Tag Archives: SBA

5 Principal Factors in Forming a Small Business Federal Government Contracting Company

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SBA

“SMALLTOFEDS” By Ken Larson

“Individuals and groups often ask what conditions drive the right time to form a small business federal government contracting enterprise. 

Here are factors to consider in determining if the time is right for you to form a small business federal government contracting company. “


INTRODUCTION
Individuals and groups often ask what conditions drive the right time to form a small business federal government contracting enterprise.
They may be working in the venue for someone else. Perhaps they have discovered a need in the civil agencies or defense markets they can fill with a product or service being provided in the commercial sector and feel they could expand into the government marketplace.
A contractor moving from project to project in government contracting as an individual often asks, “Are conditions right to form an enterprise?”
Starting a government contacting company may seem a logical extension of the work one has done previously so the transition appears easy enough.  What must be learned very quickly is the business planning, marketing and competitive analysis aspects of operating an enterprise, as opposed to single person efforts.
Industry teaming, having others work for us and dealing as a company instead of a person are all challenges. The adjustments in outlook and in the development of a client base as a company progressing to profitability pose challenges.
This article will suggest factors to consider in determining if the time is right for you to form a small business federal government contracting company.
1. EXPERIENCE
Small business federal government contracting is not rocket science – to succeed one must take what one does well in the commercial marketplace or what experience leads one to believe one can plan successfully as a commercial enterprise and then apply it in a slightly different manner from a business perspective to accommodate federal government contracting requirements.
Very few companies enter federal government contracting without some commercial experience and success or prior professional employment.  Very few start ups entertain initially contracting exclusively to the federal government without commercial work or other employment to sustain operations while the more lengthy government procurement process is being pursued.

Introducing Federal Government Contracting

2. DEFINITION

There is often confusion regarding the definition of the term, “Contractor” in government work. The term is used in a conflicting manner to describe companies, individuals and business relationships. It has different connotations within corporations as opposed to government agencies, and is often confused with terms like “Subcontractor”, “Supplier” or “Vendor”.
The article linked below defines the term, “Contractor” and discusses the regulatory factors and practical considerations related to use of the term from a small business federal government contracting perspective:

3. STRATEGY 

Consider carefully a product or service area in which you have experience and talent as well as for which there is a demand.  Make it in a field in which you would enjoy a long term involvement.  Then give your small business company concept the following test:

1. Do you have a product or service niche in mind?

2. Do you believe you have a market for 1 above and the means to reach it?

3. Are you willing to develop a business plan using the tool kit linked below to validate 1 and 2 above before you launch?

How to Write a Business Plan

Business Plan Samples

If the answer to the above questions is “Yes”, take the actions indicated above, observe the results, and make an informed decision on whether or not to proceed.

4. FORMATION

Executing the below process establishes the firm officially on paper and commits the owner(s) to the enterprise:

For the majority of individuals who are starting single person or no more than 2 or 3 person operations, a Limited Liability Company (LLC) registered with the state and with the federal government is recommended.It will separate personal assets from company assets and protect them. When product or services sales begin generating revenue an LLC has many tax advantages.  It can be registered as Sub Chapter ‘S’ for tax purposes and revenue and the expenses can be passed through to personal tax returns, paying no taxes as a company. The double taxation issue prevalent with many of the other types of incorporation is avoided with a Sub chapter “S” LLC. An LLC assists in limits your personal liability for debt and court judgments that may not fall in your favor.

Representing the business as a company allows pursuing financing as an enterprise. You can think of a creative name for your LLC and you can complete the articles of incorporation necessary to bring your enterprise into existence. The term, “LLC” must conclude the name of your company if you decide to form such an organization.

Free instructions for registering in your state and federally with the IRS are available at the Box Net “References” cube in the right margin of this site. You will receive tax and employer identification numbers by registering your business.

