Waiting for a contract award to achieve a government contracting business process is not advisable. A win may not happen at all without addressing the structure and process requirements in your proposal to convince the customer you understand his business environment.
If you are not prepared in advance and you are fortunate enough to win, then in a very short time frame you will have to evolve your business system to perform on your contract and submit a billing.
This article will discuss a framework for a small enterprise to develop a business system in service contracting, which is the most frequent venue utilized to enter the government market.
The above diagram depicts the major elements of a suggested integrated template.
If you are a small startup organization, your process and automation may be quite rudimentary and simple in addressing the above structure and functions. If your company is in a high growth mode with many transactions, projects and details your processes and computerization will be more complex.
The point to remember is the need to overlay the above on your existing company for the unique products and services you provide, and then address how to fit, supplement, or accommodate the necessary adjustments to support contracting to the government.
Please read the following articles on the highlighted topics for details that may assist in evolving your unique business processes to support government contracting:
Remember, small business federal government contracting is not rocket science – it is taking what you do well in the commercial environment and applying it in a slightly different manner from a business perspective to accommodate the way the federal government does business.”
“The Defense Department is concerned that foreign investment will take advantage of small businesses in the defense industrial base reeling from the COVID-19 pandemic.
The defense industrial base, which consists of more than 300,000 companies, is “vulnerable to adversarial capital,” and DOD wants them to “stay in business without losing their technology” or be subject to intellectual property theft.“
“Ellen Lord, DOD’s top acquisition executive: “The foreign investment issue is something that I have been tracking for the last couple years. There is no question that we have adversarial capital coming into our markets through nefarious means,” Lord said.
“So what we are doing, on the defense side, looking at [the Committee on Foreign Investment in the United States], on the offensive side, we’re looking at our Trusted Capital mechanisms.”
DOD has been conducting periodic Trusted Capital Marketplace virtual events to pre-empt CFIUS concerns and ensure companies’ access to “clean capital.”
Lord said the global outbreak of COVID-19 has created instability and uncertainty, especially for small businesses that aren’t sure if government contracts will continue.
“I think it presents a greater attack surface as there is greater uncertainty, especially to small businesses as to whether their contract will continue,” Lord said. “So we want to basically mitigate that uncertainty.”
DOD under the Trump administration has been pushing for more domestic manufacturing and reducing foreign investments, namely with drone production. It has also been adamant about finding U.S.-based solutions for telecommunications services and hardware production, barring the use of Huawei and ZTE products because those companies have ties to the Chinese government and military.
These moves, especially as the global health crisis persists, could have broader implications and shrink direct foreign investment up 15%, according to a United Nations report.
The Defense Department has also created a new task force to synchronize its COVID-19 efforts led by Stacy Cummings, the principal deputy assistant defense secretary and leader of the Acquisition Enablers office.
The Joint Acquisition Task Force will coordinate with military services and agencies’ acquisition resources and field requests from the Federal Emergency Management Agency, the Departments of Health and Human Services and Homeland Security and other federal agencies for medical resources and personal protective equipment.
The task force aims to identify weak points in workforce and industrial capability and ultimately reduce companies’ reliance on foreign supply sources. It will also direct use of Defense Production Act authorities, which include being able to use economic incentives and priority-rate defense contracts to best serve the need of troops in the field and team with industry to boost commercial capabilities.”
How can firms maintain the 35% HUBZone residency requirement if some employees are college students whose residence hall has closed? SBA recognizes that some HUBZone employees are students who have been called home to locations no longer in a HUBZone, even though they continue to work remotely, impacting firms’ ability to maintain the 35% HUBZone residency requirement. SBA will determine affected firms’ compliance with the 35% HUBZone residency requirement by reviewing documentation showing where the impacted employee lived prior to the COVID-19 response measures being put in place. Accordingly, a firm that has a HUBZone employee that was required to move from student housing to a non-HUBZone location AND continues to work for the HUBZone firm, the firm may continue to count that employee as a HUBZone resident by providing documentation showing: 1) the university/college closed the student’s residence and 2) the employee has been maintained on the payroll. This applies only to students who, at the time of the firm’s application for certification or recertification, were already on payroll and had residency established prior to the university closing student housing.
How can firms maintain compliance with the Principal Office requirement if their employees are required to telework? SBA recognizes that if all of a firm’s employees are required to telework in response to the COVID-19 pandemic, this might impact a firm’s ability to comply with the HUBZone program’s principal office requirement. In response to this concern, SBA will determine affected firms’ compliance with the principal office requirement by reviewing the firm’s compliance prior to the telework measures being put in place. Accordingly, at the time of application for certification or recertification, a firm that has placed its employees on mandatory telework will have to provide documentation showing where its employees performed their work prior to requiring telework. Such an applicant will also be required to provide a signed statement that: the firm put all their employees on telework associated with social distancing in response to the COVID-19 pandemic; the teleworking measure is temporary in nature; and the employees will return to their normal work location once the teleworking measures have been lifted.
How can firms maintain compliance with the requirement for uninterrupted and continued employment for “Legacy HUBZone employees,” as outlined in the HUBZone regulations at 13 C.F.R. 126.200(d)(ii)(3), if employees are laid off or on extended sick leave? The revised HUBZone regulations, which became effective December 26, 2019, allow firms to count “Legacy” HUBZone resident employees as permanent HUBZone resident employees if they are able to demonstrate that the employee was a HUBZone resident for 180 days prior to and for 180 days following the firm’s HUBZone certification or recertification. In addition, the requirement states, “The certified HUBZone small business concern must maintain records of the employee’s original HUBZone address, as well as records of the individual’s continued and uninterrupted employment by the HUBZone small business concern, for the duration of the concern’s participation in the HUBZone program.” SBA recognizes that many firms have placed employees on extended (unpaid) sick leave status or are contemplating layoffs. SBA will allow HUBZone companies to place an employee in a temporary non-paid status such as FMLA to care for themselves or a sick family member during COVID-19 if the firm attests to their intent to put such individuals back on payroll after the period of extended sick leave. However, there is no such exception for employees that have been laid-off. If a firm lays off an individual, that individual cannot be counted as a “legacy HUBZone employee” for any future HUBZone certification or recertification.
Can the HUBZone Program expedite my application for certification? SBA may expedite the application of any firm that submits a completepackage for certification and indicates that they intend to respond to a specified solicitation that relates to COVID-19.
Can the HUBZone Program waive or reduce the 35% residency requirement? This statutory requirement would necessitate Congressional action to change.
