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Mid-sized vendors squeezed out of U.S. IT, logistics contracts

This analysis was first available to Bloomberg Government subscribers. 

Two of the federal government’s most important contracts, the General Services Administration’s Alliant Large Business and OASIS Unrestricted, are squeezing out mid-tier companies, according to Bloomberg Government analysis.

Too big to qualify for small-business preferences and lacking the resources to compete with larger contractors, companies with $25 million to $500 million in annual contract revenue find themselves in a procurement no-man’s land, making organic growth in the federal marketplace difficult.

While mid-tiers are big players on many multiple-award contracts (MACs), their positions are weak on Alliant LB and OASIS Unrestricted, which account for huge swaths of the federal government’s procurement of engineering and IT services.

From fiscal 2012 through 2016, Alliant LB’s 22 active mid- tier companies won just 10.7 percent of total spending, dropping to a five-year low of 9.2 percent last year. On OASIS Unrestricted, mid-tiers won just 7.6 percent of obligations, with a low of 6.9 percent in fiscal 2016.

Mid-tiers may also be hindered by GSA’s use of quantitative self-scoring methods for measuring past performance to award slots on these contracts, which also have extensive security and certification requirements that such companies may lack.

Mid-Tiers Lag on Alliant LB

Alliant LB has been one of GSA’s most important information technology MACs since awards began in fiscal 2009. To date, Alliant LB has channeled about $14 billion to 55 vendors, including $3.3 billion to 44 vendors last year. Just $299 million went to Alliant LB’s 16 mid-tier companies in fiscal 2016, despite accounting for 36 percent of Alliant LB’s vendors.

Alliant LB will be supplanted by the 10-year, $50 billion Alliant 2 LB contract, to be awarded this year.

Mid-Tiers Account for 9.2 Percent of FY 2016 Alliant LB Spending

In fiscal 2016, Alliant LB was the 25th largest revenue-generating vehicle of the MACs held by mid-tier companies.

By contrast, 319 mid-tiers won $2.6 billion on GSA’s Group 70 IT Schedule contract, the largest MAC for mid-tiers. NASA’s Solutions for Enterprise-Wide Procurement V (SEWP-V) was mid-tiers’ second-largest vehicle, with 59 mid-tiers winning $2.1 billion. The Navy’s Seaport-enhanced contract was third, with 149 mid-tiers winning $1.6 billion.

Further pressure on Alliant LB mid-tier vendors comes from companies on Alliant SB that have grown to mid-tier size while still benefiting from the less-demanding requirements.

No OASIS for Mid-Tiers

Mid-tiers have fared even worse on OASIS Unrestricted, GSA’s 10-year program management, consulting, logistics and engineering services MAC.

Since the start of OASIS Unrestricted in fiscal 2015, the contract’s 39 active vendors have been obligated about $1.3 billion. The 13 mid-tier companies that held one-third of the slots received just $123 million, or 10.7 percent, of the money.

Mid-Tiers Account for 10.7 Percent of Recent OASIS Spending

Far Better Elsewhere

Mid-tier vendors generally performed better governmentwide in the four NAICS markets defining Alliant LB and OASIS Unrestricted than they did on the contracts themselves. Only in OASIS, for NAICS 541219 (Other Accounting Services), did the contract share exceed the governmentwide share in fiscal 2016.

Governmentwide vs. Contract Mid-Tier Share of NAICS Markets

As agencies strive to streamline and rationalize operations under the Trump administration, contracts such as OASIS and Alliant 2 LB will play an important role in defining key growth markets. Alliant 2 LB will run for a decade once awarded; OASIS Unrestricted, which began issuing orders in fiscal 2015, is expected to run through 2024.

Both encompass important parts of category management’s professional services and IT market definitions, markets that have been identified by GSA and the Office of Federal Procurement Policy as candidates for cost-cutting.

The post Mid-sized vendors squeezed out of U.S. IT, logistics contracts appeared first on Bloomberg Government.

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