A very common mistake is not generating and executing an operating agreement among the founders if there is more than one person involved in forming the company. An operating agreement, is a separate document, not controlled or required by the state or the federal government, but very important to your company.It should be a simple,  straightforward document  you and the prospective partner(s) can draft  yourselves addressing such  matters as % of ownership, how revenue will  be distributed and other  general matters, as well as who can commit the  company in the form of  credit cards, employment offers and who signs  checks on the company  account and other administrative matters. Buying out a partner should also be covered as well as adding new members if the need arises down the road.

I have seen many enterprises fail or go through terrifically hard times   due to lack of an operating agreement. The parties should sign it after a review by a lawyer. It should then be notarized and made an official   part of the company file. You can download a generic operating agreement at the Box Net “References” cube in the right margin of this site.

It is for an LLC but you could modify it for other types of corporations.  You can feel free to borrow from the sample or supplement it as you see fit. It is fairly comprehensive in order to cover most business situations and there may be elements of the example you feel are not necessary.

5. TEAMING

You will not be able to go it alone.

Evolving niches and industry teaming leading to larger projects as part of multiple company efforts is a necessity in forming a small government contracting business, particularly in the services venue.Synergism is paramount in teaming with any size company, whether in a lead or subcontracting role. There should be technical, management and market segment similarities between you and any company with whom you are considering teaming. Your prospective team member ideally will not be a direct competitor; rather a business in a related field with whom you share a mutual need for each other’s contributions in pursuing   large-scale projects.

Relationships must be developed with primes and other small businesses that can help you, team with you and keep you in mind as they search for success. That takes time, patience and open-minded, out of the box thinking. It also takes more than a   Non-Disclosure Agreement (NDA), a teaming agreement (TA) and a proposal   to succeed. It takes dynamic marketing and communication with strong   partners and hard, innovative work. Nice buzz words you say – but it is the truth and you have to find what that truth means to you.

Small Business Government Contract Teaming

SUMMARY

Carefully consider the 5 factors noted above when evaluating the formation of a small business government contracting company. For additional details on any of the factors, please see the free book in the BOX at the right margin of this site: ”

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GSA And SBA Partner to Offer Joint Small Business Innovative Research (SBIR) Acquisition Assistance

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Assisted Acquisition Services

“FEDERAL NEWS RADIO”

“The General Services Administration’s new pilot to use its Assisted Acquisition Services in the Federal Acquisition Service aims to connect companies with federal agency buyers.

13 agencies participate in the SBIR program and many lack a dedicated contracting shop so having AAS [will] support SBIR contracts with a dedicated area.”


“Pallabi Saboois the CEO of Harmonia Holdings Group, a small women-owned business, with revenues approaching $20 million.

Harmonia Holdings Group is working for the Marine Corps to modernize its legacy system by using a tool the company developed to automatically migrate old software code into leading-edge languages.

Saboo said Harmonia Holdings couldn’t have won the contract without the Small Business Innovation Research (SBIR) program. Harmonia Holdings has won 89 SBIR grants over the last 15 or so years.

But Saboo said her company won the Marine Corps contract and many others not because agencies are using the SBIR program like Congress intended, but despite of it.

“The best kept secret in Phase III of the SBIR program is that any agency can put millions of dollars on the contract without competition. It’s very similar to an 8(a) contract,” Saboo said in an interview with Federal News Radio. “The problem is most contracting officers have no clue how to do that. I’ve tried to sell that until I was blue in the face. I have 89 different SBIRs, but I can’t get them to use it. That is challenging.”

Instead, Harmonia Holdings is using SBIR as a kind of venture capital fund where Saboo can obtain funding for research and development and then once the tool or software is ready, offer it back to the government through other contract opportunities.

“I use SBIR technology opportunities as areas where I want to develop competencies for my company,” she said.

GSA to offer Assisted Acquisition Services

And this is why the General Services Administration’s new pilot to use its Assisted Acquisition Services in the Federal Acquisition Service aims to connect companies like Saboo’s with federal agency buyers.

