Small-vendor Being Snapped Up to Tap Coveted Federal ContractsOctober 14, 2011
Large defense companies are snapping up small government contractors at the fastest pace in a decade, according to an article in The Washington Post. With the acquisition, large firms can book the small vendors’ “multiple awards” contracts, the fastest growing type of federal contract, in which a company gains access to federal contracting for 15 years. The larger firms view the acquisition of a small vendor as one way of tapping federal work during a time of deep budget cuts. The federal government’s goal is to award 23% of prime contracting dollars to small businesses each year. It defines small businesses as those earning $7 million or less annually, according to the article. Existing rules prevent large contractors from competing for federal contracts under the small business provisions after they have acquired a small contractor. But in practice, larger contractors have found that the small companies they take over can continue to work on fulfilling contracts signed before the acquisition. Federal agencies also would be hit by “high switching costs” if they tried to terminate the contract, according to the article. |
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