II. HUBZone Program updates related to a change in regulations
When and why did SBA propose new rule changes to the HUBZone program? The SBA proposed new regulations to make it easier for small businesses to participate in the HUBZone program. These changes will make the program more attractive for small businesses to invest in HUBZones and hire HUBZone residents, providing greater impact to communities and making it easier for federal agencies to meet their goal to award 3 percent of contracts to certified HUBZone small businesses. The rule change was published in November 2019 and took effect December 26, 2019.
What are the new rules around recertification? All firms will be required to undergo an annual recertification rather than a triennial recertification, with a full documentation review taking place every three years. Once certified, a firm is eligible for all HUBZone contracts for which the business qualifies as small, for a period of one year from the date of its initial certification or most recent recertification (unless the concern acquires, is acquired by, or merges with another firm during that period). Prior to this change, in order to be eligible for a HUBZone contract, firms had to prove their HUBZone eligibility at both the time of offer and the time of award, lengthening the procurement process for HUBZone firms uniquely among all small businesses—and serving as a disincentive for federal agencies to contract with HUBZone companies.
When and how will annual recertification begin? SBA has experienced a delay in the implementation of our new annual recertification process. Firms which, based on the prior triennial recertification schedule, were due for recertification in 2020 will be contacted automatically by the HUBZone Certification and Tracking System (HCTS) and will be required to recertify on the anniversary date of their initial certification. (For example, if a firm was initially certified on December 1, 2017, the firm will receive a notice from HCTS that it is due to recertify its HUBZone status within 30 days of December 1, 2020.) All other firms (which were not scheduled to recertify in 2020 under the triennial recertification rules) will continue to be considered eligible as of the date of their initial certification or most recent recertification, and must be prepared to prove their eligibility at that time if their HUBZone status is protested in connection with a HUBZone solicitation issued after December 26, 2019. Until such time as we have introduced a fully automated recertification process for all firms, we will also allow firms to voluntarily recertify on the anniversary date of their initial certification, if they choose to do so. We will advise firms within the next two weeks regarding the process for voluntary recertification on their anniversary date.
Are Governors now permitted to ask SBA to designate HUBZones? A new Governor-designated covered areas initiative that became effective on January 1, 2020, represents an opportunity to expand the HUBZone program to reach more distressed rural communities. The new authority allows state governors to petition SBA to designate as HUBZones rural areas with populations under 50,000 and unemployment levels of 120 percent of the U.S. or state average. SBA will provide updates and update the HUBZone maps to reflect newly covered areas.
Are there other changes to the HUBZone maps? SBA has frozen the HUBZone maps through 2021, until the results of the 2020 Census are available. This will provide the program and participating small businesses with an opportunity to transition to a new requirement to update the maps and designations on five-year intervals, starting after the 2020 Census. Five-year HUBZone updates will enable small businesses to plan and invest in their HUBZone communities without fear that their designation may change from one year to the next, thus providing stability for both the community and HUBZone businesses. While the maps are frozen, no new Qualified Non-Metropolitan Counties, Qualified Census Tracts, or Redesignated Areas will be removed from or added to the maps. However, SBA will continue to add locations approved through the new Governor-designated covered areas initiative, qualified base closure areas, qualified disaster areas, and Indian lands, as any new data is received.
How has the definition of the Principal Office changed? A new provision in the HUBZone regulations allows small businesses that invest in HUBZones by purchasing a building or entering a long-term lease (of 10 years or more) to maintain HUBZone eligibility for up to 10 years, even if at some point the office location no longer qualifies as a HUBZone. This provision does not apply to offices located in areas categorized on the HUBZone map as Redesignated areas.
Are there changes to the 35% HUBZone employee residency requirement? The new rule allows HUBZone companies to retain long-term “Legacy” HUBZone resident employees as permanent HUBZone resident employees, under certain circumstances. An employee who resides in a HUBZone for at least six months (180 days) at the time of certification or recertification, and continues to reside in a HUBZone for at least six months (180 days) after such time, may continue to be considered a HUBZone resident so long as they are continuously employed by the firm, even if he/she moves to a non-HUBZone area, or if the area of his/her residence loses HUBZone geographical eligibility. If the firm wants to count such a “Legacy” employee as a HUBZone resident for the duration of the individual’s employment, then at the time of any subsequent recertification, the firm will be required to identify any such employee and provide supporting documentation demonstrating that the individual resided in a HUBZone for 180 days before and after certification and that the individual has been an employee of the firm for the entire period of time since the firm’s certification.
How may I obtain help or learn more about the HUBZone Program? The following resources may be accessed for additional support:
Your SBA District Office can provide local assistance on topics such as government contracting, certifications, financing, general business support, and more. The list of local offices can be found at https:// sba.gov/local-assistance/.
The SBA Answer Desk at 1-800-827-5722 and email@example.com can also answer general questions.
“Each SBIR Road Tour stop, hosted by a local organization, will provide attendees with an opportunity to hear directly from the participating federal agency program managers that administer over 5,500 new awards annually and to meet one-on-one with program decision makers.”
“Now is the time to think through your marketing strategy and the various venues for contracting with the federal government. This article will discuss these venues and the opportunities they offer your small business.“
You are embarking on the utilization of SAM Contract Opportunities, the gateway for federal government agencies advertising prospective contracts on the Web.
II. WHAT TYPE OF SMALL BUSINESS ARE YOU?
A. Commercial Contracting Under FAR Part 12
Are you planning to market an existing commercial product which has been on the market, such as software, hardware, a commodity, a report, a conference, a survey or a study, sell it to meet a government specification or statement of work and bill for the end product when delivered?
If the answer to this question is “Yes”, you may be able to do business under Federal Acquisition Regulation (FAR) Part 12, “Commercial Contracting”, which is a simplified and fast form of selling to the federal government.
The vast majority of purchases by the federal government in this category are Firm Fixed Price (FFP) with a product warranty of some type. You may be able to sell under FAR Part 12 if your product meets the definition of commercial items specified by the government.
B. Non-Commercial Contracting
Are you planning to market your services at an hourly rate, sell them by labor categories with professional job descriptions to perform the government statement of work and bill by the hour for labor and at cost for material and travel?
Or is your product or service a development effort or not readily available to customers in the commercial marketplace. If you fall into this category for either reason it is unlikely you will be contracting under FAR Part 12 and you will be pursuing long term government contracts.
If the above apply, much of the remainder of the Federal Acquisition Regulation (FAR) will apply to you, together with the various contract types other than FFP which are used for efforts where the contractor and the government may share the business risk in development, implementation or production of a new product, system or service.
C. Commercial and Non-Commercial Contracting
You may decide to market under both (A) and (B) above. Some small businesses sell their product commercially, but contract for product implementation and support on a service contract basis.
