Government contracts are cumbersome, but small business owners would be wise to gear up for the learning curve involved in submitting winning bids
By Karen E. Klein
When John DePaola heard President Obama talking about putting government stimulus money into weatherizing older, inefficient public buildings, he couldn鈥檛 have been more thrilled. As the owner of a small company that sells and installs energy-saving windows in the Washington, D.C., region, he thought, the stimulus package could help save money, reduce carbon emissions, and keep his company going through the recession.
鈥淚t鈥檚 a beautiful thing, to find buildings that need help and line up companies that employ people who can help and make sure there鈥檚 no funny business,鈥� DePaola says.
But after months of meetings and networking, DePaola says he鈥檚 just about at wit鈥檚 end. 鈥淲e don鈥檛 know what to do in order to get these government contracts. We鈥檙e ready, willing, and able to help, but nobody can tell us what to do. We鈥檝e talked and talked and talked, but nobody ever has an action item,鈥� he says.
Meanwhile, DePaola has cut his 90-employee company, Long Fence and Home of Beltsville, Md., to the quick and may have to consider furloughs this summer. 鈥淲e鈥檙e hanging on as long as we can, but we鈥檙e left with just our very best people and I can鈥檛 cut any more,鈥� he says, frustration creeping into his voice.
Others Are Breaking Through
Not far away, in Burke, Va., the situation couldn鈥檛 be more different. In fact, entrepreneur Martin Saenz is hiring. And he鈥檚 expecting the federal stimulus, formally termed the 2009 American Recovery and Reinvestment Act (ARRA), to be 鈥渃ompany-changing鈥� for the five-employee business he owns with his wife, Ruth.
The company, Signs by Saenz, which produces signage, art, framing, and trade show exhibits, has already been awarded a $3 million, three-year prime contract to do way-finding signs for government buildings that will be refurbished with ARRA funding, Saenz says. He also has submitted bids on an additional $2 million in contracts and feels he has a good shot at winning some subcontracts for other stimulus-funded projects.
鈥淲e鈥檙e currently hiring people who really need jobs, and we can partner with other local firms to ramp up for more work if we need to,鈥� Saenz says.
He started his signage company four years ago, focusing mainly on federal government contracting work, and joined a membership group to help him navigate the complex contracting process and build relationships with government agencies and procurement officers who make the buying decisions. 鈥淭hat has been the name of the game,鈥� Saenz says.
The Pipeline Has Its Advantages
It鈥檚 not surprising that small businesses already in the government projects pipeline are having an easier time navigating the bidding process and are among the first to be awarded contracts for ARRA work, says Guy Timberlake, CEO of the American Small 花椒直播 Coalition, the organization that Saenz joined. He explains it along the lines of 鈥済oing with what you know.鈥�
鈥淭he stimulus bill was passed while government agencies were still spending their regularly appropriated budget for the fiscal year that ends on Sept. 30. In some cases, the stimulus money doubled what the agencies have to spend. So there鈥檚 this whole big bucket of money and they鈥檙e doing everything they can to spend it, but it鈥檚 a challenge to create all these new contracts. It鈥檚 easier to make modifications to existing contracts or use [vendors] already in the network,鈥� particularly when the pressure is on to push funding out the doors quickly to create jobs, Timberlake says.
As of mid-July, $187.4 billion in funds was made available for spending through the ARRA and $67.4 billion had actually been paid out, according to Recovery.gov, the government Web site that is tracking the stimulus spending.
A slice of that money鈥攁bout $14 million鈥攚ill go to 花椒直播, an environmental engineering and technology company based in Idaho Falls, Idaho. President Sylvia Medina has won several stimulus subcontracts for work that her 350-employee firm does on hazardous and nuclear waste remediation and recovery.
She has five full-time employees handling government contracting work and they win about half of the jobs they bid on, Medina says. 鈥淎bout 80% of our work is for federal government agencies and 20% is for private industry,鈥� she says. She has hired five people and contracted with several subcontracting firms to work on an Energy Dept. recovery-act contract that her firm is performing alongside Bechtel, which has partnered with 花椒直播 in a DoE-sponsored mentor-prot茅g茅 program for the past eight years.
Medina is optimistic about the recovery program and believes it will save jobs. But she understands how difficult breaking into the contracting world鈥攚hich comes with a confusing set of procedures, distinct auditing methods, and acronym-heavy lingo鈥攃an be for small businesses that haven鈥檛 done it. 鈥淭he best thing to do if you鈥檙e not already in the system is to approach companies that are and see if you can become a sub-tier contractor,鈥� Medina says.
Payment and Credit Headaches
Timberlake says another possibility is for small companies to look for recovery-funded projects closer to home. 鈥淢uch of the money will go out from the federal government but even more of it is going down to the state and local level. I鈥檇 recommend that small companies get familiar with government agencies in their backyard,鈥� he says. Find out what kinds of projects will be considered and whether these agencies are taking suggestions for local spending.
