A Changed Landscape for Small Businesses in Government Contracting

In case you haven’t heard, the Government is intent on lowering its contractor costs. In fairness, the defense budget, specifically within the intelligence community, was raised to an unsustainable level post 9/11. As time has passed, administrations have turned over, and sadly, memories have faded, the onus of spending on defense and national security has lessened. At first, the cuts were marginal, and frankly, warranted. Companies were getting “fat” on defense, and the market became over saturated. A market correction was needed.

For those unfamiliar with Government contracting, it is worth noting that billing rates are a bit different than in the commercial sector. All contractor rates to the Government are audited; each line item that comprises the billing rate is reviewed and scrutinized. Our company has been a part of proposals where pre-award I was asked to produce invoices and receipts to justify our rate structure. In short, there is no fluff; there are no hidden buckets in which to tuck away profit. For perspective, when I was a 22 year old mini-cyborg fresh out of school, I was billed out by a Fortune 500 company at $250 per hour. Clearly, the customer was paying quite the premium for the ability to say that they would know me 15 years later. Now? I bill for half of that. And I’m twice as awesome.

As budgets have been reduced, companies have been forced to adjust their balance sheets to match the state of the industry, and rightly so. Large companies began losing work to smaller, more agile firms with less overhead. Stockholders were not happy. To compete with small businesses, some large firms have split their Government services from other business units in order to allocate overhead expenses to the “proper” cost center…aka…their commercial sectors. This change put the large companies and small companies on an even playing field, one that, in my opinion, produces the Utopian environment….when all things are equal, talent and innovation is what wins work as opposed to name brand or frugality.

Unfortunately, over the past year, the landscape has continued to change, and not for the better. Funding to the defense and intelligence sectors has continued to decrease, to the point that in the opinion of some, national security could be compromised. Our customers realize this. A certain level of support is needed in order to keep this country safe. To put it bluntly, our customers need the same level of support….but at a lower cost.

Geoff and I built this company with a vision of providing opportunity and stability for all who trusted their careers with us. We have always said that employment at integrateIT is what you make of it. We wanted to develop a culture that provided employees with the ability to define their future. If you wanted to work 40 hours a week and stay in the same job for 20 years? You can do that. If you wanted to learn how to build a company, mentor resources, and participate in business development with the hope of one day starting your own business? We encouraged that. Now? It is tough to look someone in the eye and sell that vision, as the current state of the industry hinders the opportunity that we can provide. It kills us to have an all hands meeting with our staff, to look them in the eye, and tell them that if you are interested in moving to a new position, the reality of the world is that you may have to take a pay cut to do so.

We’ve been in this game long enough to know that there are ebbs and flows, and that the true mark of a successful company is how you come out at the other end of an obstacle. We can sit and sulk, or lean upon the core values that brought us to the dance. We will strive to maintain our status as an employer of choice by providing the best compensation and benefits package possible. We will continue to expand our business developments efforts to tap into new customer bases for diversification, with the hope that new customers will provide our staff with new opportunity to grow their skillset and career. We will innovate our recruiting efforts to entice new talent to join us in spite of the industry. We will keep on keepin’ on. It’s what we do.