If you are selling under (A) and (B) or just (B) above you should examine this web site further to obtain sufficient detail to develop your business system in estimating, proposing, accounting and billing the government for contracts not qualifying under FAR Part 12.
III. YOUR CUSTOMER
Although all requirements in the federal government market emanate from the US Agencies there are several ways for meeting these requirements with a business arrangement that suits your small business.
A. U.S. Government Agency As a Customer
There are over many agencies or “Departments” in the Federal Government. Each of these agencies has a statutory obligation to contract from small business for 23% of everything it buys. Contracting officers must file reports annually demonstrating they have fulfilled this requirement. Not fulfilling the requirement can put the agency annual funding in jeopardy. You have a motivated customer in federal government contracting officers and buyers.
As a prime contractor to one of these agencies your small business proposes, negotiates and contracts directly with a federal government contracting officer. You may or may not have subcontractors or suppliers.
A subcontractor is a teaming partner who agrees to accept a portion of the effort under your prime contract and abide by the prime contract terms and conditions flowed down to him from you. On competitive procurements the business arrangement is usually mutually exclusive on the part of the subcontractor and your company.
A supplier is a purchased finished vendor or off the shelf retailer who sells you items or components necessary to produce your product but does not accept the flow-down provisions of your prime contract other than the most general terms and conditions such as US Public Law , EEO, Tax Provisions, Warranty and the like. Supplier relationships are not usually mutually exclusive arrangements.
You may be able to fulfill the entire prime contract scope of work or meet the product specification from within your company. However, major government procurements are increasingly geared to teaming arrangements involving a prime and several subcontractors. As the prime on such a procurement you normally have the lead share of the work scope, you have a product critical to the program, you know the customer the best or a combination of these factors. Your subcontractor team members are usually not your direct competitors but are involved in lines of work that complement your business and enable the team to fulfill a scope that is larger than any single member could undertake alone Your direct competition is most likely forming similar teaming arrangements in an attempt to win the larger jobs which can span a number of years in duration and mean good, solid cash flow for all participants.
A General Services Administration (GSA) Schedule is a pre-qualifying way to obtain business directly from all federal government agencies. The GSA performs the service of negotiating with you for multi-year pricing of labor, products and equipment, together with pre-established terms and conditions. Your schedule and terms are posted to the GSA Web Site and all federal agency buyers can expeditiously buy from your schedule. A GSA Schedule is normally set up for 5 years. Achieving and Utilizing a GSA Schedule
The GSA also sponsors and manages major Indefinate Delivery/Indefinate Quantity (IDIQ) procurements such as “Alliant” and “Alliant Small Business” for Information Technology. These contract vehicles pre-position large and small contractors and teams of contractors to accept competitive delivery orders under established terms and conditions and standardized solution s for technological areas in high demand across the federal government. An IDIQ procurement can span a period as long as 10 years.
B. A Government Prime Contractor As A Customer
Government Prime contractors who are large businesses (roughly defined by the SBA and the banking community as having over 500 employees and annual sales in excess of $20M) and who hold federal government contracts have the same requirement as government agencies to buy at least 23% of the supplies and services in support of those contracts from small business.
Large business, under federal procurement law, must prepare and submit annual “Small Business Contracting Plans” for approval by the local Defense Contract Management Area Office (DCMAO) nearest their headquarters. These plans must include auditable statistics regarding the previous 12 month period in terms of contracting to small businesses and the goals forecast for the next year. The federal government can legally terminate a contract in a large business for not meeting small business contracting goals. Approved small business plans must accompany large business contract proposals submitted to federal government agencies. You have a motivated customer in large business subcontract managers, administrators and buyers. A small business who becomes a prime contractor does not have to meet the annual small business contracting plan requirement until it becomes a large business.
In selling to a prime contractor you propose, negotiate and subcontract with a company who holds a contract with a US government agency and in turn flows down its provisions to you. Or you sell under purchase orders on a commercial basis (FAR Part 12) to another company who holds a federal government contract.
C. Selling Via a Joint Venture
There are occasions when two companies wish to combine their respective products or resources and form a separate entity to undertake a contract, usually a prime contract with the federal government. The marketing considerations for such a venture involve impressing the client with the resources being dedicated to the program or addressing government concerns about broadening the technology and assuring redundant capability in the industrial community. A joint venture consists of human and other resources from the participating companies. However, it stands alone as a legal entity. Joint venture agreements are difficult to craft. Protecting proprietary information, together with intellectual property is especially demanding. Dividing the contractual effort and ultimately integrating it into a final product or service is also a challenge. Complicating the scenario is the fact that the US Government reserves the right to approve joint venture agreements before a contract can be issued to the entity. One company usually assumes the lead role in the joint venture. Some joint ventures hire a joint venture administrator who is the only legal entity authorized to sign a binding document on behalf of the two companies once it has been approved by each firm through a joint venture board, with equal representation by both organizations. Administration, accounting and billing at the joint venture level is a third tier of administrative cost which must be born by both companies.
Your customer in the federal market is either the government itself or a prime contractor. You will sell as a prime contractor, as a commercial supplier or as a subcontractor and on occasion you may have the need to establish a joint venture with another firm.
IV. MARKETING AVENUES
A. Small Business Certifications
Your small business designation at your SAM registration places you in the small business set-aside market for 23% of the total goods and services the federal government buys. Within small business, there are additional self-certifications and SBA certifications to which you can apply if you qualify.small business designations
Self-certification occurs when you respond to government requests for proposals, cite you registration number and state in your proposal certifications and representations that you are a Small Business and whether or not you have set-aside designations.
Procurement contracting officers and prime contractors are responsible for verifying self-certifications. Owners claiming designations must have a major equity share in the business and must be involved in running the business operations.
The SBA certifies Small, Disadvantaged Businesses under their “8(a) Program”. The application for this certification is available at the SBA Web Site for businesses who qualify by virtue of minority ownership and minority involvement in running the business operations. The SBA reviews, approves and grants 8(a) Certifications to small minority-owned businesses. Please see the following link:
Federal agencies and prime contractors are required to set goals and contract to achieve annual objectives for each of the above certifications within the overall 23% small business contracting mandate required by statute. Procurements are regularly “set-aside” for these designations to achieve government and prime contractor annual objectives. Procurements are also set-aside for small business in general, which includes companies who may not qualify for the additional small business certifications discussed above.
B. Capability Statement
With your small business SAM registration and additional certifications, you are ready to develop your capability statement. This document will be a promotional brochure which on paper and through the electronic media advertises who you are, what your do and why the government or prime contractors should buy from you. Major elements of your capability statement in addition to your small business designation and certifications are as follows:
(1) Company overview
(2) Supplies and services description couched utilizing your marketing ideas and strategy.
