In honor of Small Business Week, Inc. reporters deployed to several cities where they spent one day talking to owners and entrepreneurs in a particular sector about their challenges.
At most companies, Donald Trump's tweets spark chatter in the kitchenette. At Savan Group, they prompt a meeting in the conference room.
Founded in 2006, Savan Group is a federal contractor that specializes in strategy and operations, human capital, and information technology, with a focus on data and records management. So, in March, when the National Archives and Records Administration directed the White House to preserve all the president's tweets, CEO Veeral Majmudar spied an opportunity to play thought leader. Majmudar and his team quickly gathered to discuss creating social media guidelines for Savan Group's clients, which include the departments of Agriculture, Education, Labor, and Justice. "What are your retention schedules? What do you do if someone deletes a tweet?" says Majmudar, listing questions agencies should ask themselves.
On a warm April morning, Majmudar is sitting in Savan Group's bright, unfussy offices, in a KPMG building in McLean, Virginia. McLean is one of more than a dozen towns in the northern part of the state--others include Alexandria, Arlington, Vienna, Herndon, and Falls Church--that are the natural breeding ground for contractors. While the government moves with the slow deliberation of a battleship, small companies like Savan are the more agile patrol boats providing tactical support. "Government policies go through the bureaucratic process," says Majmudar. "We try to determine what the end state will look like and get ahead of that."
No one knows exactly how many small businesses serve the federal government. But--California excepted--the greatest concentration of contractors abides close to the D.C. mother ship, operating in a landscape of anonymous office towers, hivelike co-working spaces, and thrombosis-speed traffic. There are 113 government contractors from the area on the 2016 Inc. 5000 list of fast-growing private companies, with median revenue of $13 million. Most are consultancies specializing in areas like program management, IT, and analytics.
In some ways, the Virginia contractor community is the inverse of Silicon Valley. Entrepreneurs here want to serve, not disrupt. Experience trumps youthful energy, and dorm-room startups are rare. This kind of work requires substantial industry experience, typically at larger contractors or in the military. "In our business, we don't really have newbies," says Tom Stauber, co-founder of Axiologic Solutions, an Arlington company that provides systems engineering to defense-related agencies.
While high-tech companies thrive on speed, patience is the paramount virtue for government contractors. Roughly 10 percent of business-to-business companies have sales cycles of more than a year. The federal acquisition process, by contrast, regularly takes two years. And companies that lose bids can protest, adding another few months to the tally. "Government by its very nature is slow. It is intended to be that way," says Majmudar. "Historically speaking, our founding fathers did not want government to be fully efficient. That was the whole purpose of checks and balances."
And while small firms in Virginia want to grow, most are content to fly beneath the public's radar. These companies don't have brands--they have reputations. Marketing is based on relationships, and advertising is relegated to websites dense with acronyms and clip art. "It's always a guy in a suit in an office or a guy with a gun on a hill," says Beth Inglis, founder of Preting Consulting an Arlington-based provider of training, operational support, and other services for the departments of Defense, State, and the armed forces.
Despite their lack of flash, these small businesses--collectively and indirectly--touch the lives of virtually everyone in the nation. From the sidelines, they assist those trying to solve our most urgent issues. Melaine Privitera is co-founder, with her husband, of Mobius Consulting, an Alexandria business that provides systems engineering, modeling, and other services to defense, security, and intelligence agencies. Ask what keeps her up at night and she replies flatly: "North Korea."
At a time of seismic political change, Inc. visited Northern Virginia to learn what's on the minds of this slice of the contractor community on a variety of subjects. Here's what they told us.
Heightened fears in the age of Edward Snowden and White House leaks have significantly toughened security requirements. "Everything out here runs on security clearances," says Inglis, who estimates that in recent years she's had to spend an additional 5 to 10 percent of her time solving HR puzzles related to who has clearance to work on which projects. "It's gotten a lot more painful. It takes longer."
In November, the Department of Defense mandated that contractors put in place insider threat programs to prevent them from endangering clients. Privitera, whose company supports programs like missile defense, is accustomed to a strict security regimen. For example, she can't even respond to some requests for proposal unless she's in a designated part of the office and uses a computer approved by the government. Now she's extended training to the whole staff. "You can lock it all down. You can encrypt everything," says Privitera. "But the weakest point of security is our humanity."
