How to Become a Government Contractor
With credit tight, unemployment rising, and consumer and business spending slowing dramatically, only one sector of the economy seems poised for growth: government. The federal government is about to start spending hundreds of billions of dollars to stimulate the economy -- some directly, some passed through to the states. And some of that money will go to small companies.
For one thing, the law requires that government purchases worth from $3,000 to $100,000 be directed to small businesses. Moreover, the government sets a goal that 23 percent of all contracts go to small businesses.
Nice work if you can get it, but the road to government riches is often bumpy. Contractors typically must adhere to rigorous standards for wages and safety. And the government can be an onerous, fickle customer. Solicitations for bids often run scores of pages. Though government acquisition is extremely rationalized and often transparent -- the Web is an essential element in doing business with the Feds -- it can also be maddening. "That's part of the screening process," says Patricia Peacock, director of the Mason Enterprise Center at George Mason University's Manassas, Virginia, campus. "If an entrepreneur gets frustrated with the multitude of questions, that screens them out." Patience is critical. It can take a novice business two years or more to develop the expertise and networks that will land the first contract.
Selling to the Feds
1. Meet the Market
Your first step is to find out which federal agencies or subagencies buy your product and how they purchase it. If you sell something the government buys routinely, it probably appears in a GSA schedule (see below). For less common products, log on to the Federal Procurement Data System, or FPDS (fpds.gov), which records detailed information on most of the government's past purchases. And each agency produces a procurement forecast with contact information; you can find these forecasts at FedBizOpps.gov (fbo.gov), the government's exhaustive contract solicitation website.
Enroll in the Central Contractor Registration. An entry in the CCR (ccr.gov) is required for doing business with the federal government, but this is more than merely red tape -- government procurement officers routinely search the database to fulfill contracts under $100,000. Help them out by including the optional federal codes for your product categories ("Federal Supply Classification Codes" for goods, "Product Service Codes" for services; both sets of codes are available at outreachsystems.com/resources/tables/pscs). Once registered in the CCR, companies that meet the government's definition of small are prompted to create a profile, which procurement officers and others can then find using the Small Business Administration's Dynamic Small Business Search database. Again, don't neglect the optional fields, such as keywords, which make it easier for government buyers to find you, and past performance references. "Past performance is huge in the government these days," says Clyde Stoltzfus, director of the Southeast Pennsylvania Procurement Technical Assistance Centers. "It's not the lowest price anymore; it's best value. One of the three factors in best value is past performance." The "capabilities narrative" field affords a brief opportunity to make the case on a second factor, technical ability to execute the contract. (The third factor is price. Different solicitations weigh these factors differently.)
Cultivate your network. As in the private sector, government contracting requires diligent networking. Particularly if you offer a unique product, start with the small-business liaison officers at your target agency's Office of Small and Disadvantaged Business Utilization, which lobbies the agency's procurement officers on behalf of small businesses. (Every agency has such an office.) But you, too, need to lobby procurement officers, whom you can find at fbo.gov. You can also meet them at procurement conferences sponsored by government agencies and private organizations. Send them a concise capabilities statement -- longer than the "narrative" mentioned above (which is restricted to a field in a database) but free of charts or other graphics. "From there you want to get as close to the person using the product as possible, so the user becomes your advocate," says Stoltzfus. Procurement and small-business liaison officers will often put you in touch with the end user.
2. Find Opportunities
All contract opportunities worth more than $25,000 are published on FedBizOpps.gov. In 2008, some 45,000 solicitations appeared on the site.
Check the schedule. If your product or service is either off the shelf or widely used across the government, chances are it's listed on a Federal Supply Schedule managed by the General Services Administration (gsa.gov). With GSA schedules (also called Multiple Award Schedules), the government negotiates low prices with a variety of sellers, typically for five-year periods with options to renew. State and local governments may also use GSA schedules for technology and disaster-preparedness products.
A company can apply to become a scheduled vendor by responding to the schedule's standing solicitation. (Solicitations can be found through the GSA's website, which in turn links directly to the solicitation on FedBizOpps.gov.) Normally, the government requires terms comparable to your best commercial terms (and generally, you will have to document this). As part of your solicitation, you will have to submit to a "past performance evaluation" of your commercial sales, conducted by OpenRatings.com (for $175). If the government accepts your offer and lists you on a schedule, that won't guarantee a purchase -- you will still have to market yourself to the bureaucracy as you would with any prospective client.