(3) Past performance of your enterprise or your personal background and qualifications (experience, education, etc.)
(4) Facilities or capabilities overview (How you perform your service couched in a manner that will appeal to your target market)
(5) Explanation of the positive results the client should expect.
(6) Points of contact and ways to contact you for meetings, placing an order and contracting your services.
Your capability statement can be distributed on paper to your target market as a brochure, emailed as an attachment and linked into related industry web sites or partner web sites to get the word out about your product or service. The capability statement targets contracting officers and prime contractor buyers who are seeking to fulfill their small business buying goals. It is a way to get you in the door and speak to or correspond with the management and technical personnel who are the decision makers in sourcing small business buys.
C. Self-Marketing for SBA 8(a) Small Disadvantaged Business (SDB)’s and Historically Under-Utilized Business (HUB) Zone Contractors
If you qualify for a SDB Certification or can attest that you are located in a HUB Zone, these items can be valuable marketing tools. Presenting your capability statement to a prospective federal customer and meeting the management, technical and procurement decision makers puts you in a position to self market projects. All federal agencies and large business contracting to the federal government have to meet SDB and HUB Zone annual buying objectives. They have processes for competitive procurements. The processes are generally lengthy to comply with regulations governing solicitation on the open market, request for proposals, source selection, negotiation and award.
Under the 8(a) SDB Program and the HUB Zone Program if you can assist a federal agency or large business in identifying a product or service they need and that you are a qualified source to fill that need then the your customer can buy it directly from you and bypass the competitive process entirely. The key to achieving this type of targeted marketing is to contact and/or visit your customer regularly and get in front of the solicitation process. Once a project has gone to the “Sources Sought” or “Solicitation” stage you can still convince the customer to set it aside for 8(a) or HUB Zone firms, but you will be competing with other SDB’s or HUB Zone contractors in your NAIC’s Code for the business. The “Early Bird Gets the Worm”, adage is useful for SDB and HUB Zone organizations. Some buying agencies even permit an 8(a) SDB or HUB Zone Contractor to assist in writing the product or performance specification for a project to expedite the process. Federal agencies and large businesses are motivated to use the non-compete, set-aside features of the 8(a) SDB and HUB Zone Programs. Doing so permits them to meet their small business procurement goals and enables a swift buying action of a product or service for which they may have a critical need.
D. GSA Schedules and Indefinite Delivery/Indefinite Quantity (IDIQ) Contracts
The General Services Administration (GSA) pre-qualifies contractors with a terms and conditions package and negotiated rates for products or services. Your GSA schedule is then posted to the web at:
This site is searchable by all government agencies who want to buy products and services. A GSA schedule allows you to offer a pre-existing contract vehicle with established pricing to any federal government agency or prime contractor. This shortens the procurement process considerably. In some procurements, a GSA Schedule is necessary to qualify for bidding certain jobs. You can read more about applying for a GSA Schedule by going to the General Services Administration Web Site at: GSA Web Site
Under Indefinite Delivery/Indefinite Quantity (IDIQ) Contracts, terms and conditions and labor hour pricing are agreed upon in advance with an agency for a period of time (usually a multi-year arrangement). Many large government agencies contract utilizing IDIQ contract vehicles and often make multiple awards to several companies who then compete for work on a delivery order basis thereafter.
The GSA also manages large scale IDIQ procurements in high technology areas such as Information Technology (IT). Individual agencies then compete and procure IT products and services against the standard with established terms and conditions and known pricing. Once qualified, winning in this type of environment is simplified to submitting the best technical solution to a given delivery order with the lowest man-hours or product pricing. It is not uncommon for competitors to offer discounts during the competition.
Under both GSA Schedules and IDIQ Contracts individual delivery orders are negotiated separately regarding the labor hours, material and travel cost necessary to complete a discrete scope of work.
Because the federal government buys on such a large scale and in many acquisitions chooses to package related technologies or services, it is a necessary part of your marketing plan to consider teaming with other companies. As discussed in paragraphs II. and III., above, large businesses who are in the same line of work as you are have a requirement to subcontract to small businesses under federal government contracts. In addition, large and small companies who are in related or synergistic businesses to yours actively seek partners in the federal government market to permit access to larger packaged procurements.
Attend trade conferences, join trade organizations, get into technical blogs on the web. All large businesses contracting with the government have a small business liaison officer which you can locate at the company web site. Present your capability statement electronically or preferably in person to local large businesses engaged in federal government contracts who may need your services.
Many large businesses are willing to team as a subcontractor to a small business to get access to the small business set-aside market. A large business cannot receive an amount in excess of 50% of the dollar award of a small business set-aside, but many large businesses are willing to subcontract to multiple small businesses on federal government contracts to broaden their business base.
For SDB companies, the “Mentor – Protege’ Program is available. This is a federally sponsored program whereby a large business sponsors a smaller business through active teaming and mentoring. Your can learn more about this program at:
The best way to approach a large business or another synergistic small business is to have a program target as a discussion vehicle. If you find a project for which you need a partner or partners, carefully research the firms you are considering, check their D&B’s, see if they have entered their company in the “Interested Parties” frame of the solicitation at FEDBIZOPS.
When teaming with another company, most arrangements become mutually exclusive if you are subcontracting to one another and not just supplying off the shelf products. As the business relationship evolves and you begin sharing information a two way Non-Disclosure Agreement (NDA) is usually necessary to protect proprietary information.
As the business relationship matures and the parties agree to become exclusive, a teaming agreement is also necessary. At this point you have agreed upon who will be the eventual prime contractor and who will be the subcontractor. The areas regarding work share and proposal preparation are particularly critical in terms of thorough definition to avoid future misunderstandings among the parties. If and when the prime contract is awarded, the teaming agreement is replaced by a subcontract from the prime party to the subcontracting team member.
F. Small Business Innovative Research Program
Other federally sponsored programs are the Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) Programs for high technology small business. These are competitive programs awarding small business fundng in critical high technology areas. Your can learn more about the SBIR/STTR Programs by going to:
This article has offered a template of avenues for small business federal government contract marketing. You should apply the template to your business plan and explore which avenues suit your enterprise. The federal government contract customer is motivated to buy from you. Your marketing task is to target and find your customer considering the supplies and services you sell. The federal government offers competitive advantages to various types of small business, depending on ownership and size. Federal government contracts offer small purchases and long term contractual arrangements from firm fixed price purchases to cost type and time and material contracts. The opportunities are there for small business entrepreneurs’ to pursue.”
