SBC Examines Mid-Size Businesses: Too Big to be Small, Too Small to be Big
WASHINGTON – Today, Members of the Committee on Small Business Subcommittee on Contracting and Workforce held a hearing to examine the challenges businesses face when their company surpasses being classified as a small business and enters the mid-tier market.
“Mid-size firms are significant job creators and foster much-needed competition for industry leaders,” said Subcommittee Chairman Steve Knight (R-CA). “Unfortunately, mid-size contractors, particularly emergent or newly-graduated firms, face a dilemma. They are no longer eligible to compete for small business government contracts yet must compete against companies across the entire middle market spectrum, which can consist of companies many times their size, up to and including the titans of industry.”
No Man’s Land: Middle-Market Challenges
“As small businesses and government contracts become larger, it is inevitable that they will face choices – grow beyond the small business programs to compete with large companies, stay small to avoid the difficulties of competing in a “full and open” environment, sell, or go out of business. Unfortunately, it appears that more and more firms are being forced to make those latter choices — stay small, sell, or go out of business,” stated Mr. Stephen Ramaley, Associate at Miles & Stockbridge P.C., in McLean, VA, testifying on behalf of the Montgomery County Maryland Chamber of Commerce.
“The reality is that there are limited choices for companies like mine — acquire or be acquired…,” said Ms. Lisa Firestone, President and CEO of Managed Care Advisors, Inc., in Bethesda, MD, testifying on behalf of Women Impacting Public Policy. “Our executive team has spent significant resources putting together a plan to survive in the federal midsize world and I am loath to restrict my growth to stay in the small business program. It runs counter to my entrepreneurial instincts and it certainly is not good for the local economy nor is it good for the federal government or the thousands of injured federal employees who count on us every day to support their recovery and return to work.”
“Mid-tier companies are part of the natural progression of small business growth. Without providing a structured path to mid-tier growth, we place a cap on how far these businesses can go and we institutionalize a scheme that has damaging ramifications to our supply base and in turn the services we provide our taxpayers,” stated Mr. Mehul Sanghani, CEO of Octo Consulting Group in Reston, VA. “Further, it’s very clear that our industry is blessed with numerous exceptional entrepreneurs. However, without a defined path to and through mid-tier status, entrepreneurs will be less likely to choose our industry.”
“While the set-aside process needs improvement, the competitive marketplace is not perfect. As businesses of all sizes look to win free and open awards, the process has become timely and costly, preventing and discouraging businesses from competing. If a graduated small business is shuttered out of the market for the length of these contracts, it is likely they will revert to a small business,” said Ms. Eminence Griffin, Counsel and Director of Federal Procurement at the Information Technology Alliance for Public Sector, in Washington, DC.