Bass, Berry & Sims attorney Jason Northcutt authored an article for Contract Management Magazine discussing strategies for the middle-tier of government contractors that participate in the contracts bidding process. Historically, middle-tier contractors have faced numerous challenges from competition, including the "lowest price, technically acceptable" (LPTA) standard, which favors companies who compete primarily on the basis of price. These contractors typically consist of companies offering commoditized products or services, or large companies with significant economies of scale. Going forward, however, the 2017 National Defense Authorization Act (NDAA) mandates that the LPTA standard can only be used for straightforward commodity procurements, showing that the use of the standard is trending towards stricter regulations. Beyond the tightening of the LPTA standard, middle-tier contractors can also look forward to expanded opportunities from increased fiscal spending as proposed in President Trump's 2018 fiscal budget, which currently includes increased military spending and border security.
In terms of business growth, contractors should not expect a spike in merger and acquisition transactions since government services deal volume is expected to remain at 2015-2016 levels. Contractors should adopt a "focused scale" strategy to best focus on core competencies while slowly broadening its product of offerings to expand access to deals. "Organic growth alone can only take you so far," Jason said. "The federal market is an industry where companies have turned to inorganic strategies to drive growth."
The full article, "Silver Linings and Golden Opportunity – Growth Strategies for the Middle Tier," was published in the August 2017 edition of Contract Management Magazine and is available online or the PDF below.
Originally published in the August 2017 issue of Contract Management Magazine. Copyright 2017, National Contract Management Association. Used with permission.