“The purpose of this article is to compare small business federal government contracting as opposed to selling commercial products and services. The comparison may be useful for those who are considering melding commercial and federal government business or starting an enterprise involving both venues. WHAT FEDERAL GOVERNMENT CONTRACTING IS – AND IS NOT
Small business federal government contracting is not rocket science – to succeed you must take what you do well in the commercial market place or what your experience leads you to believe you 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. Very few startups entertain contracting exclusively to the federal government without commercial work to sustain operations while the more lengthy government procurement process is being pursued.
Federal government contracting is controlled by the Federal Acquisition Regulation (FAR). Bid and proposal types are driven by the nature of the supply or service being procured. No one reads the FAR cover to cover – It is a source book for when you need it. The FAR and associated regulations are taught in only a few colleges, such as the Defense Systems Acquisition University at Ft. Belvoir and the George Washington School of Government Contracting. Very few CPA’s are familiar with the US Government FAR Cost Accounting Standards (CAS) and I am not aware of any questions regarding CAS on current CPA exams. In general one must grow to understand these requirements and that usually happens by doing business under them.
BUSINESS DRIVER COMPARISONS
The following are some common driving business factors and a commercial versus federal government comparison for each:
The above are not all the driving factors you should consider when weighing the differences between commercial and government work, but they are some of the most significant. Becoming a government supplier may not result in the highest profit-making product/service line in your enterprise but the venue has the potential to pay the bills and be a major platform for stability and long term growth. It should not be your only endeavor but it could be a major element of your total business plan.
Please see the Table of Contents at this site and the free downloads of books and materials for further details. “
“The inspector general found that federal agencies awarded more than $80 million in contracts to entities found to have engaged in conduct indicating a lack of responsibility, including fraudulently obtaining contracts though the use of pass-throughs, and submitting false certifications of business size, while an entity excluded because of a Clean Water Act violation received a loan valued at $2.9 million. “
If the Small Business Administration does not improve its suspension and debarment process, how much money will be lost to fraud, waste, or abuse is anyone’s guess.
Those who are suspended, debarred, or proposed for debarment are supposed to be banned—or “excluded”—from doing business with the government. These individuals or companies are supposed to be excluded for a set period of time: while they are under investigation or are involved in a pending legal proceeding (suspension), or after the investigation or proceeding results in a finding that they did something that shows they can’t be trusted with federal funds (debarment). But, as we have known for many years, excluded individuals and companies sometimes slip through the cracks and improperly receive federal funds.
This was most recently highlighted in an audit report released last month by the Small Business Administration’s inspector general. According to the report, suspended and debarred entities were awarded millions of dollars in federal contracts and loans between 2012 and 2018 because of deficiencies in the agency’s oversight.
The inspector general found that federal agencies awarded more than $80 million in contracts to entities found to have engaged in conduct indicating a lack of responsibility, including fraudulently obtaining contracts though the use of pass-throughs, and submitting false certifications of business size, while an entity excluded because of a Clean Water Act violation received a loan valued at $2.9 million.
The inspector general found two key problem areas. First, officials are not always checking the list of excluded recipients—maintained in the System for Award Management database—prior to making awards, nor are they consistently documenting that they have checked the database. Out of 14 loans, the watchdog found that files for 11, worth a total of $3.8 million, lacked documentation confirming that officials had checked the database prior to approving the loan.
Second, the Small Business Administration is taking too long to process suspension and debarment referrals. Referrals are commonly made in connection with a legal proceeding, such as a criminal or civil judgment. The watchdog found 15 referrals that had been awaiting review for an average of 620 days—almost two years. Furthermore, the Small Business Administration often fails to document the reasons for declining suspension and debarment referrals; or, when an exclusion is imposed, the agency fails to promptly update the award management database so that all other federal agencies will know not to do business with these individuals and companies.
The inspector general made several recommendations to improve the oversight and management of the agency’s suspension and debarment program. Failing to adopt the recommended corrective actions could be a costly mistake. The watchdog warned that inadequately documented referral decisions could expose the government to adverse legal action by those claiming they were unfairly suspended or debarred.
Explore the Federal Contractor Misconduct Database
The federal government routinely awards contracts to companies with histories of misconduct, including contract fraud and other violations. POGO maintains this database to improve contracting decisions and increase public knowledge of how the government spends billions of taxpayer dollars each year.Explore the Database
But much more is at stake—potentially billions more. According to the report, in just one year federal agencies awarded over $105 billion in small businesses contracts, while the Small Business Administration managed a loan portfolio worth $132 billion. If the agency does not improve its suspension and debarment process, how much of that money will end up in the hands of risky individuals and companies and lost to fraud, waste, or abuse is anyone’s guess.
That’s why POGO has kept on top of this issue for so many years. Whether through working with policymakers to improve the suspension and debarment system, maintaining a Federal Contractor Misconduct Database tracking the integrity and ethics of the government’s largest contractors, or pressing the government to create its own data resources to better track fund recipients, this area is a worthwhile focus for achieving a more effective, ethical, and accountable government.”
“The Navy’s small business numbers are trending upward, and it wants to keep it that way to increase the number of new ideas coming into the service. To do that it’s shortening its small business innovative research process, and is attempting to get more of those technologies into production. “
“We’re really pushing hard on increasing the agility of our small business innovation research program (SBIR),” James Geurts, assistant Navy secretary for research, development and acquisition, told reporters Tuesday in National Harbor, Md. “We’ve reduced the requirement in terms of proposal length by 75% and we are looking at reducing the timeline to get to actual contract award by that amount.”
Geurts said to get those reductions the Navy looked at internal processes. The idea falls under the Navy’s broader NavalX initiative to make the acquisition process more agile.
“Many of our barriers are self-inflicted and culturally reinforced,” he said. “You’ve heard me talk about scraping the barnacles and really challenging ourselves to ensure any process time we have is adding value.”
The Navy’s work with SBIRs doesn’t stop at the initial contract though. SBIRs are grants for research and development, not for production, and the Navy wants results.
The service can award SBIRs, but they need a place to go to mature into an actual product sailors can use with an initial production contract. Geurts said the Navy is spending a lot of time identifying a need for a SBIR, and figuring out how to rapidly transfer a successful SBIR into a fielded program.
Obviously, not all SBIRs will make it big and some will die in the valley between research and development and actual production.
The Navy is thinking about what success means in terms of taking risk, while not wasting taxpayer funds on too many technologies that will never develop.
“Success to me looks like we are as efficient as we can be in generating ideas and evaluating ideas,” Geurts said. “It looks like getting our iteration speed up and our iteration costs down. I think we fail when we have cost imposing steps in the process that don’t add value.”
Geurts said it’s the Navy’s responsibility to sort out the parts of the process that protect the taxpayer and sailor and the parts that are duplicative and burdensome.
Geurts said failures in SBIR aren’t total failures, though.