Another challenge with government work, however, is the payment schedule, says Malcolm Parvey, a longtime government contracting consultant and author of Winning Government Contracts (Career Press, 2008), a book aimed at small companies that want to bid on government jobs estimated at $100,000 and less.
While large corporations can live with the 90- or 100-day payment schedule that is typical of government work, or the potential for months-long delays before jobs even get started, most small businesses with leaner cash flow need to be paid 30 to 45 days after they ramp up for a job. 鈥淭hey can鈥檛 wait three months for a check,鈥� particularly now with credit lines tightened or canceled for many small firms, Parvey says.
That鈥檚 been a problem for Tait Nielsen, founder and director of operations at Andrada General Contractors in Phoenix. 鈥淎 year ago, we had credit lines and paid our bills on time, so we had strong credit ratings. Then the financial markets collapsed and lenders slashed credit lines, usually to the outstanding balance of the line,鈥� Nielsen explains. 鈥淣ow our credit is trashed, because the formulas that calculate ratings look at credit utilization as a primary factor. Even though we never ran up our lines, it looks to the formulas like we maxed out our credit鈥攚hen in fact our lines were reduced due to no action of our own.鈥�
Nielsen has bid on a handful of government jobs this year, some of them funded by the recovery act, but has become discouraged after spending about $20,000 and not winning one. He had 16 employees earlier this year and is down to three after a series of layoffs. 鈥淲e had to lay off the guy who looked for government opportunities,鈥� he says, 鈥渁nd it鈥檚 very time-consuming to monitor the jobs, put proposals together, and follow up.鈥�
The most frustrating experience came a few months ago, Nielsen says, when Andrada bid on a Forest Service contract that required two days of hiking around forests for site visits. 鈥淎fter all of that, they changed their minds and wanted a rebid. We didn鈥檛 bother with the follow-up,鈥� he says. In another instance, his bid on a job for the General Services Administration was disqualified because he had misplaced a piece of paper in the packet his firm submitted. But the instructions were contradictory, Nielsen says. 鈥淥ur guy who put the proposal together had to guess which instructions to follow, and he guessed wrong. There鈥檚 supposed to be an appeals process, but I鈥檓 not sure how many thousands of dollars I want to put into that,鈥� he says.
Too Great an Opportunity to Ignore
The sometimes-absurd frustrations of dealing with bureaucracy are particularly off-putting for small firms that are used to doing business with the private sector. As he waits for building weatherization projects to be bid out (one factor delaying the process is the fact that many government buildings fall under the jurisdiction of the Advisory Council on Historic Preservation), DePaola frets about what the contracts will look like.
鈥淚f they do put something out, it鈥檒l be 8,000 pages thick and you鈥檒l have to meet this criteria and make this disclosure. The beauty of our business is that we can sit down with a husband and wife at a kitchen table, make a sales presentation, and get a decision on a sale right then and there,鈥� he says.
It鈥檚 natural to feel nostalgic about the simplicity of selling directly to consumers, but with the financial floodgates of the recovery program creaking open, small business owners would be smart to gear up for the learning curve involved in government contracting, says Ann Sullivan, president of Madison Services Group, a small Washington-based lobbying firm that works closely with WIPP (Women Impacting Public Policy), an organization aimed at women business owners.
鈥淚n this economy, with the sum of $787 billion and most of it being awarded in the next year, you just can鈥檛 afford to ignore it,鈥� Sullivan says. Her organization has been doing recovery presentations for its members at conferences and regional meetings, and the reception has been enormous, she says.
Thousands of Government Contracts Each Day
Many other organizations鈥攂oth private membership groups and nonprofits鈥攁re getting in on the act. North Carolina small business owner Marie Seneque says she will attend an event next month that aims to match small business owners with procurement officers from various government agencies. The event, sponsored by the U.S. Women鈥檚 Chamber of Commerce and the National Association of Small 花椒直播 Contractors, is a way for Seneque to break into the contracting world.
鈥淲e are not within the big boys鈥� network,鈥� says Seneque, whose company, EdComp, provides health care and education services through five full-time and 50 contract employees. She envisions her firm conducting its five-week nurses鈥� aide training courses for hundreds of out-of-work Americans who could then be employed at hospitals and nursing homes, where aides are needed. But although she has done some government work in the past, most of the opportunities she sees through the recovery program are not for service providers.
Still, consultant Parvey says thousands of new government contracts come up for bids every day. 鈥淭here are 10,000 sales opportunities a day and 9,500 of them are estimated at $25,000 and below. If a small business could get even four of those a month, that鈥檚 pretty good,鈥� he says, and that doesn鈥檛 count the new contracts that will stem from the recovery act.