Business incubators have been all the rage in the D.C. area in recent years, as local leaders try to step beyond the region's dependence on federal money. But the area's newest incubator is taking a different approach: doubling down on federal contracts while trying to open that market to a more diverse group of people.
To help small businesses grow and compete for government work, a Rockville, Md.-based consulting business called OST Global Solutions is starting an incubator focused on helping its members scale within the federal market.
Despite an array of new set-aside programs meant to give small firms an advantage, the number of small companies holding primary government contracts has shrunk substantially since 2010. OST founders Olessia Smotrova and David Huff say insider knowledge — and not resources — is the main thing that keeps small firms out of the market.
"It literally is the divide between those who know what to do and those that don't," Smotrova said.
Members can go through the program remotely or co-work at OST's offices, paying between $275 and $695 a month. The coursework focuses on the nuts and bolts of following government bid proposals and keeping government decision-makers happy, as well as the intangible aspects of entrepreneurship and business management.
The secret to their work, Smotrova says, is getting members to hold themselves to ambitious growth metrics by constantly competing for new work. Too often government contractors are content to rest on their laurels once they win a contract, she says.
"A lot of government contractors don't have that sense of urgency to fill their pipeline," Smotrova says.
The program commits members to an ambitious growth path of 400 or 500 percent, and gives them customized goals they must reach before they can graduate.
"We can diagnose where they are failing and why they are failing," Smotrova said.
One of the first members to opt for the co-working program is Virginia-based VG Systems LLC, an eight-person IT firm that brings in between $1.5 million and $2 million a year in revenue.
Chief executive Thomas Perry says he's hoping OST can help him get a more stable stream of income. The company's earnings can vary widely based on what work is available.
"It's been a wild roller coaster," Perry said. "The reason we're trying to go through the incubator is we're trying to make that a little more of a smooth upward growth curve."
Small businesses that are working in the federal space usually do so with the help of official "set-aside" programs designed to give such firms an advantage.
One is Ogden, Utah-based Wynsor LLC, a 10-person firm that makes a steady business of decontaminating old uranium mines, among other environmentally oriented work for the federal government.
Lea Ann Rodriquez founded Wynsor in 2007 while she was still working at the Idaho National Laboratory, which she left in 2009. Today her firm is working on uranium mines in Oklahoma and Washington state, and also holds a contract to decontaminate respirator machines at Hill Air Force Base in Utah.
It took her three years to get through the paperwork required for the Small Business Association's 8a small disadvantaged business certification program, which gives her an automatic leg up on certain federal contracts.
But the market is getting more competitive, even among the small businesses that qualify for set-asides. And her advantage under that program expires in 2021 when the eight-year program times out.
She wants to keep her company after 2021, but to do so she'll have to grow before the company "graduates" and loses its certification under that program. She's hoping OST can teach her how to compete for work without having the help of a set-aside program.
"A lot of [8a program participants] graduate and their sales just plummet," Rodriquez says.
Others joining the incubator are leveraging deep connections to the U.S. military. One is Gib Godwin, a former two-star Navy rear admiral who runs a consulting firm.
Godwin retired from the Navy in 2006 and briefly worked for PricewaterhouseCoopers and Northrop Grumman before setting off on his own. His company, BriteWerx LLC, competes for federal work under a set-aside program for service-disabled veterans.
His only full-time employee is his daughter, who holds the title of chief financial officer. Their small partnership takes in between $850,000 and $950,000 each year in revenue, most of it through a single Navy contract the firm received through a sole-sourced award.
As a former Navy officer, there are certain lines he can't cross. He has a lifetime ban against winning large contracts related to the F-18 Hornet and F/A 18 Super Hornet fighter planes, for example, because he served as a chief engineer on those programs while in the Navy. He has similar limitations on certain Navy and Marine Corps IT systems.
But his rank has mostly helped the business, he says.
"My flag officer network has been a huge help," Godwin said. "Because of what you've done before, you can get a meeting without crawling through broken glass on your belly."