“While the SBIR itself may or may not go forward, that doesn’t mean it didn’t add value,” he said. “It may have made a stink about a requirement in a different way. It may have challenged our way of thinking about an operational problem. SBIRs can be successful in a lot of ways, it can get a new startup familiar with how to work with the Defense Department.”
The Navy is trying to bring in more small business to shake up the status quo and bring in more ideas to the service. The Navy contends that in near-peer competition, the service will need novel technologies that give the United States the edge over China and Russia.
In 2019, the Navy beat its big goals for small business.
“Our small business rate was about 18.3% and that represents about $16 billion,” Geurts said. The Navy as a whole awarded $117 billion in contract obligations in 2019. “That’s above the goal. We had a goal of 14%. I think that’s important because we get some great innovation from our small business providers.”
“This article is template to apply to your marketing operations for accommodating federal government contract proposal preparation. Proposals are special, sometimes exhausting projects, but a necessary part of doing business with government agencies.
Like many other aspects of business, the more proposals you prepare, the more you learn and the more can borrow from past practice for the next one. “
Your marketing efforts have resulted in locating a solicitation for supplies and services that is exactly suited to your business. The solicitation by the government may be a result of your self-marketing efforts or you may have located it at FEDBIZOPS, the gateway for all federal government business in excess of $25K. The fact that the government has now converted a project requirement into a formal solicitation means that the funding is available for a contract and the authorities within the government agency have authorized a source selection process.
BID/NO BID DECISION
Government contract proposal preparation is time consuming and can be costly. Meeting the agency Request for Proposal (RFP) requirements with a responsive proposal can be well worth the effort if a winning strategy can be formulated. When considering submitting a proposal to a given government solicitation, conduct a bid/no bid exercise. By going through that process you will begin formulating your win strategy or you will discover that you should not bid this job for lack of such a strategy. The elements of the process are discussed below in the form of questions to ask yourself against topics for key consideration. Affirmative or non-affirmative answers to the topical questions and ability to fill in the blanks below will drive your decision to bid or not bid a solicitation.
Do you know this customer? Yes __ No ___ Does this customer know you? Yes___No ___ Do you have any idea of the available funding for which the customer has obtained authorization? Yes___No ____ Specify the marketing contacts which have been made with the customer thus far: Date: Contact:
B. Supplies and Services:
Specify the supplies and services to be delivered in the prospective contract:
Line Item (s): Description:
Are the supplies and services in the RFP Statement of work a good match for what the company sells? Yes ___No ___ Is the RFP Statement of Work specific enough to identify risks? Yes____No ____ Is the RFP schedule specific enough to determine the delivery requirements? Yes____No____ Can the delivery schedule in the RFP be met? Yes ___No _____ Specify the delivery schedule for the prospective contract:
Line Item: Delivery Date:
C. Contract Type/Value/Start/End Date:
Does the proposed contract type (FFP, CP, T&M, etc) suit the nature of the work? Yes___ No ___ Specify the contract type for this program: _______________. Are there any unusual terms and conditions specified in the government RFP? Yes ____No___ Specify any unusual terms and conditions: ___________________________________________
What is the Rough Order of Magnitude (ROM) value of the prospective contract? $___________. What is the anticipated start date of the contract? ________. What is the anticipated end date of the contract? ________.
D. Company Strengths: Is this prospective contract for effort in which the company has strong skills? Yes____No ____ Specify the strengths the company will utilize in meeting the product specificaton or statement of work:
E. Company Weaknesses:
Are there any company weaknesses in meeting the product specification or statement of work? Yes ___No ___ Specify any weaknesses for which the company must compensate and manage associated risks:
F. Teaming Arrangements (If any):
Does your company plan to team with other companies in the performance of the prospective contract? Yes ___No ___ Identify the other team member companies:
Will your company be a prime or a subcontractor? Prime___Subcontractor ____ Have NDA’s and Teaming Agreements been executed? Yes____No ______
Is this a sole source set-aside procurement to your company? Yes____No____ If this is a competitive procurement, identify the prospective competition and their associated strengths/weaknesses:
H. Win Strategy:
Identify the proposal features and themes which will be utilized in the proposal as descriminators to win this program:
I. Proposal Budget:
Estimate the man hours and dollars for proposal labor, any travel expenses, shipping, packaging, samples and other expenses associated with preparing the proposal. The government does not reimburse the contractor for proposal preparation under the subsequent contract. Proposal expenses must be included in the cost center overhead or G&A and accounted for as marketing expense allocated across the cost center or the company.
Labor Hours __ Labor Dollars $______ Material _______ Travel _______ Reproduction _______ Samples (if any) _______ Packaging/Binding/Ship _______ TOTAL $_______
J. Bid/No Bid Decision:
If you can answer “YES” to at least 5 of the questions under paragraphs A through D above, it is likely you should bid this procurement. If the answers to 7 of the 10 “YES” or “NO” questions under paragraphs A through D above are “NO” it is unlikely you should bid this procurement unless the answer to G is “YES”. Even then, examine your answers and carefully review whether this business is suitable for your company. If the answer to E is “YES”, it is unlikely you will bid this procurement successfully unless the answer to G is “YES”. Even then, determine how you will overcome the weaknesses you have identified in your company associated with doing this work before you decide to bid it. Carefully compare the competitive analysis under Item G to the win statagy under H before you make your final decision.
BID _____ NO Bid _______
YOUR PROPOSAL You have decided to bid a prospective project. You have downloaded the RFP from the government agency and the clock has started on the proposal due date.
Visit the federal government on line certifications and representations web site and complete the standard information there, which can be utilized for all federal agency proposals. Certifications and representations are required for virtually every proposal submission. That web site is at:
The following information addresses the proposal process. It is from an independent consultant named Deborah L. Kluge, who is a specialist in proposal writing and consulting. The below is an extract from Deborah’s Web site.
If you are preparing a FAR Part 12 Commercial Proposal, certain elements of this material may not apply, but you are encouraged to utilize the information and the checklist to insure you have covered all the bases.
Read it once, then read it again. And again. Experienced bidders know that several readings of an RFP are necessary for a complete understanding of what is required. Learn what the lettered sections of an RFP are (e.g., Section B refers to your pricing, Section C is the scope-of-work, Section K contains Representations and Certifications, Section L provides instructions to the bidders, Section M specifies the bid evaluation criteria, etc.). The titles of the lettered sections are generally the same in every RFP. Be aware that information critical to your bid may be scattered among many different sections of an RFP. Put the RFP in a 3-ring binder for easy use as a reference document. You might also want to insert dividers in front of each important section for quick reference. Use small “Post-It”™ notes at the edge of a page to mark important pages or paragraphs. That way, you can find them quickly.
