Effect of Size Standards on the Erosion of the Mid-Level Companies. In recent years, mid-size firms, by virtue of being neither small enough nor large enough to successfully compete, have consistently and considerably seen their share of the market decline, according to Gregory Sanders et al.’s report Structure and Dynamics of the U.S. Federal Professional Services Industrial Base 1995-2009 (see figure 3-14, Sanders et al., 47). The Executive Summary of the report finds that:
“[I]t is clear that those in the middle tier have suffered an erosion of their relative share. In 1995, middle-tier companies captured 40 percent of the total value of federal professional services contracts. By 2009, the middle-tier companies were able to capture only 30 percent of that value. At the same time, (…) [s]mall companies have sustained a 19–22 percent market share in the value of prime contracts. The large companies in this industry have been particularly active via mergers and acquisitions and have been able to increase their market share from 41 percent of the total market in 1995 to 48 percent in 2009. Thus, the middle tier has been squeezed from above by consolidation and from below by the slight growth in small contractors’ share of the market” (Sanders et al. XV).
The report concludes: “Traditionally, mid-tier companies have served as a conduit for new ideas and improved business practices. Policymakers must determine whether a robust middle tier of services companies is important or desirable for the federal marketplace. If so, current incentives for companies to enter and remain in this mid-market level must be revisited.” (Sanders et al. 53)
Because small business size standards are not updated very often, this is an ideal time to re-look at these size standards in light of the erosion of the mid-tier firms.