Is your Business Ready for a Government Contract?

By: Rene Cota

A little research will reveal to you that government contracting is lucrative and has many upsides. One of the biggest upsides is the volume at which the government procures products and services. For purposes of this article government contracting encompasses Federal, State, Local and Utility contracting.

Having been involved with government contracting for over 15 years I have seen numerous small businesses attempt to penetrate the government contracting market without asking the critical question, “is my business Ready for a government contract?”

Let’s delve into the question. The first factor your business needs to consider is the anatomy of procurement officials and the methodology behind their procurement of products and services. Contracting officers are trained early and often that risk is something that will kill their careers and that numerous steps must be adhered to with the goal of procuring products and services at a very minimal amount of risk. The reality is that contracting officials consider small businesses “risky” to award government contracts to —justifiably so since contracting officials are responsible for our tax dollars and spending those dollars prudently.

All of you with socio economic certification (DBE, MBE, SDVOSB and 8(a)’s) are asking yourself, “How do I break into the market if they define my business as high risk”

If you have ever developed a marketing plan or strategic plan you will agree that we have just identified a barrier to entry into the government contracting market. The answer to the question about breaking in is to articulate the mitigation of that risk which can be accomplished through proposals you submit as well as capability briefs you provide to your government contracting targets. If you accept that your company is looked at as “risky” you make sure that you identify that to the target and show what steps you have taken to mitigate that risk, i.e. lines of credit, teaming agreements and prime contractor relationships.

The next step to determining whether your business is ready is understanding buying cycles which can be different depending on whether the target is a Federal , State, local or Utility. The federal contracting cycles typically consist of contracts lasting one year with four year options. State, Local and Utility contracting cycles usually entail research with the actual procurement division. For the most part government contracting consists of yearly procurement cycles. If you are invited to submit a proposal on a particular procurement and lose, can you wait an entire year consisting of constant contact and watching the service of the competitor you lost to, attempting to find a reason to unseat the incumbent?

The third step to answering whether your business is ready or not, is the financial readiness of your business as it relates to government contracting. Every small business owner believes that “if I could close that big government contract, we would grow quickly”. This thought process can hamper your success in the government contracting market. Preparation is needed as you develop your government contracting strategy.

Determining your financial readiness. How long will I have to carry payroll and overhead until I am paid by the government? The answer to this question varies from agency to agency as well as Federal, State and Utility. Federal payment systems are very effective for the most part and depending on the agency, electronic funding within 15 days is a normal payment period. California payment cycles adhere to the “prompt payment act” and if they do not follow pay cycles set in the contract are subject to damages and late charges. Utilities vary in this category. Taking these points into consideration is critical when you choose to get into the government contracting market.

If you are not quite ready for a prime contract (with the government), there are other options to consider. Subcontracting to a prime contractor or another company that has great past performance in government contracting is a very pragmatic strategy to get your feet wet in the government contracting realm. Another option is pursuing simplified acquisitions or micro purchases which enable the contracting official to raise their accepted level of risk in doing business with a small business and provide your business with a starting point and an opportunity to build your performance record.

Having a set strategy is a must within the government contracting market. I hope these tips have provided insight into government contracting. You can contact Orange County SBDC at (714) 564-5200 and schedule an appointment with our government contracting consultant to receive specific strategy points as well as expert analysis of the government markets pertaining to your business and core competencies.

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