If you don’t understand some of the information in the RFP, you can submit written questions to the Contracting Officer. Some RFPs specify a date by which questions are due. Make sure you send in your questions before the due date or they may not be considered. Be aware that the Government’s response to all submitted questions are distributed to all bidders, usually through a written amendment to the RFP. Although you and your firm will not be identified as the “asker” of specific questions, the way in which you word your questions could provide important information to your competitors. Word your questions carefully to ensure that you don’t give away information on your strategy or pricing. If you call the Contracting Officer to obtain or clarify information in an RFP, be aware that verbal information given to you by the Government is not binding.
THE PROPOSAL OUTLINE
If you have downloaded an RFP from the Internet, you can use that file to begin constructing your proposal outline. If you do not have the RFP on disk, use a scanner to scan in important sections for use in preparing your outline. Some people prepare an annotated outline as well as a basic outline. An annotated outline can contain important points from the RFP, as well as your own information on what you are planning to say in each section. If you prepare an annotated outline, copy your file, save it under a different name, and delete the annotations. The result will be a basic outline which you can use for easier viewing and tracking of proposal sections and subsections. For each section and/or subsection of your outline, indicate the estimated number of pages that will be written, the person responsible for doing the writing, and the evaluation points. Put important instructions on the first page or at the top of your outline, so you don’t have to rummage through the RFP to find them. These instructions might include: proposal due date and time, number of copies, page limits, font size, page margins, packaging and delivery instructions.
THE PROPOSAL SCHEDULE
Make one and stick to it! Work backwards from the proposal due date. You might want to make a separate schedule for preparation of the cost/business proposal. Make sure you leave plenty of time for copying, binding, and delivering the proposal. Remember, the copier knows that an important document is being copied, so it will break, jam or smudge. Have a back-up plan that includes having extra paper and toner on hand and sending the proposal out to be copied. Distribute the schedule to all members of your proposal team.
Make sure you are familiar with the instructions in Section L of the RFP. Study the proposal evaluation criteria and the points allocated to each section/subsection of the technical proposal, as well as the points that are allocated to cost. This information will tell you what to emphasize and where to put your efforts with regard to proposal preparation. Hold an intial and regular follow-up meetings with your proposal team to discuss strategies, progress and problems. To the extent possible, your Technical Approach and strategy should provide answers to the following questions: who, what, when, where, how, and why. Depending upon the instructions in the RFP, your Management Section might contain a discussion on how you will manage the overall project, a discussion on how you will manage and oversee the work of your staff and subcontractors (if any), an organization chart of the project, and position descriptions of project staff. In your Personnel Section, you may be required to include narrative information on the experience and skills of the staff members you are proposing for the project and/or their resumes. In your Related Experience or Capabilities Section, you may need to demonstrate that you have performed similar or related work for this or other clients. Your proposal may have other sections such as an Executive Summary, a discussion of your Understanding of the Problem, Appendices, or other required information as specified in the RFP.
Don’t assume that the Government knows your organization’s capabilities, staff or the projects you have carried out. The Government is supposed to evaluate only the specific information contained in your proposal. That means it must be written down in accordance with RFP instructions. Use tables, charts and graphics to summarize information (“a picture says a thousand words”) or to break up your narrative. Check the entire proposal for the following: technical consistency; spelling; page numbering; section/subsection numbering or letting; consistency of appearance of headings, subheadings, font types and font sizes. Make sure you have filled in and signed all the forms in the RFP that you must return with your bid. Before and after copying your technical and cost proposals, check to see that each copy contains all pages and that they are in the proper order.
You have a technical strategy — you should also have a costing strategy! Don’t wait until the last minute to begin gathering cost information that you will need to prepare your cost estimate. Be aware of and understand the type of contract you are bidding: fixed-fee, cost-plus, cost-reimbursement, time and materials, etc. This will likely affect the way you price your proposal. Prepare a spreadsheet template or checklist of items to include in your cost estimate. Make sure your cost estimate is consistent with what you are proposing to do or provide. You may need to develop some specific assumptions for pricing purposes. If appropriate, you can include these assumptions in your cost/business proposal on a separate page or as footnotes to your estimate. In any event, always document your assumptions so that you can refer to them later and make changes if needed. Check and re-check your numbers and formulas. Review the hard copy of your estimate to help in spotting errors. Make sure that your cost estimate can be easily read. Don’t use a font that is too small. IF YOU WIN Celebrate! Uh oh — you now have to actually manage and implement your project.
IF YOU LOSE
You can call the Contracting Officer to arrange an in-person or telephone debriefing to find out the reasons for your loss. Try not to get too discouraged — no one can win all the time. Learn from your experience and apply that learning to your next bid.
PROPOSAL PITFALLS – Don’t Let These Happen to You!
Failure to follow the RFP instructions regarding organization of the proposal, inclusion of required information, page limits, volumes, etc. Failure to take evaluation criteria and allocated points into consideration when preparing your response. Failure to understand and to demonstrate an understanding of the problem (i.e., the reason why the agency is issuing the RFP). Failure to submit your proposal on the required date and time. Failure to include all of the information requested by the Agency. Failure to tailor your response to the specific RFP. Costs/Prices are unreasonable (too high or too low) or incomplete. Costs/prices do not provide any detail or breakdown information (if required) for line and sub-line items. Failure to include specifics of your proposed approach to the project. Proposal is unprofessional in appearance (e.g., typos, blank pages, unnumbered pages, smudges, no whitespace, sloppy-looking, etc.). This reflects poorly upon your company. Proposal is poorly written (e.g., information is not presented/organized in a logical manner, proposal is difficult to follow, poor grammar, etc.). Proposal merely repeats or paraphrases the RFP. Proposal does not explain how or by whom the project will be managed. Proposal does not contain RELEVANT information about your firm, its capabilities, and/or its management and staff. Proposal does not demonstrate that your firm/organization and personnel have the experience and capability to carry out the project.
Obtain complete copy of RFP Distribute RFP to appropriate staff. Review RFP for missing pages/sections. Prepare questions for submission to Contracting Officer. Receive and review responses to questions. Collect, distribute and review pertinent background documents.
Identify partners to participate in bid. Determine type of partnership arrangement. Prepare teaming or other type of appropriate agreements. Receive signed agreements from partners. Determine each partner’s level of effort for project. Number and type of long-term staff. Number and type of consultants.
3. TECHNICAL STRATEGY
Hold strategy meetings. Identify the partnership’s strengths and weaknesses. Identify competition and their strengths and weakness. Identify ways to differentiate partnership from competition. Develop strategic themes. Develop strategy for each component and overall.
