Big Tech Need Not Apply for Whopping $5 Billion Federal Contract

Tuesday, 29 Jan 2013 07:58 AM

By John Morgan

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The U.S. government is tapping small computer equipment vendors to fill a $5 billion contract, leaving tech giants like IBM, Dell and Hewlett-Packard out in the cold, Bloomberg Government reported.

The move is part of a federal effort to steer more contracts to small businesses after missing its targets in that area.

The contract by the Department of Veterans Affairs will be divided among as many as three companies by the end of March to fulfill the five-year agreement.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

Because only firms with a maximum of 150 employees are eligible to be prime contractors in the deal, bigger companies will end up wooing them for a piece of the work, Bloomberg reported — a reversal of the usual bidding food chain where smaller vendors feed off of big ones.

“It’s about time for us to get our fair share of the pie,” said Cris Young, president of the American Small Business Chamber of Commerce.

“The dollar amount of the VA contract is huge. For a small business to get something like this is amazing.”

Dozens of small companies have expressed interest in the VA contract, under which prime contractors will supply the agency with laptops, servers, routers and storage systems.

One such company, Red River Computer of Claremont, N.H., already has part of a separate $3 billion contract with Homeland Security, which also reserves its prime contractor slots for small businesses, Bloomberg reported.

Both HP and IBM appear on a federal list of companies that have expressed interest in the sub-vendor portion of the VA deal.

Almost 100 companies, including such bigger players as Lenovo Group, Oracle, Dell and Cisco, registered to attend a VA event for vendors wanting more information on the project.

Abhey Lamba, an analyst at Mizuho Securities, said government work is important to large computer makers, in part because it provides stable income.

“Every contract matters, especially one this sizable,” Lamba said.

U.S. government contracts to female-owned small businesses dropped for the second consecutive year, according to a separate report from Bloomberg, declining at a faster rate than did awards to their male counterparts.

The women’s contracts fell 5.5 percent to about $16.4 billion in the fiscal year that ended Sept. 30, from $17.3 billion in fiscal 2011, Bloomberg reported.

Awards to small firms owned by men fell 4.1 percent to $80.9 billion.

The gender gap might reflect stiffer competition, a diminishing pool of contract revenue and bureaucratic red tape.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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