This article will address 10 misleading or erroneous impressions that small enterprises commonly hold regarding doing business under federal government contracts. It is our hope that correcting these misconceptions will assist companies considering entering the venue and help those who are already in the field to improve.
1. It is easy to become established in the federal marketplace by founding a start up in small business contracting to the federal government
Very few do so. The principle reason for this is lack of past performance records either commercially or as a registered government contractor. Past performance is a major factor in awarding government contracts:
Small enterprises who succeed in federal government contracting usually have a sustaining commercial business as ongoing support while they learn federal contracting bid, proposal, and pricing, industry teaming and marketing techniques.
2. Federal government contracting is just like local and state contracting
It is not. Every local and state government agency has their own set of rules and contracting techniques. Although states must meet federal law with regard to interstate trade, EEO and similar matters, they are given wide latitude by the federal government. Most state and local or municipal agencies are very dissimilar in the specifics of how they conduct procurements and are strongly influenced by community ordinances and state law.
Federal government contracting has its own set of specific rules (The Federal Acquisition Regulation (FAR) and Cost Accounting Standards (CAS) which cross all agencies. Small business must understand how these rules affect their doing business at the federal level.
3. Business can be conducted at the federal level without significant process changes from commercial practices
To succeed in federal contracting the small enterprise must implement processes such as GSA pricing, job cost accounting, forward pricing rates and related matters that are not common in the commercial venue. This takes research, time and process/business systems implementation that many firms overlook until they realize, through hard experience, that they must develop them on the fly to succeed. Federal government contracting is not rocket science but it is different than commercial contracting.
4. Federal government contracting can begin immediately after registration
This is a hypothetical possibility but not realistic. Registration simply self-certifies a small business to compete, establishes a Central Contractor Registration (CCR) Number and a Federal CAGE Code for the firm. Agencies do not go looking for registered firms to do business with them. A niche must be located by the prospective contractor in the form of an agency requirement that fits the company. Or the company must locate industry team member (s) that can use capabilities available from the newcomer. Very small enterprises achieve these objectives to a large scale degree within their first year of pursuing contracts with the federal government.
5. All federal government contracting agencies are the same
Not so. Department of Defense (DOD) contracting, for instance is very different than contracting with civil agencies like the FAA. The technical requirements, environment and security factors vary dramatically even though they use the same contracting rule book. The seller must market to the agency that has the greatest need for the product or service offered and team with industry partners who can enhance the potential of the small business in collaborative efforts. Section I, “Contract Clauses” at the below link illustrates some of the FAR Agency Supplements that apply overall FAR guidance within specific agencies.
6. Small Business set aside designations will yield immediate business
Self-certifying as a minority-owned, woman-owned, veteran-owned or disabled, veteran- owned business allows a firm to compete with other companies who have the same designation. At times this involves substantial competition. Achieving a government certification as a small-disadvantaged 8(a) or HUB Zone enterprise may allow set-aside contracts without competition, but such awards are becoming rare, harder to justify by the government and are monitored closely for competitive possibility by oversight functionaries.
7. Federal government contracting can be undertaken by a company on a stand-alone basis
This is only true for companies with very unique, off the shelf products involving small buys. Even then, knowledge of the industry and networking with other firms dramatically increases the possibility of expanding sales. Relationships must be developed with primes and other small businesses that can help the small firm, team with with it and keep it in mind as they search for success. That takes time, patience and open-minded, out of the box thinking.
Synergism is paramount in teaming with any size company, whether in a lead or subcontracting role. There should be technical, management and market segment similarities between the small business and any company with whom it is considering teaming. A prospective team member ideally will not be a direct competitor; rather a business in a related field with whom the small enterprise shares a mutual need for each others contributions in pursuing large-scale projects.
8. Small Businesses receiving set aside contract awards from the federal government can subcontract all the work to other, larger and established enterprises
Companies obtaining small business set aside awards must be capable under the law of performing a minimum of 51% of the required effort internal to their organization.The quantitative measurements the government uses to gauge this rule are the work scope, hours and dollars content of the prospective contract.
9. Obtaining a GSA schedule guarantees new business
A GSA schedule permits a quick ordering process for federal and state clients. In dealings with prime contractors to which the small firm aspires to subcontract a GSA schedule is valid pricing which can be readily included in proposals to government agencies. A GSA schedule facilitates teaming with other synergistic small companies in proposing large scale efforts.
However, a GSA schedule does not guarantee new business will come. Very few companies await government agencies to find them by searching the GSA data base. To succeed, small businesses must actively market their schedule to targeted agencies as an expedient way to contract with them or as a qualification criterion for new business awards.
10. FEDBIZOPPS is the best way to identify, bid and obtain federal government business
Often misunderstood, is that much has occurred in the way of marketing activities by companies in advance of notices formally published by the government on FEDBIZOPPS. By the time the formal, solicitation is published it is too late to market for setting a procurement aside for a small business designation if it has not already been established as such. In addition, formal solicitation publication closes the window on self-marketing by HUB Zone and 8(a) firms for set asides to them individually without competition. In short, businesses have been marketing for a requirement long before it became formally announced at FEDBIZOPPS.
Finding a solicitation that is ideal for a company for the first time on FEDBIZOPPS is excellent market research insight into what the agency publishing the requirement is buying. However, a careful bid/no bid analysis should be conducted as to whether it is prudent to go through the expense of a proposal if the opportunity has not been a new business target for the firm earlier in the game.
Federal government contracting is not a quick process; but for many it can provide a steady cash flow and potential growth.
To succeed, a carefully constructed, relationship-driven, marketing and business operations program must be developed, tailored to the federal environment. The program must include adequate research and preparation with respect to bid decisions, teaming, proposal preparation pricing and business system requirements.