4. TECHNICAL PROPOSAL
Prepare draft outline/revise as needed. Identify & select writers for each section. Determine page numbers for each section. Determine document format (font, major/minor headings, etc.). Provide writers with written formatting guidelines/instructions. Prepare/distribute list of nomenclature, abbreviations, acronyms. Identify and provide writers with relevant sections from past proposals. Prepare schedule/identify due dates for draft sections. Determine review, feedback and editing process for written sections. Ensure compatibility of software packages and versions. Ensure compatibility of document transmission via e-mail. Ensure sufficient quantities of appendix materials are available.
Prepare packet of materials for long-term candidates. Prepare personnel checklists/tracking list for candidate documents. Prepare commitment letter(s) for signature by candidates. Recruit long-term staff and consultants. Collect Resumes Sort Resumes by category/areas of expertise. Review Resumes Identify best candidates and alternates. Confirm candidates’ interest/availability. Obtain additional info from candidates for Resumes, if necessary. Obtain signed letters of commitment from candidates. Review personnel checklists for missing items. Determine format for re-written Resumes. Re-write Resumes. Prepare skills matrices.
6. PAST PERFORMANCE REFERENCES
Use RFP format if required. Update and/or prepare past performance information as needed. Review for accuracy and completeness.
Select cover design (map, picture, graphic, etc.). Identify info for cover (RFP #, date, submitted to/by, etc.). Prepare cover. Determine how proposal will be packaged. Purchase binder rings and covers, if needed. Purchase notebooks if needed. Purchase dividers/tabs if needed. Ensure sufficient quantities of all packaging items are available.
8. FINISHING TOUCHES
Spell check all sections. Gather appendix materials. Prepare Table of Contents. Prepare Transmittal Letter. Prepare Inside Cover Sheet for Technical Proposal. Prepare Section Tabs/Dividers for Technical Proposal.
Determine where and by whom proposal will be reproduced. Insert special pages, charts, etc., if required . Insert appendix materials. Check pages in each copy for legibility. Check each copy to ensure no pages are missing.
10. PROPOSAL DELIVERY/LOGISTICS Preparations for Delivery Obtain packaging materials (boxes, wrapping paper, tape). Purchase box handle (if needed for hand carrying). Prepare label for technical proposal. Prepare outside address label. Mark “original” on 1 copy of proposal. Prepare receipt (for hand carrying). Mailing Check courier service schedules (# days required for delivery). Wrap technical proposal and affix proposal label. Affix outside address label. Hand Carrying Identify person to carry proposal. Make airline and hotel reservations. Wrap technical proposal and affix “technical proposal” label. Affix outside address label. Affix handle, if required. Provide receipt to person who will hand-carry proposal. “
This article has offered guidance as a template to apply to your marketing operations for accommodating federal government contract proposal preparation. Proposals are special, sometimes exhausting projects, but a necessary part of doing business with government agencies. Like many other aspects of business, the more proposals you prepare, the more you learn and the more can borrow from past practice for the next one. As a final note please read the following carefully. Your proposal data may contain rate information, proprietary data or strategic technical solutions which you would not want to fall into the hands of a competitor. The government does not sign Proprietary Data Agreements (PDA’s). The government’s obligation to protect your information is covered in the following FAR clause and requires protective markings by you on the title page of your proposal and on each subsequent page.
FAR 15.509 Limited use of data.
(a) A proposal may include data that the offeror does not want disclosed for any purpose other than evaluation. If the offeror wishes to restrict the proposal, the title page must be marked with the following legend:
“The data in this proposal shall not be disclosed outside the Government and shall not be duplicated, used, or disclosed in whole or in part for any purpose other than to evaluate the proposal; provided, that if a contract is awarded to this offeror as a result of or in connection with the submission of these data, the Government shall have the right to duplicate, use, or disclose the data to the extent provided in the contract. This restriction does not limit the Government’s right to use information contained in the data if it is obtainable from another source without restriction.”
(b) The offeror shall also mark each restricted sheet with the following legend: “Use or disclosure of proposal data is subject to the restriction on the title page of this Proposal.”
(c) The coordinating office shall return to the offeror any unsolicited proposal marked with a legend different from that provided in 15.509(a). The return letter will state that the proposal cannot be considered because it is impracticable for the Government to comply with the legend and that the agency will consider the proposal if it is resubmitted with the proper legend. “
“The market doesn’t just have a mid-sized business challenge, but a challenge with small businesses that can’t survive outside of the set asides.
More attention needs to be paid there but the onus really needs to fall on the business owners to prepare for the day they outgrow the designation. That’s the better solution than adding another layer of set asides to the small business program.“
GAO offers a couple solid ideas, especially for formerly small businesses that have recently moved out of that designation.
One solution is already in place under some large task order contracts that allow firms to move seamlessly from the small business portion of the contract to the unrestricted. The argument is that this allows companies to continue to use what has been a successful vehicle for them and one their customers want to use.
The General Services Administration’s OASIS contract is one example that allows for a transition. But the Homeland Security Department’s EAGLE II vehicle does not, according to the report.
Another idea that seems practical is to change how past performance is used. Lowering quantitative requirements would increase contracting opportunities for mid-sized businesses and small businesses. This would lower the barrier to entry for some large contracts. Recall that small and mid-sized businesses are often shut out of competitions because they don’t have past performance that is large enough to qualify.
The report also describes the idea of allowing businesses to use subcontracting work as part of their past performance qualifications.
There also is some discussion of creating a set-aside program for mid-sized businesses, but you can tell from the tone of the GAO report that this idea doesn’t have legs. It would create a burden for government to administer and it would take opportunities away from small businesses. It is hard to imagine Congress supporting this anyway.
The report doesn’t make any recommendations. It’s just a review of the different options that have been discussed in the market around how to support the middle tier.
It’s an interesting read but really brings home the point that middle tier really is under a tremendous disadvantage but the solution really shouldn’t be another government program.
But every small business owner should read this report and shake in their boots because of one set of stats in the report.
In 2008, 5,339 companies won a small business set-aside contract. In 2013, only 104 of those 5,339 businesses had become what GAO defined as a mid-sized business. Of those 104, only 23 remained mid-sized as of 2017, and three had grown to the large business category.
That’s a horrible rate for companies to grow out of the small business designation.
GAO created its own definition for mid-size and large. A mid-size is a business with revenue of up to five times the small business threshold, and a large is a business whose sales exceed five times the small business threshold. GAO says at the end of the report that the definition of mid-size might need some work. The Small Business Administration said that a better calculation might be two or three times the size standard instead of five.
But that change doesn’t really impact the fact that so few transition out of the small business category, and that’s the concerning part.”