How Successful Are Small Businesses at Getting Government Contracts?

Date posted: June 25, 2012

By Karen Axelton

Uncle Sam is the world’s largest single purchaser of goods and services, spending more than $535 billion on government contracts last year.  The federal government dedicates 23% — or about $123 billion – of that to small businesses. How successful are small business owners at obtaining those government contracts? A new survey from American Express OPEN polled 740 active small contractors to see what works for small firms pursuing government contracts.

The study found one way in the door for small companies to get government contracts is by teaming up with other small firms and subcontracting with larger contractors, instead of trying to become a federal prime contractor. American Express reports almost half (48%) of the active contractors have contributed products and services as a subcontractor; the average company got 25% of its procurement revenue from subcontracts.

Here’s some more of what the study found:

  • While subcontracting is big, teaming is lagging: Teaming — banding together with fellow small business owners to pursue larger prime contracts — is not as common as subcontracting among small businesses. Just 27% of active small contractors have had some procurement revenue from teaming, averaging 9% of their procurement revenue.
  • Getting left out is an increasing concern: Nearly one-third (29%) of active small business contractors say they have been shut out by large prime contractors—meaning that, although they took part in a winning bid as a subcontractor, they did not end up getting to help fulfill the contract.
  • Minorities lead the way in teaming: Women and minorities are equally active in subcontracting as the average small firm contractor, but minorities are more likely than average to be engaging in teaming.
  • When subcontracting, good performance pays off down the road: Almost one-quarter (22%) of active small contractors say that they have gotten more subcontracting opportunities after a prime contractor they had performed for in the past recommended them to another prime contractor.

You can get more advice and resources for successful government contracting at the American Express OPEN website.

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