INTRODUCTION
The March 1st, 2012 posting at this
site discussed “Sequestration”, a
forthcoming action involving automatic cuts under the law to civilian and defense
department discretionary spending. It is an automatic result of legislation in
connection with the special committee that was assembled to identify more than
$1 trillion in budget reductions to federal spending.
The
committee ended its proceedings without achieving the specified objectives on
November 21, 2011. That event, under the legislation on the books, puts
sequestration on auto pilot unless modified by further legislation. Many believe in an election year further
legislation will not occur or will have only a minor impact on the slated
budget reductions.
Companies have been
cutting back, anticipating leaner times in February 2013 when sequestration
formally begins. They are heavily pursuing commercial sector potential. For the federal sector, a focus in strategic
planning is advisable to prepare for the sequestration event and beyond.
The purpose of this article is to suggest long range planning tips for
small business to best position an enterprise in the federal sector under
waning federal budget conditions.
TIP # 1 UNDERSTAND
THE GOVERNMENT FISCAL YEAR
The US Government fiscal
year runs from 1 October to 30 September each year. About mid-summer every agency begins to get concerned about whether or not they have spent all their money, worried about having to return some and be cut back the next year. They must also submit their budget projections for the new fiscal year.
Agencies often flood
the market with sources sought notifications and open solicitations to get
remaining funds committed. Then during the last fiscal month (September)
proposals are backlogged with the government.
With the new fiscal year in October, after the usual Congressional approval
delays, the log jam breaks and the playing field becomes apparent for the next
year. If you are a small business you
need to be aware of these cyclic events and use them to your advantage.
TIP # 2 STUDY AGENCY FORECASTS AND FUNDING
LEVELS
A
recent article in Washington Technology entitled, "Should Contractors Fear
Sequestration?" cites potential trends which we suggest small businesses
research and to which they should remain sensitive in the coming months:
Below
is a summation:
Study
your current client funding activities.
The government will likely try to avoid terminating contracts. Instead,
officials will reduce the amount of money obligated under their contracts. It
is expected they will become less willing to extend contracts into
their option years and obligate money for one fiscal year at a time on
task order and services contracts.
Expect
the government to possibly use the prospect of funding cuts to renegotiate
contracts.
Officials will more often decide
to not award new contracts. Procurements that can be put off will be put off.
With available money, agency officials
will maximize contracts that meet their agency’s core duties; expect agencies
to look for more flexibility to avoid hard-and-fast commitments, such as
fixed-price contracts and minimum revenue guarantees.
IDIQs and the General Services
Administration’s Multiple Award Schedules program may become more attractive to
agencies. They allow for more negotiations at the task order level.
Advocate for the importance of a
program and stay in close contact with a contracting officer. Realize though
that the officer may not know the fate of a program until very late in the
process. You need to get to the real decision makers inside the agency early
and often and yet be polite to the gate keepers.
Businesses should also emphasize what
they can do for the agency; including the options the company is willing to
agree to that may even decrease its revenue.
Check the Past Performance Information
Retrieval System (PPIRS) and the Federal Awardee Performance and Integrity
Information System (FAPIIS). The information needs to be correct, and it should
reflect as favorably as possible on your company’s performance.
TIP # 3 STAY TUNED TO STRATEGY FROM THE EXPERTS
We posted the following question recently under “Government Contracts” on the business professional social networking site, "Linked In":
"What Steps are
Government Contractors Taking to Prepare for Sequestration of Federal Funds on
January 2nd, 2013?"
There were
significant astute remarks by those experienced in the industry such as Mark
Amtower, Olivia Bradford and others.
Here are extracts of Mark's and Olivia's responses:
MARK AMTOWER
http://federaldirect.net/
“ We should not fear
sequestration. We could dislike it, and dislike the reasons that may cause it
to occur, but certainly not fear it. Prepare for it as best you can. If you
have solid contacts inside the agencies, especially those where you currently
have programs in place, understand where those programs fit as far as cuts go
and rank them according to the likelihood of being impacted by sequestration. A
percentile ranking would be best. Most mid-size and larger companies are
already looking to diversify their client base to
commercial, state & local, education or health if they can. But smaller companies have fewer
resources to go after all those markets. Initially, the best thing to do is to
rank the programs you have according to where they would fall if sequestration
comes. Then solidify your relationships with your customer base in each agency
where you have programs. If the majority of your work is sub-contracting and
the program is likely to face cuts, your will will likely suffer. Have an
alternate method for that customer to access you, like a GSA Schedule. Don't
fear sequestration, prepare for it as you would a hurricane. You can't stop it,
but perhaps you can limit the damage.”
OLIVIA
BRADFORD
http://dracosolutionsinc.com/
“Definitely contractors should worry
and prepare for the worst, but in this situation there is a little hope for GSA
schedule holders, if only the Government could make more use of this type of
contract and distribute orders more equally among holders, it will keep more
small businesses alive, and maybe the Giants like Lockheed Martin, it is time
for them to come down to earth and suffer the consequences of the cuts, they
are getting to big, and powerful. Sequestration can be an opportunity to level
the field, if the government really has an interest in helping the small
business sector, small businesses have more flexibility to make cuts, reduce
overhead, innovate and move with the flow.”
TIP # 4 ASSESS THE STRATEGIC
ACTIVITIES OF YOUR PRIME CONTRACTORS
If subcontracting is a major element of your business base, keep your ear
to the ground with your prime contractors for a sense of where they plan to
diversify, expand into new market areas or cut back. Examine your strategic
plans, positioning yourself to partner with them if their plans have potential
for you.
TIP # 5 DIVERSITY ACROSS AGENCIES
Examine your core competencies. Skill sets such as IT, logistics, GIS,
facilities support and similar services will remain in demand but will be
spread across the agencies in accordance with the judgements the new congress
makes for devoting focus in the next annual budget cycles. Health care, education, the FAA the CDC and
DOT will remain at the fore, while agencies such as the Pentagon and USAID may
experience significant cuts. It will pay to broaden your marketing scope and
expand your base to government organizations for whom you could potentially
supply services.
TIP # 6 BE CAREFUL IN REPOSITIONING YOUR FIRM TO PURSUE LOCAL AND STATE
WORK
We suggest being cautious on moving to state and local business. That venue takes investment and time getting
to know the turf and the returns are smaller. There are also many local
connections and politics to consider, wired sources, statutes and policies that
vary with the locale, as well as professional competence considerations among
those who buy at these levels. The rule
book is not standard at the state and local level, unlike the Federal
Acquisition Regulation governing buying activities of the 126 federal
agencies. A considerable marketing
investment at state and local levels may not yield the return you may have
received had you invested the same effort at the federal level.
TIP # 7 SHARPEN YOUR PENCIL
Maximize your competitive pricing.
We suggest you careful examine the tips offered at the below article and
conduct tough competitive market analysis:
CONCLUSION
Federal government contracting will continue for the small business. The
impending belt tightening, mandatory from time to time, is a good opportunity
to test your strength, broaden your perspective, maximize on your industry partners
and position your firm as lean as possible for future success.
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