Government Procurement

Related Terms: 8(a) Program

Many small businesses maintain and increase their operations through doing work for local, state, and federal government entities. While these businesses may also secure business through the offering of competitive bids on jobs offered by the private sector, small business owners should be aware of the differences in procuring work from the public and private sectors. The most fundamental difference between the procurement process in the public and private sectors concerns the process itself; whereas some private companies may have fairly streamlined processes for awarding contracts to outside bidders—or may not even bother with competitive bidding at all, if they are comfortable with a certain contractor—governments at the local, state, and federal level are all obligated to adhere to a significant body of law designed to ensure that 1) taxpayer money is spent wisely, 2) contracts are not awarded for less-than-legitimate reasons, and 3) all businesses are provided with a fair opportunity to make their case for the contract in question. Because government buyers are expected to spend taxpayer money wisely, their purchases are usually subject to significant oversight. Formal procurement rules are established to prevent both the reality and appearance of favoritism.

Submitting bids for public contracts can be a frustrating experience for businesses. The process of awarding contracts—at the local, state, or national levels—is a sometimes cumbersome one that is still heavy on bureaucracy, despite recent streamlining. In addition, government contracts are far more exposed to public scrutiny than are private ones. But business analysts and government procurement officers agree that the potential benefits of securing public contracts far outweigh the disadvantages. After all, local, state, and federal government offices and agencies comprise the single biggest customer block in the nation. For many small businesses, then, government procurement is a potentially lucrative avenue to long-term organizational growth and success.

Government agencies and legislators recognize this reality as well. In recognition of the importance of federal contracts to many small business establishments, U.S. legislation requires that a certain percentage of its contracts go to companies that qualify as small businesses. These goals, which are arrived at through the combined input of the Small Business Administration (SBA) and individual agencies, classify bidding companies not only by their size, but also by other classifications (minority-owned businesses, women-owned businesses, businesses located in high unemployment areas, etc.), and government purchasing agents work to fill these slots as well. In fact, some contracts are specifically set-aside for the "exclusive participation" of small businesses, small disadvantaged businesses (minority- and women-owned enterprises), and businesses in high unemployment areas.

CHANGES IN GOVERNMENT PROCUREMENT RULES

The foundation of modern-day government contracting at the federal level is based on two laws—the Armed Services Procurement Act of 1947 and the Federal Property and Administrative Services Act of 1949. These laws sought to codify all the various contract laws that had sprouted up over the years and provide overarching guidelines on government procurement. The laws also resulted in the creation of two sets of regulations designed to oversee affairs in the realm of government contracts—Armed Services Procurement Regulation (ASPR) for military agencies and Federal Procurement Regulation (FPR) for civilian agencies. These voluminous guidelines, though, were rife with exceptions, alternate procurement procedures, etc., and in 1979, Congress passed the Office of Federal Procurement Policy Act Amendments. These pieces of legislation called on the federal government to develop a single set of simplified procurement regulations for all government agencies.

The result of that directive was the Federal Acquisition Regulation (FAR), which covered all federal agencies. The FAR changed no laws, rather it was written in simpler language, arranged subject matter in a more logical sequence, and eliminated many of the contradictions and ambiguities that bedeviled everyone. The FAR is the 'bible' for those who wish to conduct business with the federal government. Government business is conducted in accordance with FAR rules, and contractors must comply with its procedures or risk being eliminated from consideration. That same year, Congress also passed the Competition in Contracting Act of 1984 (CICA), which opened up the doors to competitive bidding in numerous areas that had previously only allowed limited bidding practices.

Today, bidding for government contracts at all levels, but especially the state and federal levels, is intense. Many small businesses are in the thick of the battle, fighting for contracts that look to be within their financial and operational grasp. But making a bid for a government project is a time-consuming process, and consultants often counsel small business enterprises to be selective in their bid choices.

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