Dell, Lenovo, IBM, Hewlett-Packard Co. and other big information technology providers will need to align themselves with small businesses to tap a $5 billion federal contract to supply items such as laptops, servers, routers and storage systems.
The Department of Veterans Affairs plans to pick as many as three companies by the end of March to share the five-year agreement, which has drawn interest from the top computer makers and International Business Machines Corp. Only firms with a maximum of 150 employees will be chosen as prime contractors, forcing large companies to woo smaller partners for work.
The boost to small firms is long overdue, said Cris Young, president of the American Small Business Chamber of Commerce, a Washington-based nonprofit group.
“It’s about time for us to get our fair share of the pie,” Young said in a phone interview. “The dollar amount of the VA contract is huge. For a small business to get something like this is amazing.”
President Barack Obama’s administration has prodded agencies to steer more contracts to small businesses after the government missed its targets in that area. The VA has the added responsibility of helping veteran-owned companies.
One of the three small businesses on the technology contract will be owned by a disabled veteran if there’s an acceptable offer, Jo Schuda, an agency spokeswoman, said in an e-mail.
The arrangement “really shows the increasing importance of partnering with small businesses,” said Brian Friel, an analyst with Bloomberg Government. “In order to get the work, big businesses like Dell and HP have to figure out which of the small businesses are going to drive the most purchases to them.”
While the Homeland Security Department and the General Services Administration have put small firms in the driver’s seats of similar contracts, the veterans agency offers more opportunities because its funding is poised to grow in an austere budget environment. It is also immune to the looming threat of automatic U.S. spending cuts.
The VA is using a separate, $12 billion technology contract awarded in 2011 to help small businesses owned by disabled veterans. So far, most orders under the umbrella contract for technology products and services have gone to such firms.
HP, based in Palo Alto, California, won $20 million under that agreement. By comparison, Systems Made Simple Inc., a Syracuse, New York-based business owned by a disabled veteran, got almost $260 million. Dell and IBM don’t have seats on the deal.
The VA’s new contract makes it easier for the agency to meet its small business targets, Friel said.
The agency had a target of spending 34 percent of eligible direct contract revenue with small businesses in the year ended Sept. 30. It surpassed that goal and hit 35.1 percent, according to preliminary data from the Small Business Administration website.
“You’re going to buy Dell or HP products anyway, but you get small business credit by going through a reseller,” Friel said.
Dozens of companies have expressed interest in the VA technology contract to be awarded by March 31.
Red River Computer Co., a Claremont, New Hampshire-based technology firm, has bid on the contract, said Jim Dunn, the company’s vice president of strategic programs.
The small business has a seat on a Homeland Security contract, valued at as much as $3 billion, that also reserved all its slots for small firms. Dell and Cisco Systems Inc. are partners on that agreement, he said.
Hewlett-Packard and IBM appear on a federal website’s list of vendors that have expressed interest in the VA project. Ericka Floyd, a Hewlett-Packard spokeswoman, and Vineeta Durani, an spokeswoman for Armonk, New York-based IBM, declined to comment on whether their companies were pursuing the work.
Almost 100 companies, including Lenovo Group Ltd., Oracle Corp., Dell and Cisco, registered to attend a 2011 VA event for vendors seeking more information on the project.
“Dell is always looking for ways to help key government customers better accomplish their mission through more effective and efficient IT solutions and services,” Scott Radcliffe, a spokesman for the Round Rock, Texas-based company, said in an e- mail. He didn’t comment on whether Dell was seeking a role in the project.
The government work is important to large computer makers such as HP and Dell in part because it provides a relatively stable source of income, Abhey Lamba, an analyst with Mizuho Securities USA Inc. in New York, said in a phone interview.
“Every contract matters, especially one this sizable,” Lamba said.