From Chairs to Weapons Systems, a Government Contract Can be Your Big Break. Here’s How to Make a Winning Bid.

By Mark Hendricks

Thanks to Ron Cruse, 563 out of 600 Iraqi health clinics now have basic emergency-room care kits. Their delivery was arranged by Logenix International Inc., the 22-person transportation company Cruse founded in Springfield, Virginia. “The only reason we haven’t delivered the other 37 is because those are in Fallujah and Ramadi,” says Cruse. “Nobody’s going in there but the Marines right now.” From a business standpoint, Cruse’s Air Force contract to deliver the kits represented $8 million of the company’s approximately $18 million in annual revenue last year. The challenge and prestige of doing business with the federal government on deals like this—as well as the size of the contracts—are some of the big reasons Cruse focuses his company on federal business.

Another is that, despite widespread opinion to the contrary, small businesses find the federal government is eager to do business with them. “In so many of these contracts, the government is setting aside whopping proportions for small business as a requirement,” says Cruse.

On average, the federal government seeks to award 23 percent of its nearly $400 billion in annual procurements to small businesses. In 2003, the last year for which figures are available, the government slightly exceeded that mark, says Al Stubblefield, the SBA’s associate administrator for business development. “Approximately $65 billion in contracts was awarded to small businesses for contracts and services,” Stubblefield says.

While the big multibillion-dollar contracts for new weapons systems dominate public attention, the overwhelming majority of federal government purchases are for much smaller amounts and much more prosaic items. The contracts and services purchased span every market, from naval ships to paper clips. And of the more than 11 million government contracts written annually, approximately 95 percent were for purchase amounts of $100,000 or less, according to John DiGiacomo, director of the Rock Valley College Procurement Technical Assistance Center in Rockford, Illinois, one of a network of PTACs throughout the country, whose mission is to help small businesses get government business.

There are government customers almost everywhere, and they buy in amounts from trainloads to single chairs. Rebecca Boenigk, the CEO and chairman of Neutral Posture, an ergonomic furniture company in Bryan, Texas, sells $4.5 million a year to federal buyers, most of it in small lots. “Our average order is only four chairs,” says Boenigk, who employs 85 and grosses $19 million a year. “And that takes into account the fact that sometimes we sell 800 or 900 at a time.”

It’s easier than you think to win a federal government contract that could introduce you to this vast marketplace. The overwhelming paperwork requirements that apply to big defense contractors bidding on a major new weapons system are largely irrelevant to small businesses, according to DiGiacomo. “There’s a huge difference between a large business and a small business, and what’s required of them,” he says. “Too many small businesses are afraid of the federal government because they think there are all these rules and regulations that, in fact, don’t apply to them.”

That is echoed by Peter Provenzano, president and CEO of Rockford, Illinois-based SupplyCore Inc., a 100- person, $170 million supplier of products to the Defense Logistics Agency and the General Services Administration, from building materials to office supplies. “People have a preconceived notion that doing business with the federal government is hard, but I don’t see it,” says Provenzano. “They’re a great customer.”

Winning Federal Business
Getting your first federal government contract starts with asking yourself whether this is something you really want to do. It can involve significant commitment and may distract you from other important opportunities that come your way. Many experienced small-business contractors to the federal government say it’s difficult to do only a small portion of your business with Washington, D.C. “If you’re going to make the government a piece of your business, I think you’d have to make it at least 25 percent to 30 percent of your business,” says Cruse, a 23-year veteran of government contracting.

Next, ask yourself whether you are ready to persist in your quest. Government sales cycles can take anywhere from months to years. “Let’s face it—they’re big,” says Ananda Roberts, president of nFocus Software Inc., a data management software developer in Phoenix whose customers include the Army. Getting that deal, her first with the federal government, took years of effort, Roberts says. “They’re the biggest thing going, and they don’t make snap decisions,” she says. “You have to be in it for the long haul.”

Being in it for the long haul means having the financial strength to weather sometimes long sales cycles and even longer deployment phases before you cash your first check. It means taking the time to learn the federal marketplace, finding your place in it, and developing the contacts and expertise to effectively market and deliver your product or service. But the first steps are very basic and straightforward.

