Sunday, December 17, 2006
MARKETING A SMALL BUSINESS IN THE FEDERAL GOVERNMENT CONTRACT ENVIRONMENT
Link to Ken Larson Counseling Profile at Micro Mentor:
Key Words: "Federal Government Contracting"
You have positioned your existing or start-up company for doing business with the federal government. You have acquired a D&B Number, completed your Central Contractor Registration (CCR) to include determination of your North American Industrial Classification (NAICS) Codes, applied for an SDB certification, if applicable, researched your HUB Zone status and developed an initial capability statement for marketing purposes. You are embarking on the utilization of FEDBIZOPS, the gateway for federal government agencies advertising prospective contracts on the Web. Now is the time to think through your marketing strategy and the various venues for contracting with the federal government. This article will discuss these venues and the opportunities they offer your small business.
II. WHAT TYPE OF SMALL BUSINESS ARE YOU?
A. Commercial Contracting Under FAR Part 12
Are you planning to market an existing commercial product which has been on the market, such as software, hardware, a commodity, a report, a conference, a survey or a study, sell it to meet a government specification or statement of work and bill for the end product when delivered? If you fall into this category, will your deliverables be less than $25K on each contract or purchase order? If the answer to both questions is "Yes", you may be able to do business under Federal Acquisition Regulation (FAR) Part 12, "Commercial Contracting", which is a simplified and fast form of selling to the federal government. The vast majority of purchases by the federal government in this category are Firm Fixed Price (FFP) with a product warranty of some type. Even if your prospective contracts will exceed $25K per contract, you may be able to sell under FAR Part 12 if your product meets the definition of commercial items specified by the government.
B. Non-Commercial Contracting
Are you planning to market your services at an hourly rate, sell them by labor categories with professional job descriptions to perform the government statement of work and bill by the hour for labor and at cost for material and travel? Or is your product or service a development effort or not readily available to customers in the commercial marketplace. If you fall into this category for either reason it is unlikely you will be contracting under FAR Part 12 and you will be pursuing long term government contracts in excess of $25K. If that is the case, much of the remainder of the Federal Acquisition Regulation (FAR) will apply to you, together with the various contract types other than FFP which are used for efforts where the contractor and the government may share the business risk in development, implementation or production of a new product, system or service.
C. Commercial and Non-Commercial Contracting
You may decide to market under both (A) and (B) above. Some small businesses sell their product commercially, but contract for product implementation and support on a service contract basis.
If you are selling under (A) and (B) or just (B) above you should examine the remaining articles in this series to obtain sufficient detail to develop your business system in estimating, proposing, accounting and billing the government for contracts not qualifying under FAR Part 12.
III. YOUR CUSTOMER
Although all requirements in the federal government market eminate from the US Agencies there are several ways for meeting these requirements with a business arrangement that suits your small business.
A. A US Government Agency As a Customer
There are over 50 agencies or "Departments" in the Federal Government. Each of these agencies has a statutory obligation to contract from small business for over 20% of everything it buys. Contracting officers must file reports annually demonstrating they have fulfilled this requirement. Not fulfilling the requirement can put the agency annual funding in jeopardy. You have a motivated customer in federal government contracting officers and buyers.
As a prime contractor to one of these agencies your small business proposes, negotiates and contracts directly with a federal government contracting officer. You may or may not have subcontractors or suppliers. A subcontractor is a teaming partner who agrees to accept a portion of the effort under your prime contract and abide by the prime contract terms and conditions flowed down to him from you. On competitive procurements the business arrangement is usually mutually exclusive on the part of the subcontractor and your company. A supplier is a purchased finished vendor or off the shelf retailer who sells you items or components necessary to produce your product but does not accept the flow-down provisions of your prime contract other than the most general terms and conditions such as US Public Law , EEO, Tax Provisions, Warranty and the like. Supplier relationships are not usually mutually exclusive arrangements.
You may be able to fulfill the entire prime contract scope of work or meet the product specification from within your company. However, major government procurements are increasingly geared to teaming arrangements involving a prime and several subcontractors. As the prime on such a procurement you normally have the lead share of the work scope, you have a product critical to the program, you know the customer the best or a combination of these factors. Your subcontractor team members are usually not your direct competitors but are involved in lines of work that complement your business and enable the team to fulfill a scope that is larger than any single member could undertake alone Your direct competition is most likely forming similar teaming arrangements in an attempt to win the larger jobs which can span a number of years in duration and mean good, solid cash flow for all participants.
