The Decreasing Number of Bids on Government Contracts

  • September 13th, 2013
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Contract“Spend” has become a dirty word in Washington. Any mention of this blasphemy puts the right side of the aisle up on their feet and yelling about the downfall of the American economy. That is probably an accurate claim given the economy over the last couple of years. And the government has been spending less, which means less money for businesses bidding on government contracts.

Businesses have to push harder to win federal business contracts with the government. American Express recently released a survey as part of their Government Contracts Program that helps train and educate small business owners that states that small business contracts, in 2012, spent an average of $128,628 securing government contracts.That’s considerably more than they spent in 2010 with an average of $103,827 and an even bigger increase from 2009 with an average of $86,124.

Spending has indeed been cut for government contracts with a 6 percent decrease from 2009. Okay, I hear some of you scoffing at 6 percent, but remember this is in terms of government spending, so 6 percent equals $35 billion. For those of you reverse engineering this math problem, that equals $517 billion dollars spent on government contracts in 2012.

Of that $517 billion, 23 percent is supposed to be allocated for small business, which is a goal that has been historically missed by the government. The government has less work for business which makes it even harder for small businesses to procure government contracts. That means that more time and money have to go into the bidding and procuring process than ever before.

The time and money goes into the staff that prepares the bids, traveling costs (increased airplane ticket prices doesn’t help) for government contracting conferences, shipping costs of documents, and the cost of matchmaking events. Luckily, with the help of the internet, most are able to keep on top of government bid notifications using cloud based eprocurement solutions.

Small businesses with 50 or more employees spent an average of $257,098 in time and money on government contracts according to American Express, while businesses with 10 or fewer employees spent an average of $37,172. What’s worse, business are bidding less than ever before with an average of 5.5 bids in 2010-2012 lowered from the 19.5 bids in 2007-2009.

While all of this seems negative for businesses and the government, we can conclude one thing: businesses are not as reliant on the government, probably because of the state of the economy over the last couple of years. It will take time for trust between small business and the government to build back up. Business with the government use to be at 38 percent for the total revenue, but now it is at 19 percent.

jeremyhJeremy Higbee loves to snowboard in Park City when the powder is absolutely perfect. When he’s not carving on the hills he writes about local news, opportunities, and business. Jeremy has an increasing interest in the SBA, James Patterson, and coffee.

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