Posted on: Sunday, October 12, 2003

Small companies find government contracts elusive

By Yvette Armendariz
The Arizona Republic

A way into the lucrative business of government and corporate contracts still eludes small companies, especially female- and minority-owned ones.

Billions are at stake, and many of these small companies view the opportunity to sell everything from landscaping to weapon parts as a secure way to boost sales.

But few contracts benefit small companies. And increasingly these contracts are getting bigger by combining several purchase orders to create volume and save money. That means small businesses have a harder time getting a contract, said George Herrera, president of the U.S. Hispanic Chamber of Commerce.

"That's been the biggest dilemma as you start bundling," Herrera said. "The small-business entrepreneur ... is nearly nonexistent (because) bigger companies can provide better competitive pricing."

Less than 7 percent of the $250 billion in federal contracts last year went to women- and minority-owned companies designated as disadvantaged businesses.

Corporate contracts are more difficult to quantify since corporations are not required to report minority numbers, but figures are thought to be low.

Ray Gonzales, owner of RBG Construction in Glendale, Ariz., is among the Hispanic entrepreneurs finding some success. He recently won a $700,000 concrete job on Phoenix Municipal Stadium. The project's general contractor, Barton Mallow, sought out RBG to bid on the job in an effort to meet city goals for using minorities, Gonzales said.

"For a small company, it's a significant amount," he said. "This is a great example of 'give us an opportunity, and we'll show you we can do it.' "

Herrera said showing entrepreneurs how to meet buyers starts the sales process. The rest is getting companies to follow through on diversity goals.

The chamber's first step was developing a procurement council made up of 40 Fortune 100 company supplier diversity directors, who seek out minority companies with whom to do businesses.

Lupe Barto, vice president of supplier diversity at Bank One, said a key reason for pushing diversity is to create more competition for quality and price. Barto regularly speaks about contracting at small business events and will attend networking functions to learn more about small and minority companies that can be potential suppliers for Bank One or resources for Bank One's prime contractors.

"Changing suppliers isn't something you (buyers) want to do (when) they are tried and true performers, and they keep performing," Barto said.

One alternative, Barto often suggests, is alliances, where small companies pool resources to compete for large contracts.