Is Your Small Business Primed to Become a Government Contractor?

Small business owners should be excited about the growing prospects in the public sector. Federal agencies alone awarded $132.9 billion in government contracts to small businesses in 2019, up from the $120 billion awarded the year earlier. State and local governments are also increasing their small business award targets – and often exceeding them!

Yet, we often hear from startups and small businesses that are less optimistic about the prospects. There’s a perception that government contracting is complex or that there’s a risk-reward imbalance. Sometimes those things are true. But in most cases, they’re not.

Agencies at all levels of government have been working extremely hard to make the vendor registration, certification and bidding processes simple. Many are trying to standardize on eProcurement systems that allow for greater visibility into bid opportunities, make it easy to communicate with contracting officers, and allow you to submit bids electronically. Procurement leaders are also implementing more flexible sourcing methods so that buyers can look beyond statewide contracts to find the vendors (and goods and services) that offer the highest quality and value. For example, many state governments are now permitting buyers to shop online in the Periscope Marketplace, which provides access to both statewide and agency contracts as well as co-op contracts and even suppliers directly. (If you haven’t already uploaded your catalog to the Marketplace, I highly recommend you do that this week.)

Of course, I appreciate that small businesses must aggressively work to grow, and the public sector’s sometimes-long sales cycles make it challenging to secure large, steady revenue streams right out of the gate. However, the effort put into building relationships, increasing brand awareness and submitting bids will almost always yield the results you want. The majority of small businesses I’ve worked with – many of which have been Periscope Supplier-to-Government (S2G) customers for years – have secured either prime contracts or subcontracts pretty quickly. Of course, “quickly” is subjective and it does take time and some money to get the ball rolling. But the investment required is minimal when you consider the payoff. Just look at the success that Whitaker Brothers and Carver Electric experienced both in the short and long term once they streamlined their market research efforts, made the right contacts and completed their pre-bid due diligence. Knowing that it might take a little time to secure some contracts, I recommend you start doing these three things as soon as possible, even if you’re still pooling resources, building your workforce and figuring out pricing.

A Final Thought

Small businesses don’t necessarily have to take big risks to strengthen their competitive position when competing for prime government contracts, or even subcontractor opportunities. They just need to be more strategic in their “sales” approach and more diligent in their market research and response preparation:

• Know which agencies award the most contracts – and the highest dollar contracts – to small businesses. The federal government is required to award a minimum 23% of total contracts to certified small businesses. Each state also has its own small business goals, as I mentioned before. But that doesn’t mean that each agency at the federal or state level has to adhere to those minimum awards. Those percentages are collective goals. Therefore, it benefits small businesses to understand which agencies have a track record that leans in their favor.
• Don’t hesitate to claim disadvantages. Some think that being a certified small business will arbitrarily disqualify them from large contracts for some of the reasons mentioned above. On the contrary, there are many cases in which being small can give you quite a few significant advantages. Remember, every government agency at every level has small business and diversity contracting goals. That means that every agency has set-asides for small businesses. Even more, agencies will further categorize set-aside contracts for minorities, women, veterans, and even rural small businesses. The point? Disadvantaged business entities should be taking advantage of these unique priority considerations. Just be sure you secure the proper certifications to validate your eligibility. 
• Diversify as appropriate, within your means. While you don’t want to stretch yourself too thin, or lose credibility due to your company’s lack of focus, it could pay off to adjust your business strategy when you’re getting started if you find the competition is thin – and the opportunities bountiful – in a particular government subsector. Just be sure to evaluate the risks vs. rewards of pursuing certain government contracts outside your typical categorical strengths.
• Be as aggressive on pricing as possible. Small businesses are often outbid on Lowest Price Technically Acceptable (LPTA) contracts for one of three reasons:
  • Larger competitors can secure volume discounting on goods from their established supply chain network
  • Larger competitors can afford to shrink their service and labor cost margins enough to hit the customer’s target pricing goal
  • Small businesses, especially those trying to penetrate new markets, simply don’t have the relationships with third party suppliers needed to reduce markups.
• Demonstrate your value. Whether you’re required to prove your skills as part of an agile project sprint, or simply asked to provide some advice to a contracting officer given your known subject matter expertise, never discount the opportunity to “show” exactly how valuable you, your business, or your goods and services can be to a government agency. That doesn’t mean you should be stalking customers or contracting officials to boast about how you’re so different or, worse, how you’re better. Nor should you be pitching them every chance you get. Just know that contracts aren’t always awarded on price alone. In fact, agencies are increasingly seeking partners, not just “suppliers.” Showing how your specialized expertise or unique competencies directly improve the tangible and intangible return on investment can prove invaluable, particularly when agencies score quality or “best value” higher than other evaluation criteria.
• Find out if there’s a prime time to secure, well, prime contracts. This means you have to do your market research. It also helps to maintain strong relationships with contracting officers and customers who can give you a heads up that solicitations are coming. (Government contracting 101, right?) Find out when certain contracts are set to expire, identify the incumbent, understand why it won last time and whether or not it has been meeting performance standards. Also understand if there is a “season” for certain types of contracts. For example, we know that nearly a third of commodity purchases are made during fiscal year-end when agencies start spending their “use or lose” funds. These insights will give you a head start on resource planning and pricing negotiations with your suppliers, if applicable, and enable you to balance the time spent pursuing new business and managing your current business. They will also help you determine if you should consider teaming with another business to increase your chances of meeting customer requirements, including non-pricing evaluation factors such as these.

The Small Business Association (SBA) publishes an annual federal contracting scorecard that grades each agency’s Prime Contract and Subcontract Spend with regards to small business contract awards. This one summarizes each federal agency’s grade for the last five fiscal years, while this government-wide performance scorecard shows overall agency progress against small business Prime and Subcontract award goals. Each state and local jurisdiction should have similar scorecards that they can provide to you. At a minimum, you should be able to find their small business contracting goals online.

That doesn’t mean that you should overextend your business, overbuy materials or compromise your standards to submit the lowest bid and secure the win. Just realize that government contracts may not help you “get rich quick” – at least not at first. Know your bottom line and set your anchor price accordingly when submitting bids or heading into negotiations. For sealed bid opportunities, be ready to drop your pricing as much as possible – without taking a loss – if you’re serious about getting your foot in the door to prove your value and establish a performance record that will pay off more in the long run via more government contract wins.

No matter what you do, just be careful not to price yourself out of contracts simply because you think market demand warrants a premium. (You can read more on this here.)    

Last, but not least, don’t forget the fundamentals. Take advantage of the many free resources available to small businesses. And, remember that state and local agencies offer just as many contracting opportunities to small businesses as federal agencies do, if not more.

Want proof? Periscope S2G finds and notifies its users about more than one million bid/RFP solicitations from 100,000+ state and local government entities each year. That’s a lot of new sales leads in your inbox every day with customizable plans available to meet your business objectives.

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