Getting Started
Any business that attempts to sell to the federal government has to get a Data Universal Number System (DUNS) number, a unique identifier. (You can get one for free from Dun & Bradstreet at www.dnb.com.) Next, using that number, you need to register your business with Central Contractor Registration at www.ccr. gov, which allows you to win contracts and get paid for them.

Now it’s time to identify target markets. Find current opportunities by scanning the online postings of all federal government contracting opportunities over $25,000 in value at www. fedbizopps.gov. There are also reports available that describe the amount, type and vendors of products and services purchased historically. For example, theDepartment of Defense produces several such reports and posts them online at www.dior.whs.mil.

If you think you might be able to find some customers there, start familiarizing yourself with the Federal Acquisition Regulations. This document is available online at www.acqnet.gov/far. The FAR is the bible of government contracting, laying out the rules under which both buyers and sellers must operate. It helps to become intimately familiar with this document, says Cheryl Amyx, president of Amyx Inc. in Alexandria, Virginia, a 35-person, $4 million business management and technical consulting firm that does all of its business with the federal government. “Some procurement officers want to do it their own way,” explains the founder. “And some of them aren’t that educated on the FAR.”

One specific government agency that’s likely to interest small businesses is the General Services Administration. The GSA is the largest civilian federal customer (the Defense Department takes the top spot overall), and it’s also the place to obtain a Federal Services Supply contract. Getting an FSS contract doesn’t mean you’ve sold anything yet, but it does mean you are an approved government seller, one that other government agencies can place orders with for nearly any kind of business product or service.

Boenigk’s first foray into government contracting occurred when her company hired a consultant to help her obtain an FSS contract. Since, then, all her federal business has come through the GSA. Learn more about FSS at www.gsa.gov.

SBA Resources
Any small business attempting to sell to the federal government for the first time will find allies at the SBA. SBA programs set up specifically for this purpose include the 8(a) program, which helps small businesses grow by helping them obtain government contracts; SCORE, which provides small businesses with low-cost advice from seasoned businesspeople on government selling and other topics; matchmaking events that give small businesses a chance to present their offerings in one-on-one meetings with procurement managers; Procurement

Center Representatives, or PCRs, who work from SBA offices and federal buying centers around the country to help set up small-business set-asides, hook up small businesses with federal buying opportunities and otherwise assist small contractors; HUBZones, which steer contracts to small businesses located in areas designed for economic development, and numerous others.

Eventually, you’re going to have to go out and meet people who buy for the federal government. Although the procurement process is much more mechanized than it was even a few years ago—some contracts are actually awarded by computers, without human intervention—it’s still important to make contacts and get to know people. “Knowing the key people is critical to making this work,” says Stubblefield.

You can meet people through numerous seminars on how to sell to the federal government, sponsored by individual federal agencies such as the Defense and Energy departments; the SBA; and Small Business Development Centers and PTACs, which are located in many cities and towns. These seminars offer a chance to hear government buyers talk about what they’re looking for in terms of products and services and what will likely interest them in the future.

The seminars also give you a chance to introduce yourself and get into the pipeline of information about what’s coming up. That’s essential, according to expert small-business contractors. “By the time it’s in FedBizOpps,” Amyx explains, “it’s too late. We’re looking at what’s happening today, but we’re also looking ahead at least 18 months, sometimes longer. The federal sales cycle is so long that it can easily take 12 to 18 months to make the sale.”

Most small-business contractors feel that opportunities in FedBizOpps are already likely to be snared by companies that were involved early on in the procurement process. If you get into the mix earlier, you’ll be better able to position yourself to take advantage of future opportunities. “You still might not win,” Amyx says, “but you’ll know when it’s coming out, and you’ll know what it’s going to take to win.”

This doesn’t mean that you always have to be in on the planning stages to win a contract, that getting any given government business will require a months-long effort, or that contract opportunities in online databases are not worth pursuing. Most PTACs offer free automated bid services, which scan all government bid opportunities and send you e-mails listing appropriate ones for your company, DiGiacomo says. Most are small contracts for common products or services, which will be evaluated strictly and quickly on price, terms, and delivery. “In 90 percent of cases, it’s a matter of putting in a price and delivery and sending it back in,” he says.

