Federal workers aren't the only ones anxious about looming budget cuts. Federal contractors — plentiful in Maryland — have a lot at stake, too.
Mark Amtower, who helps companies market products and services to the federal government, thinks there's plenty of reason to worry. The most obvious challenge on the horizon is sequestration — the automatic cuts of $109 billion annually that are due to start in January if Congress cannot agree on deficit reduction. But Amtower sees other changes as well that he says make it more difficult for small companies selling, or hoping to sell, to Uncle Sam.
He started his firm, Amtower & Co., in 1985 and runs it from his Highland home with his wife, Mary Ellen.
What are the key challenges facing federal contractors in these days of budget uncertainty?
If sequestration proceeds, we are facing basically [an] across-the-board cut with a couple programs not impacted. [Medicare would take a 2 percent reduction; Social Security and Medicaid would not be cut.]
So what's going to happen is the competition, which has gotten more intense over the last couple of years, will become more so. That means the larger contractors will be looking to … bid on smaller opportunities.
Unless it is a set-aside contract, a contract designated for only small businesses, the larger companies are probably going to have a higher win ratio because they have internal bid proposal shops. They do this day in and day out. Small companies are usually doing it themselves or they have a consultant. The bidding proposal process is a fairly costly prospect for the contractor, so if you bid a lot and lose, you're losing a lot of money.
For smaller businesses to survive in that environment, I believe they're going to have to target the most friendly larger businesses and end up doing more subcontracting as a result.
What other problems do you see for small businesses?
The GSA [General Services Administration] schedules currently have somewhere around 18,000 companies that can provide products or services through the schedules. … This has been traditionally one of the major ways smaller vendors come into the market. [But] GSA is starting to limit the number of companies that can apply to sell through the GSA schedule.
This has a horrible, negative impact on small businesses. … Now it's not necessarily the government's role to be an employer for contractors, but by the same token, for years and years and years, GSA has touted itself as the place to be for all contractors that want to sell to the government. Now they're turning around and saying, "Well, we really didn't mean that." For small businesses, now you have one less viable avenue for doing business with the government.
Do you think the sequestration cuts will take effect as planned?
Right now, everybody I know doesn't know. And nobody's willing to say yes or no. If I had to bet, I would say yes, because the extreme elements [in] either party are unwilling to bend.
What can contractors do? How are savvy companies preparing?
You're going to have to do more with less, so if you have current contracts, make sure that you're delivering on absolutely all facets of those. Solidify your relationships with your customers. This is very much a relationship-driven market. If a government manager likes and trusts a vendor, they will try to find ways to work with that vendor.
If you're new to the market, it's going to be tough, but it's always been tough. It's always taken time. It doesn't mean you shouldn't try to come into the market, but come in with your eyes open.
How do these times compare with, say, defense cuts after the Cold War?
The sequestration is the largest potential cutback in government spending, and I think what seems to escape most people on the Hill, though I can't figure out why, is that the federal government is responsible on its own for about [one-quarter] of the GDP. So if you cut the spending, what's going to happen to the economy? What's going to happen to those small businesses?
That's a scary thought. So from my perspective, this is as bad as I've ever seen it.
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