A General Services Administration (GSA) Schedule is a pre-qualifying way to obtain business directly from all federal government agencies. The GSA performs the service of negotiating with you for multi-year pricing of labor, products and equipment, together with pre-established terms and conditions. Your schedule and terms are posted to the GSA Web Site, "GSA ADVANTAGE", and all federal agency buyers can expeditiously buy from your schedule. A GSA Schedule is normally set up for 5 years.
The GSA also sponsors and manages major Indefinate Delivery/Indefinate Quantity (IDIQ) procurements such as "Alliant" and "Alliant Small Business" for Information Technology. These contract vehicles pre-position large and small contractors and teams of contractors to accept competitive delivery orders under established terms and conditions and standardized solution s for technological areas in high demand across the federal government. An IDIQ procurement can span a period as long as 10 years.
B. A Government Prime Contractor As A Customer
Government Prime contactors who are large businesses (roughly defined by the SBA and the banking community as having over 500 employees and annual sales in excess of $20M) and who hold federal government contracts have the same requirement as government agencies to buy at least 23% of the supplies and services in support of those contracts from small business.
Large business, under federal procurement law, must prepare and submit annual "Small Business Contracting Plans" for approval by the local Defense Contract Management Area Office (DCMAO) nearest their headquarters. These plans must include auditable statistics regarding the previous 12 month period in terms of contracting to small businesses and the goals forecast for the next year. The federal government can legally terminate a contract in a large business for not meeting small business contracting goals. Approved small business plans must accompany large business contract proposals submitted to federal government agencies. You have a motivated customer in large business subcontract managers, administrators and buyers. A small business who becomes a prime contractor does not have to meet the annual small business contracting plan requirement until it becomes a large business.
In selling to a prime contractor you propose, negotiate and subcontract with a company who holds a contract with a US government agency and in turn flows down its provisions to you. Or you sell under purchase orders on a commercial basis (FAR Part 12) to another company who holds a federal government contract.
C. Selling Via a Joint Venture
There are occasions when two companies wish to combine their respective products or resources and form a separate entity to undertake a contract, usually a prime contract with the federal government. The marketing considerations for such a venture involve impressing the client with the resources being dedicated to the program or addressing government concerns about broadening the technology and assuring redundant capability in the industrial community. A joint venture consists of human and other resources from the participating companies. However, it stands alone as a legal entity. Joint venture agreements are difficult to craft. Protecting proprietary information, together with intellectual property is especially demanding. Dividing the contractual effort and ultimately integrating it into a final product or service is also a challenge. Complicating the scenario is the fact that the US Government reserves the right to approve joint venture agreements before a contract can be issued to the entity. One company usually assumes the lead role in the joint venture. Some joint ventures hire a joint venture administrator who is the only legal entity authorized to sign a binding document on behalf of the two companies once it has been approved by each firm through a joint venture board, with equal representation by both organizations. Administration, accounting and billing at the joint venture level is a third tier of administrative cost which must be born by both companies.
In summary, your customer in the federal market is either the government itself or a prime contractor. You will sell as a prime contractor, as a commercial supplier or as a subcontractor and on occasion you may have the need to establish a joint venture with another firm.
IV. MARKETING AVENUES
A. Small Business Certifications
Your small business designation in the Central Contractor Registration (CCR) Data Base places you in the small business set-aside market for 23% of the total goods and services the federal government buys. Within small business, there are additional self-certifications and an SBA certification to which you can apply if you qualify. The self-certifications are as follows:
· Small Woman-Owned Business
· Small Veteran-Owned Business
· Small Disabled Veteran-Owned Business
Self-certification occurs when you respond to government requests for proposals, cite your CCR number and state in your proposal certifications and representations that you are a Small Business and whether or not you are Woman-Owned, Veteran-Owned, or Disabled Veteran-Owned. Procurement contracting officers and prime contractors are responsible for verifying self-certifications. In the case of the self-certifying entity, a woman, a veteran or a disabled veteran must have a major equity share in the business and must be involved in running the business operations.
