I was recently asked to provide my thoughts for a Washington Post article titled, Small federal contractors feeling the pinch of reduced government spending, concerning how contracting "batting averages" have declined for both primes and subcontractors. American Express Open provided data that showed that the success rates, or "batting averages" for prime contractors bidding on government work have declined in 2008-2010, from 2007-2009. The decline has been greater for subcontractors than for primes.

As all small businesses know, providing services for the federal government has always been hard work, and now it's getting even harder. Small business owners are having less success in securing federal government contracts even as they go after contracts more aggressively, according to data from a new report released this week by American Express OPEN, which polled 740 small business federal contractors in an online survey.

According to the survey, active small business contractors reported that they spent an average of $86,124 seeking federal contracts in 2009, but they spent $103,827 doing so in 2010 - an increase of 21 percent. The costs include both staff time and expenses such as travel, mail and meetings.

The success rate declined even more - by 27 percent - for subcontractors, who tend to be smaller. The AMEX OPEN research team thinks this might be because prime contractors are holding on to more of their work as government spending dries up, rather than doling it out to subcontractors. "Large primes are not opening up for as much subcontracting activity," an AMEX OPEN research advisor said. "Federal spending is down, and it's impacted big contractors, which then has a ripple effect on small businesses that are suppliers to the larger primes."

My point of view is that a small contractor should network with agencies and prime contractors, attend all industry trade shows and build a stellar Web site that showcases examples of past work.

My rule of thumb is that a contractor should "say 'no' more than they say 'yes' to decisions to bid" so as to ensure that they're not wasting resources on contracts they likely won't get. The AMEX OPEN survey found there are diminishing returns for those taking a scatter-shot approach. Bidding on more than six contracts in a three-year period actually caused a business's "batting average" to decrease suggesting companies are better off trying for just two or three contracts each year.

To read more about the AMEX OPEN study and the Washington Post article go to:

http://www.washingtonpost.com/business/on-small-business/small-federal-contractors-feeling-the-pinch-of-reduced-government-spending/2011/12/12/gIQACpcwrO_story.html