There are seemingly countless reasons why a small business would seek to get into the federal contracting game, but to not over-complicate matters, here are ten of the most compelling arguments in favor of this fruitful endeavor.
Benefit 1 – Sole Sourcing
Sole Sourcing accounts for a huge chunk of all 8(a) sales, or approximately $16 Billion dollars annually. A sole source contract functions similarly to contracts that are awarded in the normal small business marketplace, where a formalized bidding process is not relied upon. The Federal procurement officer meets with the owner of the 8(a) firm, and they agree to project specifics and price. As long as the 8(a) firm is not found to be more than 10% above market, the federal procurement officer can directly award the contract to the 8(a) firm. A side benefit of an 8(a) company’s ability to obtain sole source contracts is that often the 8(a) firm can obtain contracts from their federal buyers before other businesses are even given notice that an opportunity was present. In many cases 8(a) firms, in their third year and beyond, do not even respond to bids anymore, as the relationships they have developed lead to enough sole sourced contracts to keep them busy.
Sole-sourcing limits are set at $4 million for goods and services, and $6.5 million for manufacturing.
Benefit 2 – Limited Competition
An 8(a) Certification limits the field of competition for bidding on federal contracts. There are approximately 24 million businesses in the United States, yet less than 6,000 currently have successfully completed the process of obtaining their 8(a) Certification. 5% of all federal spending is earmarked for 8(a) firms, which last year accounted for around $34 Billion per year in federal contracts. This is a substantial amount per year in federal spending per 8(a) firm.
Benefit 3 – Cuts through Federal Bureaucracy
The SBA acts as a liaison with the 8(a) firm, in order to help the 8(a) firm obtain federal contracts. This benefits the 8(a) firm in the reduction of time necessary to achieve its first federal sale. For most 8(a) firms, the SBA will send out letters of introduction which help the 8(a) firm make initial contact with their targeted market.
Benefit 4 – Large Contracts
Contract size for 8(a) firms can be large from a small business standpoint. These contracts can be accomplished by teaming with other partners. This is because 8(a) firms are permitted to partner with other firms in what is known as a joint venture or mentor protégé arrangement. This is often done with large federal prime contractors. This helps expand the 8(a) companies’ knowledge on how the government works, allows the 8(a) firm to be awarded contracts they would not otherwise be able to win, as well as helping to build the 8(a) firms’ federal performance history, so that they can win large contracts without the 8(a) firm needing to partner in the future.
Benefit 5 – Better Pricing
Due to the limited number of 8(a) firms and the fact that they are all small businesses, 8(a) certified companies are able to receive higher markups than their non-8(a) small business peers.
Benefit 6 – Growth
8(a) firms have the capability of growing much faster than their peers. The Washington Post publishes the fastest 50 each year, made up of the fastest growing federal IT contractors working for the federal government. It is not an accident that 31 of the fastest 50 are 8(a) IT firms.
Benefit 7 – 8(a) Boosts GSA Schedule Effectiveness
An 8(a) Certification will greatly increase the effectiveness of a GSA Schedule. When a federal procurement officer visits GSA Advantage, the web portal for GSA buying, those procurement officers always seek out 8(a) firms first. This gives 8(a) firms an estimated 300% advantage over their non-8(a) GSA Schedule peers.
Benefit 8 – Construction Contractor Friendly
8(a) firms are very successful in their award of federal construction contracts, therefore outperform their peers. As a result, 40%+ of all 8(a) firms are in the construction field. Additionally, because 80% of all Federal Construction occurs at DoD facilities (Army, Navy, Air Force, Marine Bases), the contract dollars are spread throughout the United States and US Territories.
Benefit 9 – FEMA Contracts
When national disasters strike, due to the quick nature of the 8(a) sole source contracting mechanism, 8(a) firms are administratively better equipped to be awarded contracts and help disaster victims. In the past ten years, there have been 560 designated presidential disasters, with $11.5 billion spent annually, with a large amount of these dollars going to 8(a) firms.
Benefit 10 – 8(a)’s Become Large Business Concerns
Approximately 30% of 8(a) firms are able to leverage their performance rating and contacts with the federal government to become large federal prime contractors, once they graduate from the program. These companies are often having annual billing in excess of a hundred million dollars.
If you would like to find out more about the 8(a) Certification, and how it might help you to obtain federal contracts, I always recommend contacting an industry expert such as ez8a or Advance 8a. Neither charge for an initial consultation.