Governmentwide IT contract push is edging out opportunities for small businesses, analyst says

With technology contracts getting larger, the opportunities for small technology contractors are becoming fewer, as large contracts become increasingly in vogue looking ahead to 2024. 

A series of governmentwide acquisition contracts and enterprise vehicles slated to go into competition starting this fall and early into next year has put small contractors on notice about the direction of technology acquisition in the federal government moving forward, said Carey Webster, vice president of federal research at Deltek. 

“We’ve seen it for years, obviously with these large GWACs that they keep recompeting,” Webster told Nextgov/FCW. She noted that some agencies — like the Department of State — are now using large, enterprise contract vehicles for their IT procurement after consolidating many of their own individual contracts. 

Webster said the State Department’s solicitation for the $10 billion Evolve contract in December 2022, which effectively consolidated more than 20 prior information technology contracts and task orders into a single vehicle, “sort of gave people pause” as the landscape of technology acquisitions increasingly pivots toward large vehicles that companies will have to secure a spot on to be able to compete in the market. 

“I think there were some contractors that focused on the Department of State that we wouldn’t see them come out with their own contracts like Evolve,” she said. “Obviously, if you are a Department of State contractor, you’ve got to get on that contract. It’s just something that we continue to see, the consolidation of these contracts.”

Bigger contracts have been a recent staple of the federal IT market, as past administrations have favored acquisition strategies like category management and shared services to gain more buying power and IT security.

However, Webster said this year has seen a rise of large, agency-specific, enterprise IT contracts like Evolve and the Department of Veterans Affairs’ T4NG that are soliciting contract bids alongside large anticipated GWAC vehicles, like the General Services Administration’s Alliant 3 and NASA’s SEWP 6.

“There are so many of these must-have IT contracts right now. I’m sure IT contractors are very busy,” she said. 

One of the challenges of these IT contracts getting bigger is more competition to get on the vehicle and fewer opportunities to do so, ultimately leading to fewer companies in the marketplace. 

The Biden administration has sought to head off a persistent drain of small contractors with a series of policies targeting the increased use of set-aside contracts and prioritizing opportunities for the companies. 

In January, the Department of Defense issued a memo that said meeting small business goals and increasing contracting opportunities for small, disadvantaged businesses would take priority over its best-in-class contract goals. 

The Biden administration also reported last month that the federal government exceeded its small business contracting goals in fiscal 2022, though prime contracting opportunities continue to decline. 

Webster said that the White House’s efforts to boost small business participation by focusing on agency set-aside goals will drive benefits for small companies, especially at large agencies like the DOD and GSA.

“I think that some of the things that Biden is doing, like increasing goals, is certainly going to help,” she said. 

All the same, she said it would be wise for small companies to pursue acquisition strategies that would help them find spots on these larger IT vehicles, such as teaming arrangements with larger primes and focusing on subcontracting opportunities alongside prime contracts. 

“Just do a lot of due diligence right now on who’s in the market, who are the players, where are they winning business, what could you possibly bring to the table for them, be that past performance at a particular agency or if you specialize in some sort of emerging tech,” she said.  “We are seeing that is a subbing requirement in some of the IT RFPs that we’ve seen. So just looking to differentiate yourself.”