“We partnered with Small Business Administration to make this pilot program happen, said Mark Lee, GSA’s assistant commissioner of the FAS Office of Policy and Compliance, during a press briefing on July 30. “We think AAS is positioned to set up a shared service across the government to help support innovative solutions throughout the marketplace and that can lead to the job creation the program is designed to bring. There is a unique opportunity to work with companies early on and bring them to a contract vehicle and get them opportunities.”

Lee said the client support centers in Region 5 and the FedSIM office will run the pilots and have dedicated support to help expand the use of companies under the SBIR program throughout the rest of the federal acquisition offerings by GSA.

Saboo said any more attention Phase III SBIR companies can receive to help commercialize their technologies, the real key is whether FAS trains its acquisition workforce to use the program to the full extent the law allows.

“Once you finish Phase III, you are in the valley of death because there is no specific need anymore,” she said. “If you find someone who is interested in your project, you need money to really expand the project to do what they want, and the customer, especially in the Defense Department, may not be able to get you money for two years because of how the budgeting process works. We, and many other companies, have never been able to use the Phase 3 contract because contracting officers don’t know how to use it and the gap between funding is too much.”

Lee said part of the reason why GSA is stepping in is to address similar problems Saboo is referring to.

He said 13 agencies participate in the SBIR program and many lack a dedicated contracting shop so having AAS support SBIR contracts with a dedicated area

SBIR participating agencies

Jeff Koses, GSA’s senior procurement executive, said AAS is offering access to the SBIR Phase III companies currently and the pilot runs through fiscal 2019.

“We will have a governance process in place to ensure we understand the rules and making most effective use of the program,” he said. “We will communicate with SBA about future possibilities, such as extending the pilot to other parts of GSA or other areas of the SBIR program. When a customer agency comes to us with authority to use a company in the SBIR program, GSA will be the acquisition arm to support that makes the connection between the agency need and industry partner.”

John Shoraka, a former SBA associate administrator for government contracting and business development and now managing director of GovContractPros, said GSA’s idea is a good one, but the agency and SBIR companies also need to keep in mind several things.

“There should be significant SBA involvement as their Office of Innovation and Investment (OII) manages the SBIR program and reports on it to Congress,” he said. “The reporting of SBIR awards is unclear, and it is also unclear how many agencies use all of their dedicated SBIR funding, and how successful the funding is. There should be a report card grading system like the small business report cards to Congress for SBIR.”

Saboo said another way to improve the SBIR program would be for agency acquisition officers and commercialization assistance programs to spread the word about how the program works consistently and persistently.

“GSA doesn’t have to do matchmaking. I can take products and create opportunities if contracting officers are open to listening and understanding what they can do with the SBIR program,” she said.”

https://federalnewsradio.com/reporters-notebook-jason-miller/2018/08/gsa-wants-to-rescue-innovations-from-the-valley-of-death/

 

 

SBA: Federal Government Hits Some Prime Small Business Goals, Falls Short On Others

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SBA Goals

“WASHINGTON TECHNOLOGY”

“Overall, the government met and even exceeded its goal for small business prime contracts last fiscal year, the $100 billion mark for the first time.

But agencies fell short of their overall subcontracting goal.”

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“During fiscal year 2017, agencies bought $105.7 billion in goods and services from small businesses, which captured 23.9 percent of prime contract dollars. That proportion was slightly below fiscal 2016 when they captured 24.34 percent. Those numbers do not include subcontract dollars.

But the total dollars — prime and subcontracted — are higher with $105.7 billion in fiscal 2017, compared to $99.1 billion in 2016.

The Small Business Administration gave “A” grades to 20 agencies. Nine of those got an “A-plus” and 11 with an “A” grade. Two agencies received a “B” grade and one received “a” C grade — the U.S. Agency for International Development.

While the overall goal of 23 percent was surpassed, two specific small business categories fell short of their goals.