The SBA certifies Small, Disadvantaged Businesses under their "8(a) Program". The application for this certification is available at the SBA Web Site for businesses who qualify by virtue of minority ownership and minority involvement in running the business operations. The SBA reviews, approves and grants 8(a) Certifications to small minority-owned businesses. Please see the following link:
Federal agencies and prime contractors are required to set goals and contract to achieve annual objectives for each of the above certifications within the overall 23% small business contracting mandate required by statute. Procurements are regularly "set-aside" for these designations to achieve government and prime contractor annual objectives. Procurements are also set-aside for small business in general, which includes companies who may not qualify for the additional small business certifications discussed above.
B. Capability Statement
With your small business CCR registration and additional certifications, you are ready to develop your capability statement. This document will be a promotional brochure which on paper and through the electronic media advertises who you are, what your do and why the government or prime contractors should buy from you. Major elements of your capability statement in addition to your small business designation and certifications are as follows:
(1) Company overview
(2) Supplies and services description couched utilizing your marketing ideas and strategy.
(3) Past performance of your enterprise or your personal background and qualifications (experience, education, etc.)
(4) Facilities or capabilities overview (How you perform your service couched in a manner that will appeal to your target market)
(5) Explanation of the positive results the client should expect.
(6) Points of contact and ways to contact you for meetings, placing an order and contracting your services.
The document itself can be created with some graphics, pictures, themes and sales pitches in MS Word or Power Point Software. "Art Explosion Publisher Pro" is an inexpensive product which is useful in creating business brochures. It offers templates and works well with photos, graphics, background, etc.
The following is a link to a capabilities statement on the WEB. It is in the public domain.
Your capability statement can be distributed on paper to your target market as a brochure, emailed as an attachment and linked into related industry web sites or partner web sites to get the word out about your product or service. The capability statement targets contracting officers and prime contractor buyers who are seeking to fullfill their small business buying goals. It is a way to get you in the door and speak to or correspond with the management and technical personnel who are the decision makers in sourcing small business buys.
C. Self-Marketing for SBA 8(a) Small Disadvantaged Business (SDB)'s and Historically Under-Utilized Business (HUB) Zone Contractors
If you qualify for a SDB Certification or can attest that you are located in a HUB Zone, these items can be valuable marketing tools. Presenting your cabability statement to a prospective federal customer and meeting the management, technical and procurement decision makers puts you in a position to self market projects. All federal agencies and large business contracting to the federal government have to meet SDB and HUB Zone annual buying objectives. They have processes for competitive procurements. The processes are generally lengthy to comply with regulations governing solicitation on the open market, request for proposals, source selection, negotiation and award.
Under the 8(a) SDB Program and the HUB Zone Program if you can assist a federal agency or large business in identifying a product or service they need and that you are a qualified source to fill that need then the your customer can buy it directly from you and bypass the competitive process entirely. The key to achieving this type of targeted marketing is to contact and/or visit your customer regularly and get in front of the solicitation process. Once a project has gone to the "Sources Sought" or "Solicitation" stage you can still convince the customer to set it aside for 8(a) or HUB Zone firms, but you will be competing with other SDB's or HUB Zone contractors in your NAIC's Code for the business. The "Early Bird Gets the Worm", adage is useful for SDB and HUB Zone organizations. Some buying agencies even permit an 8(a) SDB or HUB Zone Contractor to assist in writing the product or performance specification for a project to expedite the process. Federal agencies and large businesses are motivated to use the non-compete, set-aside features of the 8(a) SDB and HUB Zone Programs. Doing so permits them to meet their small business procurement goals and enables a swift buying action of a product or service for which they may have a critical need. In addition, for HUB Zone contractors, a federal agency is permitted to consider a HUB Zone Contractor's proposed price 10% lower than other contractors who may have bid a comparable amount in a competitive procurement. A similar 10% advantage rule for SDB's was recently eliminated by the federal government.
