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Friday, January 2, 2009

SHOULD YOU CONSIDER SMALL BUSINESS FEDERAL GOVERNMENT CONTRACTING?

According to an article recently published in USA Today, the federal share of the economy is soaring, accounting for $1 out of every $4 and nearing the highest level since World War II:

http://www.usatoday.com/news/washington/2008-12-10-spending_N.htm?csp=34

There has been a dramatic increase recently in SCORE counseling requests from small businesses inquiring about entering federal government contracting. This article will address some basic things for you to consider in testing that prospect.

YOUR BUSINESS PLAN

If you don't have a business plan in these changing economic times you need one and you should keep it a living document. It is the key vehicle to determine your path forward and convince people that can help you of your firm's potential. Loan officers and investors are interested in your business plan as a function of evaluating the thoroughness of your future vision and validating your funding forecast needs.

Please go to the SBA web site that guides you through the business planning process. I suggest you follow the site presentation and note the factors to consider. The link to the SCORE site business planning presentation is:

http://www.sba.gov/smallbusinessplanner/plan/writeabusinessplan/index.html

The following site contains samples of business plans:

http://www.bplans.com/sample_business_plans/all_plans.cfm

Ask yourself some strategic questions, such as what competition you envision, what your marketing plan will be, etc. Addressing some of these questions may take some research and that is all part of the process of putting in place your plan. It is your road map for the future.

FEDERAL GOVERNMENT CONTRACTING

Your business plan should be a repository for research on the federal government marketplace and how you fit into it. There are many agencies and government prime contractors to whom you may be able to sell your products or services.

Like any other customer, the government expects you to finance your business, meet your payroll, pay your expenses and submit a bill for products and services delivered or rendered. The federal payment cycle is often 60 to 90 days, depending on whether or not you are a subcontractor to a prime corporation.

In federal government contracting you must also comply with the Federal Acquisition Regulation (FAR) and associated Cost Accounting Standards (CAS). Although these requirements are not "Rocket Science", they are different from commercial rules and generally accepted accounting practices (GAP). They have evolved over the years as the federal government has grown in the volume of goods and services it buys. Very few universities make FAR and CAS part of their curriculum and CPA's do not encounter them on a certification exam. Several articles at this site address the practical implications of FAR and CAS requirements for a small business.

The prudent, small businessperson reviews the potential impact of FAR and CAS on his or her business systems and processes before undertaking a government contract, particularly a cost plus or a time and materials contract. In many cases job cost accounting and long range budget planning are required to support pricing, overhead and general and administrative rates. Government contracts can run several months or even years.

Federal agencies form large-scale projects and use companies to service their needs by contracting specialized skills, sometimes bringing the contractors on site by labor category under time and material, cost plus or fixed rate contracts or by purchasing services or products at company facilities and remote sites.

In other cases, pre-established pricing and terms and conditions are negotiated with several suppliers in advance under omnibus contracts and separate delivery orders are issued competitively based on changing requirements. The General Services Administration (GSA) negotiates pricing and terms on multi-year schedules from which both federal and state agencies are permitted to buy.

REGISTRATION

One of the first steps that must be completed is registering your company to bid and become eligible for award of government contracts. Please visit the link below for the Central Contractor Registration (CCR) and notice the tips to make sure your file is as complete as possible.

http://smalltofeds.blogspot.com/2006/12/registering-your-small-business-for.html

Also note the North American Industrial Classification System (NAICS) Codes. Please make sure your CCR has the maximum number of codes for which you qualify, since the whole federal procurement system rides on those codes.

Self-Certification as a Small Business, a Small/Disadvantaged Business, a HUB Zone-located enterprise, Woman-owned or Veteran-Owned Business is also part of the registration process. Also insure the narrative description of your services is complete.

MARKETING

You should develop a capability statement (CAPE) for government contracts that is short and hard-hitting. It should be 1 page and should highlight the salient points of your products and offerings, your personnel and your qualifications. It should also include the specific information a contracting officer needs to place an order, such as your D&B Number, your government registration numbers, your North American Industrial Classification System (NAICS) codes and the like. These items are selected or provided by you or determined by the system when you register your company for government contracting.

The purpose of the capability statement is to respond to government postings requesting industry interest in forthcoming procurements. They are normally posted at the state and local sites referenced above and at FEDBIZOPPS, the federal government gateway to contracting:

http://www.fedbizopps.gov/

A CAPE is useful in acquainting teaming partners with your expertise and government buyers with your small business designations and qualifications. It should be developed in PDF, JPG or similar formats that that can be emailed easily and readily opened.

The following link shows a typical capability statement by a small business government contractor: He may not be in exactly the same business as you are but you can get the idea of what a CAPE should look like and perhaps frame your own document by examining his:

http://smalltofeds.blogspot.com/2007/01/seven-management-techniques-to-assist.html

As an additional approach, please examine the following link to a company who has developed a web page tab for government contracting officers with their CAPE contained therein:

http://vsolvit.com/

UNDERSTANDING THE PROCESS

To propose and win federal government contracts you must become familiar with federal contract marketing, proposal preparation, negotiations and terms and conditions. It is a huge market, but a competitive one. Part of developing the final version of your CAPE will be to examine the market and pinpoint what is out there in the way of typical government bid solicitations that fit your line of work and then frame your document presentation.

The following additional reading at this site will provide background for your research:

http://smalltofeds.blogspot.com/2007/06/federal-government-contracting-customer.html

http://smalltofeds.blogspot.com/2006/12/marketing-small-business-in-federal_17.html

http://smalltofeds.blogspot.com/2007/03/small-business-federal-government.html

http://smalltofeds.blogspot.com/2008/03/establishing-far-and-cas-compliant.html

http://smalltofeds.blogspot.com/2008/07/small-business-government-contracting.html

PRIME CONTRACTORS

Regarding larger government contracting corporations to whom you could subcontract - cover the waterfront. Find out what they are bidding and aggressively market a piece of the action as a small business. Determine the locations for the largest government contractors nearest you and register at their supplier business sites. Everything they buy for their facilities, their personnel and their operations counts toward the small business goals required contractually of them by their enormous government contracts.

Research their web sites and locate their small business liaison officers. Make appointments and visit them. While visiting, seek the names and titles of managers internal to their companies who manage prime contracts involving expertise your business can supply. Go after those managers.

SUMMARY

Please check the table of contents on the left margin of this site for other topics that may be useful to you. Small business federal government contracting is different from the commercial marketplace in terms of business system requirements, marketing, teaming relationships, pricing and the duration of associated contracts. The topics in this discussion and further reading at this site may assist you in your decision whether or not to include the federal market in your business plan.

2 comments:

Anonymous said...

For federal contracting: is there some specific requerements for accounting system of small /new company?
Thank you

Small Business Federal Government Contracting said...

Please see the following link for informtion on modified Cost Accounting Standards (CAS) coverage that applies to small business:

http://smalltofeds.blogspot.com/2008/02/dcaa-audits-and-small-business-job-cost.html