Women-owned small businesses have a goal of 5 percent but the government only spent 4.71 percent or $20.8 billion with these businesses. The fiscal 2017 percentage also is slightly below 2016 when women-owned small businesses picked up 4.79 percent of prime contract spending.

Results for Historically Underutilized Business Zone companies fell short. HUBzone firms won just 1.65 percent, or $7.3 billion, against the 3 percent goal. This also was a drop from fiscal 2016 when these businesses captured 1.67 percent of prime contract dollars.

Small disadvantaged businesses won 9.1 percent of the prime contracts, worth $40.2 billion in fiscal 2017. In fiscal 2016, they won 9.53 percent, a slight drop. The goal is 5 percent.

Only service-disabled, veteran-owned small businesses saw their percentage increase in fiscal 2017. They won 4.05 percent of prime contract dollars or $17.9 billion, compared to the 3.98 percent they won in 2016. The goal is 3 percent.

The overall subcontracting goal of 31.95 percent was not achieved. Small businesses won 31.4 percent of subcontract dollars.

Only women-owned and small disadvantaged businesses surpassed their 5 percent goals. Women-owned captured 6.2 percent of subcontract dollars, and small disadvantage captured 5.3 percent.

Service-disabled, veteran-owned business won 1.9 percent of subcontract dollars and HUBZone captured 1.3 percent. Both have a 3 percent subcontracting goal.

Agencies receiving A-plus:

  • Commerce Department
  • Education Department
  • Homeland Security Department
  • Housing and Urban Development Department
  • Labor Department
  • Interior Department
  • Nuclear Regulatory Commission
  • Office of Personnel Management
  • Small Business Administration

Agencies getting an A:

  • State Department
  • Transportation Department
  • Treasury Department
  • Agriculture Department
  • Environment Protection Agency
  • Defense Department
  • General Services Administration
  • Energy Department
  • National Science Foundation
  • Justice Department
  • Social Security Administration
  • NASA

Agencies getting a B:

  • Health and Human Services Department
  • Veterans Affairs Department

Agency with a C:

  • U.S. Agency for International Development”

https://washingtontechnology.com/blogs/editors-notebook/2018/05/sba-2017-small-business-goals.aspx

 

SBA Rejects Major Changes in Size Standard Methodology

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SBA Size Standards“SMALLGOVCON.COM”

“The SBA’s commentary accompanied the publication of the SBA’s revised Size Standards Methodology White Paper, which is now available on the SBA’s website

The White Paper explains how the SBA establishes, reviews, and modifies its small business size standards.”

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“In commentary published in the Federal Register last week, the SBA rejected (among other things) recommendations that it use average employee count to evaluate the sizes of construction firms and that other firms’ sizes be measured by profits or net worth instead of average annual receipts.

Way back in October 2009, the SBA solicited commentary on the White Paper in effect at the time.  The SBA also sought comments on various policy questions the SBA must consider when developing size standards, such  as “how high a small business size standard should be, should there be a single measure of business size for all industries (i.e., employee or annual receipts)” and so on.  The SBA accepted comments until the end of the 2015 fiscal year.

Now, some 8 1/2 years after the SBA first sought public comments, the SBA has published its responses to those comments.  If you’re something of a size policy nerd (I’ll admit to it!), the SBA’s Federal Register commentary is worth reading in its entirety.  But for those who may not put themselves in that category, here are some of the highlights:

  • Profit measure rejected.  The SBA rejected a suggestion to establish size standards based on gross profits rather than average annual receipts or employee count.  “If a size standard were established in terms of gross profits,” the SBA wrote, “a company with hundreds of millions in revenues and thousands of employees can qualify as small under a profits-based size standard.”  In fact, the SBA said, “[i]t is not unusual for very larger companies to have little or negative profit over the course of business cycles.”  Plus, “a firm’s profits can be manipulated and thus would be an inconsistent and misleading measure of [a] firm’s size for size standards purposes.”  Probably once a month or so, I hear from a business owner who asks whether size standards are already based on profits.  It’s a rather common misconception.  But not only are profits not the measure of small business size, the SBA has no plans to head in that direction.
  • Employee count for construction rejected.  The SBA also rejected a suggestion to use average employee count, rather than average annual receipts, to measure the sizes of construction companies.  “Under SBA’s prime contractor performance requirements . . . a general construction company needs to perform as little as 15 percent of the value of the work and a specialty trade contractor can perform as little as 25 percent of the work with their own resources,” the SBA wrote.  “SBA is concerned that employee based size standards could encourage construction companies near the size standard to subcontract more work to others to bypass the limitations on subcontracting and remain technically a small business.”  The SBA concluded: “[r]eceipts, as a representative of the overall value of a company’s entire portfolio of work in a given period of time, are a better measure of the size of a construction company to determine its eligibility for Federal assistance.”
  • Net worth limits rejected.  The SBA similarly rejected a proposal to base size standards on net worth, saying that such a measure “is not practicable.”  The SBA explained that “[a] company’s net worth can be affected by a number of things, such as debt, repurchased corporate stock, etc.”  Furthermore, “data on net worth is not available by industry,” which would make it impossible for SBA to fairly establish size standards based on that measure.
  • No mid-tier or “micro” size standards.  The SBA also rejected calls to establish new size standards for “mid-sized” businesses (certain companies that have outgrown the small business size standard) and “micro” businesses (such as those with less than $100,000 in sales or fewer than 20 employees).  In rejecting these proposals, the SBA cited “significant complexity,” a “much more burdensome system and reporting requirements” and the fact that “Congress would need to establish new small business procurement goals for each tier to ensure that small businesses at different tiers have a fair access to Federal contracts.”

The SBA’s commentary is chock-full of interesting information, and not everything is the SBA saying “no.”  The SBA does make some proposed improvements and refinements to its size standards methodology.  The SBA also seeks public commentary on a variety of important size questions, such as whether there would be a uniform maximum size standard, and whether the SBA should consider lowering any size standards.  Public comments are due by June 26, 2018.”

http://smallgovcon.com/statutes-and-regulations/sba-rejects-major-changes-in-size-standard-methodology/

 

US Small Business Administration Offers Help to Veterans

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“MINNEAPOLIS STAR TRIBUNE”

“The U.S. Small Business Administration has resources available for veterans who want to start their own businesses or for small businesses that may have been affected by employees who have been deployed.

The numbers are substantial, according to the SBA: Nearly one in 10 small businesses in this country are veteran-owned; veterans are 45 percent more likely to be self-employed than non-veterans; and businesses owned by female vets have increased 297 percent from 2007 to 2012.

The SBA’s website has collected a list of programs that can offer help, especially in navigating the complexities of returning home for members of the Guard or Reserve after being deployed.

It has information on starting a business, financing, mentoring and training and selling to the government. It can be found on the website Veteran Owned Businesses

One example of a resource is the Military Economic Injury Loan, which provides funds to eligible small businesses to meet operating expenses when an essential employee is called to active duty. The filing period for businesses to apply begins on the date the essential employee is ordered to active duty and ends one year after the essential employee is discharged or released from active duty.

Another aspect to consider are laws that make federal contracting more attractive to veterans, particularly those with a service-connected disability. The Veterans Entrepreneurship and Small Business Development Act of 1999 established an annual government-wide goal of awarding at least 3 percent of all federal contracts to small businesses owned or controlled by service-disabled veterans.

There’s also Boots to Business, a two-step entrepreneurship training program open to service members and their spouses. The two-day course introduces participants to the opportunities and challenges of business ownership. An eight-week online course allows participants to work through the fundamentals of developing a workable business plan.”

SBA Offers Help to Small Business

Defense Officials: Times are Good for Small Business Contractors

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Forbes

Image: Forbes Magazine

“NATIONAL DEFENSE MAGAZINE”

“The federal government overall awarded 24.9 percent of all prime contracts to small businesses in 2014, or about $91.7 billion.

