The federal government is the largest single consumer of supplies and services, and a good chunk of that spending each year goes to small businesses. But winning a government contract isn’t easy. The process can be daunting even for the savviest of business owners.
Companies of all sizes are attracted to government contracts and the $500 billion it spends each year. Of that, 23% or about $5 billion goes to U.S. small businesses. According to Steven Koprince, a partner with law firm Petefish, Immel, Heeb & Hird, in the recent downturn the government kept spending at steady to slightly higher rates at the same time that the private sector was contracting.
Because of those attributes the competition to win government contracts can be fierce. But before a company can even get started making bids, it has to ensure it fits the bill of a small business. According to Braddock's Procurement Opportunities Guide: 2013 Edition, most companies that have less than 500 employees are considered a small business and can bid on contracts. It does vary by industry so it’s a good idea to check The U.S. Small Business Administration website which lists the specific size requirements.
Since a lot of small businesses are vying for the contracts, any edge helps. Which is why it’s important to see if your business falls into any subcontract areas that are earmarked for a specific percentage of the government’s dollars. For instance 5% of the money each year is intended to go to women-owned small businesses and disadvantaged small businesses, while companies located in HUBZones, or economically distressed urban or rural communities with high unemployment and low income levels, and service-disabled veteran owned small businesses get 3%. Seven percent of the yearly budget is intended to go to Veteran owned small businesses.
“If it’s a small business and in the HudZone now you’ve set yourself apart because the agency trying to meet its goals are going to look at you a little closer,” says John Shoraka, Associate Administrator for Government Contracting and Business Development at SBA.
Before you can start searching and bidding on contracts there a few steps a small business needs to take. According to Braddock the business will need to get a Duns number, which is a unique number issued by Dun & Bradstreet that identifies the vendor in their databases. Getting a Duns number is free and can be done at https://iupdate.dnb.com/iUpdate/companylookup.htm. The business will also need to get the classification codes for the product or service it is hawking, which is available at http://www.census.gov/epcd/www/naics.html. Once the codes are in hand, the business owner can then register with the System for Award Management or SAM at www.sam.gov. SAM is where basic information about the company is imputed. Only then can a business compete for government contracts.
According to Braddock, a good time to bid on contracts is at the end of the government’s fiscal year because at that point agencies that haven’t spent their entire budgets risk losing them, so they may be eager to make fast purchases. Braddock says a good place to research how the government awards contracts is FedBizOpps, which is a website where the government posts information about contract solicitations and awards with a value of $25,000 or more. Pursuing that website will educate the business owner on what agencies are buying, how often and what they spend, according to the Braddock.
While the government does take certain classifications into account, when all things are equal, it will go with the contractor that provides the best value for the government, says SBA’s Shoraka.
“If it’s a very standard product it can be entirely based on price” but other times if it’s a technical job, price may not be what drives the best value, he says. Before submitting a request for proposal or request for a bid, Shoraka advises small businesses owners to check out the SBA.gov website which has a host of information and tutorials on doing business with the government. Business owners can also tap Procurement and Technical Assistance Centers (PTACs), which were created by Congress to help businesses compete in government contracting. PTACs help small businesses market to the government and charge a little to no fee. A list of PTAC organizations is located at: http://www.aptac-us.org/new/
Another way to gain experience, says Koprince, is to work on a government job.
“A successful strategy a lot of businesses pursue is to start subcontracting off a large business working a government contract. You get a piece of that work and you get to see how a government project works,” says Koprince.