When ‘small’ gets bigger, who gets left behind?

For more than two decades, I’ve watched small government contractors navigate one of the industry’s most difficult transitions: succeeding.

They win. They grow. They recruit exceptional people, develop deep expertise in an agency’s mission and systems, and build trusted customer relationships and institutional knowledge that can take years to develop.

Then they become too big to be small.

Suddenly, a thriving company can find itself competing in the mid-tier against organizations many times its size, without the advantages that helped it grow.

It’s a challenge the GovCon community has debated for years, and one the Small Business Administration’s proposed overhaul of its size standards could help address.

But it raises another important question: If we make “small” substantially bigger, what happens to the companies that really are small?

And what happens to the mid-tier?

Moving the line changes the market

SBA estimates its proposed changes would allow roughly 115,000 additional businesses to qualify as small. That could provide valuable breathing room for successful companies approaching today’s thresholds.

But expanding the pool also changes who competes within it. SBA itself acknowledges that growing businesses near today’s thresholds could face greater competition from newly eligible companies.

That deserves attention.

Growth shouldn’t become a liability

A contractor can spend years building the people, past performance, clearances, customer relationships and technical expertise necessary to support a government mission. Yet crossing a size threshold can dramatically alter its competitive environment.

Some companies successfully make the leap. Others pursue acquisitions to gain scale. Some become acquisition targets themselves. Others struggle to survive the transition.

There is real value in reconsidering whether today’s standards reflect the realities of modern government contracting.

But moving the dividing line doesn’t necessarily solve the underlying structural problem. It may simply move it.

Perhaps we should think beyond two broad categories of small and other-than-small. Could additional tiers, transition mechanisms or more flexible approaches for certain procurements preserve competition while allowing successful companies to keep growing?

Protecting the innovation pipeline

Government leaders continually call for greater innovation, faster technology adoption and access to highly specialized talent. Small and mid-tier businesses are an important part of that ecosystem.

Having supported companies across the GovCon spectrum, from emerging small businesses and mid-tier contractors to large global technology and defense companies, I’ve seen the distinct strengths each can bring to the mission.

What has always stood out to me about small and mid-tier companies, in particular, is their ability to combine deep mission expertise with entrepreneurial speed. They can make decisions quickly, organize around emerging requirements and attract specialized talent. As they grow, the best retain that entrepreneurial culture while adding the infrastructure and scale needed for increasingly complex missions.

Large primes benefit, too. Small businesses frequently enter programs as subcontractors and technology partners, developing capabilities and institutional knowledge that become important to the larger team.

A healthy industrial base should create pathways for promising companies to enter, compete, grow and keep contributing after they succeed.

Compete on more than status

Many small businesses understandably lead their marketing with their size status or set-aside category. Those designations can be powerful differentiators and important pathways into the federal market.

But they should never become a company’s entire value proposition.

Whether or not SBA’s proposal becomes final, small businesses should already be preparing to answer the question that eventually confronts every growing contractor:

Why us?

What expertise do we own? What missions do we understand exceptionally well? What makes our people, technology or approach different? Why should an agency choose us? Why should a prime want us on its team?

And there is another increasingly important audience for that answer: talent.

GovCon companies aren’t only competing for contracts. They are competing for people, particularly in markets requiring highly specialized technical expertise and TS/SCI clearances. A strong brand needs to answer “Why us?” for the engineer, technologist or cleared professional deciding where to take their talent just as convincingly as it does for a customer or teaming partner.

If a company’s primary competitive message is what category we qualify for, rather than what value we deliver and why people want to work with us, a more crowded marketplace could expose that vulnerability quickly.

Companies given a longer runway before graduation should use it wisely. Strengthen the brand, differentiate capabilities, deepen customer relationships, build strategic partnerships and establish a compelling employer value proposition.

Build a market position that survives your size designation.

The bigger question

SBA’s proposal addresses a legitimate problem: successful companies shouldn’t be disadvantaged simply for succeeding.

But as we reconsider where to draw the lines, we should look at the entire lifecycle those lines create.

Are we preserving opportunities for emerging businesses? Giving growing companies a viable path through the mid-tier? Encouraging productive partnerships? And retaining the innovative companies, specialized talent and institutional knowledge government missions require?

Ultimately, the goal shouldn’t simply be to create more companies that qualify as small.

It should be to create a stronger, more competitive and innovative industrial base capable of delivering the best solutions for the mission.