And defense contracts accounted for more than half, at $54.3 billion, a figure that earned the Pentagon high praise from the Obama administration.

Just less than two years ago, the Pentagon warned in a report to Congress that “continued uncertainty will hit smaller, innovative, and niche product companies particularly hard due to a lack of capital resources.”

But Pentagon officials offered a much cheerier outlook last week as they unveiled the results of the fiscal year 2014 small business federal scorecard.

“This is the highest percentage of contracting dollars ever awarded to small businesses since the 23 percent goal was established in 1997,” said Small Business Administrator Maria Contreras-Sweet, who appeared at a Pentagon news conference June 26 with Undersecretary of Defense Frank Kendall.

“Small businesses now are filing more patents than ever,” she said. “So they’re also driving innovation.”

The Pentagon has made a deliberate effort over the past five years to boost small business contracting, said Kendall. The Defense Department’s “better buying power” procurement guidelines specifically promote the use of small businesses, “both for innovation and for efficiency and to control costs,” he said. “Small businesses, particularly in the services industry, tend to be leaner and more anxious to get work, and thus tend to be more economic in many cases for the department.”

Defense officials’ upbeat talk about small business contracting is a far cry from pessimistic forecasts that followed the military spending downturn between 2009 and 2013. CEOs of large prime contractors repeatedly warned that they feared losing small business suppliers, especially those that make specialized defense-unique products.

Under Kendall, the Pentagon’s industrial policy office launched a sweeping “tier by tier” study of the defense supply chain out of concern for the financial health of small suppliers.

Today, there are no reasons to worry, said André J. Gudger, acting deputy assistant secretary of defense for manufacturing and industrial base policy.

“We don’t have a weak supply chain. We have a very healthy one,” he said. “There’s areas of concern that we have that we focus on, but yes, we have overall a healthy industrial base set up from our first tier to our sub tier suppliers.”

Kenyata L. Wesley, acting director of the office of small business programs, credits Kendall’s better buying power for the improved climate. “Better buying power strategically focuses on small business as well as technology and innovation,” he said. “If you look at better buying power 3.0, which is now the third iteration, there’s a lot more initiatives based on small businesses, because we’re not stopping, we’re not taking the foot off the gas. … It’s not a political statement that they’re the economic engines. They’re technology engines.”

Gudger said he continues to monitor the state of the industry. “I’m responsible for the industrial base and ensuring that it’s a modern, healthy, robust industrial base. And we look at the fragility and criticality of all businesses, not just small. That includes the medium and the large, to see where we have critical capability where we might have an industrial base that’s thin or weak.”

Today, he said, “there is no systemic crisis” concerning defense suppliers. “Our industrial base looks very healthy. We have improved it.”

The SBA has programs to help cash-strapped federal contractors, said Contreras-Sweet. One is called “emerging leaders,” she said. “We take experienced companies, as we help them grow to scale, put them through what we call a mini-MBA.” Another is called “quick pay,” aimed at suppliers with cash flow problems.

Defense Department service contracts appear to be the sweet spot for small businesses. About half of all defense contracts are for services. “The Department of Defense made a decision to focus on areas that were very healthy for small businesses,” said Gudger. “We focused on areas such as knowledge base services, electronic and communications, and facilities management.”

In the federal scorecard, the SBA gave the Defense Department an “A” grade. Eighty percent of the grade is based on the actual prime contracting dollars, said John Shoraka, associate administrator for government contracting and business development at SBA. Ten percent of the grade comes from the amount of subcontracting dollars, and the remaining 10 percent is based on subjective factors such as specific leadership efforts.

Shoraka noted that the federal government also broke a new record for contracts awarded to businesses owned by our military disabled veterans. The goal is 3 percent, but in 2014 that percentage rose to 3.7.”

http://www.nationaldefensemagazine.org/blog/Lists/Posts/Post.aspx?ID=1886