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Agencies' spending on 8(a) contracts dips in 2011

Mar. 7, 2012 - 12:48PM   |  
By SARAH CHACKO   |   Comments
An engineer with Crockett Facilities Services tests water to eliminate impurities and reduce energy consumption in a Judiciary Square building in Washington. The company has graduated from the 8(a) program, and now relies on it for less of its business.
An engineer with Crockett Facilities Services tests water to eliminate impurities and reduce energy consumption in a Judiciary Square building in Washington. The company has graduated from the 8(a) program, and now relies on it for less of its business. (Crockett Facilities Services)

Agencies do not award many contracts to small disadvantaged businesses or 8(a) companies, as they are technically known. Last year, only 5 percent of contract dollars went to 8(a) firms.

But when agencies do award those contracts, they tend to do so in several specific industry segments namely, construction and facilities support.

Agencies spend more on construction contracts with 8(a) businesses than any other industry area. Of the $25 billion agencies spent with 8(a)s in fiscal 2011, nearly $5 billion, or 20 percent, was for institutional building construction, heavy and civil engineering construction and industrial building construction.

Agencies look to 8(a)s and other small businesses that are certified to win set-aside awards to meet small-business contracting goals set by the Small Business Administration. Contracts with 8(a) firms are counted within an agency's "small disadvantaged business" contracting goal, which is 5 percent of all contract dollars. Agencies exceeded that goal from 2006 through 2010.

In 2011, agencies spent 4.6 percent of the government's $537 billion total contract dollars on 8(a)s, according to figures from"> SBA has not released its own figures, which could differ because SBA does not count all federal contracts in its calculations.

The government directs its construction spending to the 8(a) program because other procurement areas require larger contracts and there are not as many small businesses, said Marco Giamberardino, senior director of the Associated General Contractors of America federal and heavy construction division.

"It's easy for a department to push a lot of the goaling to the construction industry," he said. "But they aren't pushing the other industries that aren't doing a good job. [Agencies are] kind of giving them a pass."

Construction is an easy field for small businesses to break into because it requires a relatively low capital investment, said LeAnn Delaney, deputy associate administrator at SBA's Office of Business Development. Businesses have to prove that they are economically or socially disadvantaged to participate in the 8(a) program.

"A construction company doesn't start out owning its own equipment; it starts out renting equipment," Delaney said.

Chris Valenti, general manager of GVC Construction in Leominster, Mass., said he has noticed government work dropping off in the past few years. The 8(a) program has been especially helpful in directing business his way, he said.

"It has allowed us to maintain a certain level of work through some rough patches," he said.

Meeting the goal for awarding contracts to small disadvantaged businesses is especially hard for large agencies, like the Defense and Energy departments, because the majority of their spending is on big contracts that small businesses cannot handle, said Darryl Hairston, associate administrator of SBA's Office of Business Development.

So a few agencies within those departments may end up doing most of the small-business contracting, Hairston said. As discretionary spending gets cut, smaller contracts will likely be first to go, he said.

"Which means that in order to achieve the goal, agencies have to reassess how they buy things," he said.

Spending in computer-related services, computer facilities management services and remediation services has seen the biggest percentage increases in the past few years, 8(a) spending data shows.

"As long as the government is the biggest real estate owner out there, there is always going to be a requirement for facilities management services," said Mark Crockett, vice president of Crockett Facilities Services Inc. in Bowie, Md.

The federal 8(a) contracting program has allowed Crockett Facilities Services to build up its business and credibility and to invest money in marketing toward the commercial sector, to prepare for "life after 8(a)," Crockett said.

In the past five years, the company, which graduated from the program last month, has moved from earning 75 percent of its revenue through the 8(a) program to about 55 percent, he said.

ProLog Inc., a professional services company in Virginia Beach, Va., said it is cross-training its employees in multiple service areas, from administrative support to aviation maintenance, so they can be moved around when needs change but continue working on a contract.

"Within each contract, there may be six to eight labor categories. I've seen as many as 20," said Sean Connelly, ProLog director of operations. "Cross-training our personnel makes them more valuable to the government, which in turn will hopefully translate into them keeping their jobs."

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