First-time suppliers to U.S. drop most since ‘05

December 11, 2011

The number of new suppliers to civilian U.S. government agencies declined this year by the most in at least five years, even as federal contracting officials pledged to expand the pool of vendors.

Contract orders in fiscal 2011 went to 19,650 companies that had not done any business with the U.S. government in the previous five years. That number was down 23 percent from 2010, the biggest annual decline since 2005, the most recent year for which comparable data are available, according to an analysis by Bloomberg Government.

Contributing to the decline are federal budget cuts and the expanding use of multiple-award contracts that direct orders to a pre­selected pool of companies, a trend that has hurt smaller vendors in particular, said Terry Williams, chief executive of the Washington-based American Small Business Chamber of Commerce.

“By suppressing small-business access to contracts, the federal government continues to miss their goals, and they have set these goals with these firms far too low,’’ Williams said.

Most active federal vendors win at least one sale in a five-year period, said Gunnar Schalin, president-elect of the Association of Procurement Technical Assistance Centers. Consequently, the decline in contract recipients that have not done business with the government in the previous five years most likely reflects fewer first-time sellers, he said.

Government officials have said their policy is to expand the pool of companies that participate in the $500 billion-a-year market.

“The government loses when we limit ourselves to the companies we already work with,’’ Daniel Gordon, the Office of Management and Budget’s administrator for procurement policy, wrote in a February memo to federal purchasing officers. “Instead, we need to look for opportunities to increase competition and ensure that all vendors, including small businesses, get fair consideration.’’

In an interview last week, Gordon said his office is working with the General Services Administration, the agency that manages government-wide contracts, to ensure “that competition remains open and vibrant.”

“It is very easy to join, for example, the GSA schedules,’’ the U.S. government’s $39 billion purchasing catalogue, he said.

Contracting officers’ workload can lead them to direct more business to known contractors, said Bill Stuby, a procurement specialist at a small-business center at the University of Missouri in Columbia that helps companies win federal contracts.

“Price is not always a single determining factor in a selection,’’ said Stuby, a former contracting officer for the Justice Department. “They put emphasis on previous experience, so new contracts have little or no chance of getting awarded to a new business.’’

Just 15,117 small businesses won prime contract awards in the budget year that ended Sept. 30, a 25 percent drop from the year before, according to data compiled by Bloomberg Government.

The number of large companies with first-time contracts declined 17 percent to 4,533 in 2011 from 5,477 the year before.

The statistics don’t include defense contracts, for which complete data aren’t yet available for fiscal 2011.

— Bloomberg Government

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