Government jitters present opportunities for some. Savan Group is helping a civilian agency that has experienced records walking out the door to secure its physical and electronic data. "You are not going to see there the things you have seen on the news," says Majmudar of his client.
Government work abounds with acronyms. In the contractor community, the most reviled may well be LPTA. That stands for "lowest price, technically acceptable," which over five or so years has increasingly surpassed "best value" as the basis for awarding contracts. The term is self-explanatory: Contracts go to the lowest bidder who can do the work. For entrepreneurs who want to compete on value, service, quality, and innovation, LPTA is a downer.
"LPTA is almost like a four-letter word," says Inglis, who recently lost a contract to a firm that underbid her by 30 percent. "And the order of the words is important, because 'lowest price' matters more than 'technically acceptable.' That is hard to see, especially as a member of the military, who has been the end user of these things." (Inglis spent close to five years in the Air Force.)
Stauber says Axiologic won't bid on LPTA contracts, because "those customers believe what is being provided is a commodity. They are not looking for the kind of value we provide."
While LPTA is meant to save the government money, several contractors said agencies often end up spending more to deal with unforeseen issues, quality problems, and high turnover on such projects. The Department of Defense, at least, may be coming around: In December, it limited the use of LPTA.
President Trump's budget proposal not surprisingly drew a mixed reaction from the contractor community. Those who serve chiefly civilian agencies targeted for substantial cuts are reexamining their skill sets in case they have to diversify. Savan Group is already diversified: It serves 14 federal clients. But those include vulnerable agencies like the EPA, HHS, and HUD. So Majmudar is focusing on what more he can offer more-secure customers. "We do some information work for the VA. Can we continue to expand on that?" he says. "Is there work we are doing at other agencies the VA may be interested in?"
More than half of federal contracting dollars already go for defense; the prospect of more engenders optimism in firms serving those agencies. Mobius Consulting, for example, has opened 40 positions since the election and is looking for larger space. Privitera says those positions are all based on current needs. "We are not advertising hoping that we win a contract down the road," she says. "Every day I don't have someone working in those positions is lost revenue."
Others greeted the budget proposal with a shrug. "If there is more work for us to bid on, that is a good thing," says Inglis. "But in reality, any changes will take a long time to come into effect. So we try hard not to be distracted by shiny objects or possibilities that this or that might happen."
Trump lifted his hiring ban in April but still requires agencies to slim down. That directive is both boon and bother to contractors. Boon because fewer government workers means less work being done by the government--and likely more opportunities for contractors to step in to keep the lights on. "If you say we are going to cut USAID employment by 30 percent--well, for the next three or four years we have these equities that we still need to maintain in the world," says Stauber. Under straightened circumstances, "that contractor base probably has to come up at least 20 percent."
But a rise in demand for contractors may coincide with a decline in the number of people awarding contracts. Many procurement officers are Baby Boomers poised to retire. If they're not replaced or are replaced with less experienced people, the already drawn-out acquisition process may slow further. "The procurement community, which has always been strapped in terms of their bandwidth, is going to face a really big challenge," says Majmudar. "Either they are going to have to figure it out or you are going to see some controlled chaos."
Despite Obama administration directives to pick up the government's notoriously slow pace of technology adoption, agencies still lag the private sector on IT. That creates contracting opportunities and explains the deep reservoir of tech expertise in Northern Virginia. But the clients can be a challenge. Federal work forces trend quite a bit older: 60 percent of the employees are over age 45, compared to 31 percent in the private sector, according to the Census Bureau. Many "have never, frankly, been exposed to the tools that are out there now from an information management control perspective," says Majmudar. "Whether you are talking about cybersecurity risks or the cloud environment, it is new to a lot of them."
Majmudar adds that modernizing technology is essential for replacing the retiring federal work force with Millennials. Young people want to work in government, he says, "but if they come in and don't see the tools they are so accustomed to from a technology standpoint, there is going to be attrition because they don't want to be in that environment."
A few lucky companies, though, get to work on some of the most advanced technology in existence. Among other programs, Mobius Consulting provides modeling and simulation for agencies involved in the space-based aspects of missile defense. "It gives us access to the coolest technology in the world," says Privitera. She is also inspired by the mission. "There is something very satisfying," says Privitera, "about supporting our war fighters and providing protection over this nation that we love."