The plethora of buyers in various agencies and subagencies, with different rules for different business sizes and even different products and services, makes federal government contracting seem like a maze through which no one could find their way. That’s why many small-business contractors recommend picking a likely agency and trying to learn the ins and outs of that market, rather than trying to take on the whole behemoth.

“The government is pretty open about what they want,” says Cruse. “If you do enough digging, you can get a sense of what the market is.”

A Short Course on Subcontracting
One way to do federal business without being exposed to the full complexity of the market is to be a subcontractor to a prime contractor. Hooking up with a larger company can open you up to many new markets, including contracts that would be too big for you to otherwise participate in. For example, says Cruse, “If you are a small construction company and want a piece of the reconstruction of Afghanistan and Iraq, you have no chance. If you weren’t one of the big boys, you didn’t even get invited to the party.”

As subcontractors to the big boys, however, small businesses are involved in even the biggest deals. That’s almost assured because, just as the government has goals for the percentage of business it wants to go directly to small businesses, the big prime contractors are required to subcontract out a certain percentage of their deals to small businesses.

Established government contractors can also open doors that small companies can’t. Roberts tried getting government purchasers interested in her tracking software for years without success before hooking up with a midsize company that had experience selling to the federal government. “I couldn’t get anybody at the federal level to listen to me,” says Roberts. “So I looked for a company that was doing business with the federal government, and they were able to get my product demonstrated at the Army.”

Now that the Army is preparing to roll out her software to help track training of all its soldiers, Roberts feels she is ready to go after deals on her own. “It gives us credibility within the federal government to say we have a large deployment,” she says. “There’s something we can point to.”

Big prime contractors have small business liaison officers whose job it is to find small firms who can help them meet the terms of their contracts, especially the small-business subcontracting requirements. Meeting and developing relationships with these people in the industries and companies you have targeted for subcontracting is essential. “That’s the bailiwick of most small businesses,” says Cruse. “They make good partnerships with primes and are good team members.” The SBA maintains an online index of subcontracting contacts and opportunities at www.sba.gov/gc/indexcontacts-sbsd.html.

As big as it is, government contracting is a moving target. For decades, the printed Commerce Business Daily was the prime source for information on current opportunities, but it’s been completely supplanted now by FedBizOpps. Now, many procurements are going completely paperless, with contracts awarded by computers and funds directly deposited electronically into vendors’ bank accounts. “The way the federal government does business has changed more in the last 10 years than in the last 100,” says DiGiacomo.

What does the future hold for federal contracting? The only people who will find out are those who are developing the competencies and contacts to get involved in the information flow and start building knowledge, winning contracts, and making a difference.

Successful contractors like Cruse and Roberts say that, above all, having the world’s biggest customer as their customer helps them have an impact far larger than their small firms might otherwise have. “Through us,” notes Cruse, “the basics of emergency-room care were delivered to nearly 600 places all over Iraq that didn’t have anything resembling that before.”

Mark Henricks writes on business and technology for leading publications and is author of Not Just a Living.

Is Federal Contracting for You?
Some companies are not good candidates for federal government contracts. In general, the government wants companies that have been around at least a couple of years, can demonstrate good quality in both products and services, and have financial stability and solid management skills. John DiGiacomo, director of the Rock Valley College Procurement Technical Assistance Center in Rockford, Illinois, adds, “You have to be a business that can work either nationally or globally if you’re going to do business with the federal government.”

You can’t be a successful contractor unless you can do what you say. When you send back a bid on a government contract, if it’s accepted, you are expected to deliver. If you abandon a contract or don’t deliver to the satisfaction of the purchaser, you may be billed for the difference between what you agreed to do it for and what the buyer ultimately has to pay another source to do the job right.

Finally, a big customer like the federal government attracts big competition. If you can’t hold your own against other companies, you won’t last long. “There is no easy picking,” says Ron Cruse, president of Logenix International Inc., a Springfield, Virginia, transportation service. “If you want to make it a major part of your business, you’d better immerse yourself.”