By Noëlle Bernard
For small business owners or new businesses looking to enter the market of government contracting, it can be daunting but financially rewarding. By law the federal government has a goal to commit 23 percent of contracting funds to small businesses. Moreover, contracting officers have set aside requirements to make purchases worth $3,000 to $100,000 from small businesses.
When beginning, the process requires patience and research. On average it can take a few years before a new business acquires its first contract. Therefore, it is crucial to understand the steps to move forward.
According to the U.S. Small Business Administration (SBA), contracting is a mutually binding legal relationship that obligates a seller to furnish supplies or services paid for by a buyer. Therefore, a contractor for the federal government is a company that obtains a contract from a government entity to provide it with goods and services.
“With competitive contracting, federal agencies go to industry with the goal of getting the best deal for the government,” says Megan Mocho Jeschke, an associate at the firm Holland & Knight. “It’s lucrative because the federal government is one of the largest buyers out there.”
To begin the process, a company needs to acquire a DUNS (D&B) number and enter into the Central Contractor Registration (CCR) database located on the System for Award Management (SAM) website (SAM.gov). It is important to register because this is how government agencies find companies to contract. It takes roughly one business day to receive a DUNS number. Once registered, follow the steps on the CCR to become visible to government agencies.
New businesses need to become acclimated to the rules of the market and stay organized, says Simon Brody, director of communications for the National Association of Government Contractors (NAGC), an organization dedicated to improving contracting opportunities for small businesses and those new to the procurement process.
“In order to be competitive a business must research the marketplace and establish itself as a reliable entity,” Brody says. “In addition, becoming a contractor means attention to procedures, such as registering using the SAM system and obtaining a DUNS number.”
The next step is to create a one- to two-page document that captures the company’s abilities, called a Capabilities Statement.
This brief statement should include the company’s available resources, such as the number of employees, inventory on equipment, and a description of the company’s skills and past experiences.
Once the profile is completed and all necessary representations posted on SAM, they can start looking for bids and contracting Randall Luttenberg, public information officer at the Washington Metropolitan District Office of SBA, advises to be proactive.
Luttenberg likens the process to job hunting. “You can post your résumé somewhere for people who are looking and at the same time you can look for opportunities yourself,” says Luttenberg. “You want to be where they can find you.”
Look for government solicitations on websites such as FedBidOpps.gov, the Federal Supply Schedules on the GSA’s website (GSA.gov).
Moreover, when looking for contracts know the distinction between jobs for prime contractors and jobs for subcontractors. According to the SBA, prime contractors are awarded contracts directly from the government. Most small businesses are recommended to begin as subcontractors.
“Small businesses often don’t have the resources to deliver everything that the agency wants but they’re very capable of doing a small piece of it well and efficiently,” Luttenberg says. “One of the important things you need to do for long-term success is to develop a track record.”
Subcontracting involves partnering with a prime contractor if a company is not ready to bid competitively for a prime contract.
It is stated in the Small Business Act that prime contractors are required to provide subcontracting opportunities to small businesses, HUBZone small businesses, small disadvantaged businesses, women-owned small businesses, veteran-owned small businesses (VOSB), and service-disabled VOSB. Subcontracting helps build credibility for businesses, which the government likes when considering contract bids.
Oftentimes businesses use the subcontracting model as a stepping stone to acquiring prime contracts, but that is not always the case.
“Some companies never grow beyond being subcontractors because that can be a very successful model for them,” Luttenberg says. “It doesn’t have to be a transition. It could be where your company comfortably lives forever.”
At the time of placing a bid, craft a proposal to the government entity. Be sure to have a performance record of past work. A company can receive a performance rating score from sites like OpenRatings.com, but not all contracts require a score.
“The point is, you need to prove that you can deliver on-time, underbudget, reliable, high-quality work,” Luttenberg says. “Some agencies may want an outside rating service to document this officially, but all contracting officers can be expected to ask you for some proof that you can be trusted to deliver.”
In many cases it’s sufficient for a firm to complete subcontracts successfully and get testimonials, letters of recommendation, or receive recognition awards or certificates for outstanding subcontracting from prime contractors, says Luttenberg.
Once agencies receive proposals they will decide who will be awarded a contract.
The SBA and NAGC offer resources for those new to government contracting. Check their websites for publications, guides, counseling services, and seminars to answer further questions.
“Any kind of free or low cost resource that will increase your chances of success is worth taking advantage of because you have a tremendous amount of experience of other people to draw upon then,” Luttenberg says.
For instance, SBA offers a program, CAPLines, for contracting. This program provides contractors a line of credit to bridge the gap between payment cycles.
It’s a lucrative and stable model once the system is well-researched and the rules are followed.
“The federal government is the world’s largest customer,” Luttenberg says. “You don’t have to worry about it going bankrupt or not paying its bills.”