Search opps. To sell more rarified products and services, you will have to hunt down solicitations at FedBizOpps.gov, which, like the FPDS, allows you to search by contracting agency, product or industry codes, and much more. Stoltzfus recommends looking in FPDS for past contract awards that are due to expire. When you find one, says Stoltzfus, "contact the buying agency to see if the contract will be rebid -- and, if so, position your company as a potential bidder by researching the previous solicitation, contract, and needs of the agency."
3. Place Your Bid
Government bid solicitations can be daunting. With attachments, they can easily run a hundred pages. Read them carefully. The government takes all its rules seriously -- you can be disqualified from participation for submitting an offer that is, for example, too long.
Make sure, too, you understand all the terms of the proposed contract. Many of these will be stated in the solicitation, but many others will be incorporated from other sources, particularly the Federal Acquisition Regulation, the set of rules that govern procurement. Don't waste your time with the entire FAR, but be sure to read the contract provisions that are referenced in the solicitation.
It is possible to outsource this work to government procurement consultants, who tout their contacts as well as their savvy at navigating the system. Just be wary: Consulting fees can erode the already thin profit margins on government contracts.
Learn from your mistakes. If your offer is not accepted, ask for a debriefing from the contracting agency. "Most times, they will give it to you," Stoltzfus says. "And they will tell you what you did wrong, why you weren't chosen. That's a very important thing that you should take advantage of."
The Disadvantage Advantage
The government must set aside contracts under $100,000 for certified small businesses. And regulations often encourage procurement officers to reserve larger contracts for small companies. Certain classes of disadvantaged small businesses get more generous treatment, including access to set-asides, which limit contenders to a certain class of business, and sole-source contracts, which are negotiated with one provider rather than bid out.
Who qualifies: Small businesses in a designated low-income area (or Historically Underutilized Business Zone). At least 35 percent of the company's employees must also reside in a HUBZone.
Benefits: Limited-competition contract preferences; price evaluation preferences that allow winning offers to be up to 10 percent more than a large company's offer; special consideration for subcontracting opportunities.
8(a) Business Development Program
Who qualifies: Companies in business for at least two years with a majority owner and operating manager who are socially and economically disadvantaged -- certain ethnicities automatically qualify -- and whose net worth (not counting the value of a home or the business) is less than $250,000.
Benefits: Limited-competition and sole-source contract preferences; mentoring programs that can lead to additional subcontracting opportunities; joint-venture provisions that offer access to larger contracts.
Service-Disabled Veteran-Owned Business
Who qualifies: Any business managed and majority-owned by a veteran who is considered disabled by the Department of Veterans Affairs.
Benefits: Limited-competition and sole-source contract preferences.
How to Sub
To win contracts worth $550,000 or more, large businesses must establish robust goals for small-business subcontracting. And subcontracting lets small companies reap some of the profits of government contracting without nearly as much paperwork. It's also a good way to learn the ropes and build networks to win prime contracts.
Where to find the work The SBA's SUB-Net database (web.sba.gov/subnet) posts subcontractor solicitations online; the agency also culls plans in big contracts to produce a Subcontracting Opportunities Directory, by state. The GSA's eLibrary allows users to sort vendors for each schedule by state. But the best way is simply to go out and meet prime contractors, just like you do procurement officers. Any prime contractor with a subcontracting plan is required to designate a liaison to small business and make the contact information public.
SBA materials are scattered all over the agency's website, at sba.gov. The Services menu includes a detailed contracting handbook and other tutorials; the Publications page and the Government Contracting section of the SBA Programs page have other useful resources.
Procurement Technical Assistance Centers, sponsored by an agency of the Department of Defense, are an invaluable resource, often staffed by ex-procurement officers. Find the one closest to you at aptac-us.org.
Acquisition Central (acquisition.gov) is a government portal with links to many of the websites and databases described here, and more.
The OSDBU Council website (osdbu.gov) links to small-business liaisons at every agency and lists conferences and other outreach events.