It’s hard to doubt the impact government work can have on a small business in terms of both financial and technological gain. Just imagine the potential such programs could have if the playing field were level.In its first ten years of existence, visualization software company Tecplot  relied almost entirely on R&D contracts with the U.S. government. The company worked with a number of agencies, including the Department of Defense, NASA, and the Defense Advanced Research Projects Agency (DARPA) to advance computational fluid dynamics (CFD) technology.
On the surface, it was a sweet deal for the company — one of the agencies would hand over a fistful of cash and tell the small operation to get lost for a few years. Tecplot was tasked to tap its ten-year head start in parallel processing CFD, dive deep into algorithm development, crank out a solution, and come back when it was finished.
The multi-year government contracts paid the bills, but as Tecplot President and CEO Mike Peery sees it, they also confined his company’s ability to adapt to the market.
“You sign up for a Phase II SBIR [Small Business Innovation Research] program and it could go on for three years,” Peery said in a recent conversation. “You can’t just back out of those and change course. You lose your ability to respond to business leads.”
The SBIR program fit a young company that had the intention of producing commercial CFD codes, but Peery was too focused on making a high-quality solver and had yet to understand the importance of marketing. The program allowed him to keep his head down and focus on creating a superior product while distancing him from the customer base.
Luckily, a vast hole remained in the post-processing market once his senses cleared.
Government contracts, particularly those for research, don’t allow a company to make a large profit, according to Peery. The thin profit Tecplot turned was used to overrun the existing contract to keep customers happy and make sure that the company could have a chance at the next SBIR.
Nowadays, Peery is extremely picky when it comes to the government contracts because he wants to keep the company centered on the customers buying his products. However, Tecplot may not have the technology to sell had the company never pursued the SBIR. His company didn’t reap a great profit from the government contracts at the time, but Peery will admit that he was able to take the knowledge and technology forward to use in future products.
According to Glen Whitehouse, a researcher with engineering service bureau Continuum-Dynamics  (CDI), working with the government today is a murky and often incestuous cycle. CDI recently worked with CAE, a leading supplier of military full-mission simulators, on outfitting Navy helicopter trainers with the data required to simulate dangerous pilot landing situations
Read: Ride the Air Wake 
Whitehouse said CDI was lucky to catch CAE’s eye to be able to participate in the broken system.
“I feel like we’re pushing from the back for new capabilities,” Whitehouse said. “It would be nice if it was a top-down approach in which a pilot or commander in the Navy could walk in and say, ‘We need X capabilities.’ Given the way the monolith of the government works, it’s the exact opposite.”
The government doesn’t follow the usual market drivers wherein a superior product is chosen on its merit. Wheels need to be greased. As a small company, you spend time sitting on the sidelines and hoping that you are talking to the right people, the decision makers. According to Whitehouse, a small outfit spends most of its time trying to figure out what is going on.
“Whether we agree with it or not — and whether it’s morally correct or not — lobbying carries a very large weight,” Whitehouse said. “You go up against a prime contractor with lobbyists who are paid to live in D.C. and bug politicians; lobbyists that go into the pentagon; lobbyists who talk to technical people in government labs. They are able to cover so many more bases than a small business, and sometimes you wonder if the prime contractors drive the requirements documents that end up coming out.”
When the government solicits a need for a new helicopter trainer, for example, they publish it as an SBIR along with a requirements document. Whitehouse noted a potential conflict of interest because the documents are written by a prime government contractor. “It’s this incestuous cycle that isn’t always transparent to new people and small businesses as to how to get involved in the process,” he added.
It’s hard to doubt the impact government work can have on a small business in terms of both financial and technological gain. Just imagine the potential such programs could have if the playing field were level.