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Small Business Contractors Find Market Entry Easier Than Ever but Ongoing Success More Expensive

According to the latest survey data, it's easier than ever for firms to get their first government contract.
August 19, 2013

Facing tighter federal spending and a higher level of competition from their peers and larger firms, active small business contractors report that they are investing more time and money to achieve contracting success. As they seek procurement opportunities, their level of bidding activity has declined significantly over the past three years. That said, it’s easier than ever for firms interested in selling goods and services to federal agencies to enter into the market and garner their first contract.

These are among the key findings of the third American Express OPEN for Government Contracts survey of small business owners who are active federal contractors (firms that have performed on a federal contract within the past five years). The survey also found that:

  • The annual investment of time and money that active small business contractors have made while seeking federal contracting opportunities has averaged $128,638 over the past three years, which represents a 49 percent increase over the investment reported in the 2010 survey.
  • Although the average investment made has risen, bidding activity has declined significantly over the past three years: by 72 percent for prime bids and 54 percent for subcontracting bids. However, subcontracting success rates have held and prime contracting success rates are up.
  • Despite the fact that the required investment for ongoing procurement success is on the rise, it is much easier to land that first contract win. It took those who have been involved in federal contracting for a decade or more 2.9 years and 5.6 unsuccessful bids to land their first procurement win, while those who have been seeking contracts for three years or less say that it took just one year and 3.1 bids to win their first contract.

This report comes as the U.S. Small Business Administration releases its FY2012 Small Business Procurement Scorecard, which shows that federal agencies spent $89.9 billion with small businesses, representing 22.3 percent of total spending—less than the 23 percent goal and down $2 billion in spending from the previous year. The federal government exceeded their five percent spending goal with small disadvantaged businesses (achieving a record-high eight percent in FY2012), but again did not meet their five percent spending goal with women-owned small businesses (achieving four percent in FY2012). Overall, federal contract spending dropped by 4.5 percent from FY2011 to FY2012.

For more information, download the Trends in Federal Contracting for Small Business summary and the 2010 and 2011 survey reports.

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