst case scenario of possibly taking the full hit from sequestration in March (just under a 10% cut across all agencies including Department of Defense), the federal government will still remain the biggest consumer of services and products in the world, a solid market for those who are willing to do what it takes to enter the market, pursue and win business.
Eye-opening Costs of Pursuing Business
What does it take to accomplish market entry in actual dollars and cents? In a recent nationwide “Victory in Procurement®” survey of small businesses, American Express OPEN tackled this specific question and has produced eye-opening answers. This report focuses specifically on key trends with respect to small firms’ bidding and contracting activity, the investments small businesses are making in seeking federal contracts, and their success rates in the procurement marketplace.
This report states that, “…the amount of time and money that active small business contractors have invested in seeking federal contracting opportunities has averaged $103,827 [annually], an increase of 21% over the previous year…”
The report continues to address companies of varying sizes by stating “The largest small firms spend the most time and effort seeking federal contracting opportunities and make the most significant investment. Firms with 50 or more employees invested $283,284 seeking contracting opportunities, while firms with less than 10 employees spent just $41,432. And small firms with $5 million or more in revenue invested $267,559, while those with less than $250,000 in revenues invested $25,541.”
How Many Bids Needed to Win?