D. GSA Schedules and Indefinate Delivery/Indefinate Quantity (IDIQ) Contracts
The General Services Administration (GSA) pre-qualifies contractors with a terms and conditions package and negotiated rates for products or services. Your GSA schedule is then posted to the web at:
This site is searchable by all government agencies who want to buy products and services. A GSA schedule allows you to offer a pre-existing contract vehicle with established pricing to any federal government agency or prime contractor. This shortens the procurement process considerably. In some procurements, a GSA Schedule is necessary to qualify for bidding certain jobs. You can read more about applying for a GSA Schedule by going to the General Services Administration Web Site at:
Under Indefinite Delivery/Indefinate Quantity (IDIQ) Contracts, terms and conditions and labor hour pricing are agreed upon in advance with an agency for a period of time (usually a multi-year arrangement). Many large government agencies contract utilizing IDIQ contract vehicles and often make multiple awards to several companies who then compete for work on a delivery order basis thereafter. The GSA also manages large scale IDIQ procurements in high technology areas such as Information Technology (IT). The Alliant IDIQ program is a decade long example. It consists of two competitions with multiple awards; one to large business and one to small business against a standard for information technology development accross all federal government agencies. Individual agencies then compete and procure IT products and services against the standard with established terms and conditions and known pricing. Once qualified, winning in this type of environment is simplified to submitting the best technical solution to a given delivery order with the lowest man-hours or product pricing. It is not uncommon for competitors to offer discounts during the competition.
Under both GSA Schedules and IDIQ Contracts individual delivery orders are negotiated separately regarding the labor hours, material and travel cost necessary to complete a discrete scope of work.
http://www.fedbizopps.gov/ is the gateway for all federal acquisitions in excess of $25K. The search tool at the site is a very powerful engine with many filters that are useful. It is well worth the time to learn the filters. Every federal agency is required by regulation to advertise at FEDBIZOPS. You may be surprised at the products and services "Uncle" buys.
Because the federal government buys on such a large scale and in many acquisitions chooses to package related technologies or services, it is a necessary part of your marketing plan to consider teaming with other companies. As discussed in paragraphs II. and III., above, large businesses who are in the same line of work as you are have a requirement to subcontract to small businesses under federal government contracts. In addition, large and small companies who are in related or synergistic businesses to yours actively seek partners in the federal government market to permit access to larger packaged procurements.
Attend trade conferences, join trade organizations, get into technical blogs on the web and conduct searches in the CCR Data Base for companies whose supplies and services might compliment yours. All large businesses contracting with the government have a small business liaison officer which you can locate at the company web site. Present your capability statement electronically or preferably in person to local large businesses engaged in federal government contracts who may need your services.
Many large businesses are willing to team as a subcontractor to a small business to get access to the small business set-aside market. A large business cannot receive an amount in excess of 45% of the dollar award of a small business set-aside, but many large businesses are willing to subcontract to multiple small businesses on federal government contracts to broaden their business base.
For SDB companies, the "Mentor - Protege' Program is available. This is a federally sponsored program whereby a large business sponsors a smaller business through active teaming and mentoring. Your can learn more about this program at:
The best way to approach a large business or another synergistic small business is to have a program target as a discussion vehicle. If you find a project for which you need a partner or partners, carefully research the firms you are considering, check their D&B's, see if they have entered their company in the "Interested Parties" frame of the solicitation at FEDBIZOPS.
When teaming with another company, most arrangements become mutually exclusive if you are subcontracting to one another and not just supplying off the shelf products. As the business relationship evolves and you begin sharing information a two way Non-Disclosure Agreement (NDA) is usually necessary to protect proprietary information.
As the business relationship matures and the parties agree to become exclusive, a teaming agreement is also necessary. At this point you have agreed upon who will be the eventual prime contractor and who will be the subcontractor. The areas regarding work share and proposal preparation are particularly critical in terms of thorough definition to avoid future misunderstandings among the parties. If and when the prime contract is awarded, the teaming agreement is replaced by a subcontract from the prime party to the subcontracting team member.
G. Small Business Innovative Research Program
Another federally sponsored program is the Small Business Innovative Research (SBIR) Program for high technology small business. This is a competitive program awarding small business annual grants in critical high technology areas. Your can learn more about the SBIR Program by going to:
This article has offered a template of avenues for small business federal government contract marketing. You should apply the template to your business plan and explore which avenues suit your enterprise. The federal government contract customer is motivated to sell to you. Your marketing task is to target and find your customer considering the supplies and services you sell. The federal government offers competitive advantages to various types of small business, depending on ownership and size. Federal government contracts offer small purchases and long term contractual arrangements from firm fixed price purchases to cost type and time and material contracts. The opportunities are there for small business entrepreneurs’ to pursue.