Playing the Government Contract Game

Are you ignoring your biggest potential customer?

In a typical year, the U.S. government spends $500 billion on everything from janitorial supplies to complicated space and military vehicles. This year, it could be as much as $600 billion, thanks to federal stimulus spending. Shouldn't you get a piece of the pie?

The government thinks so. Federal law requires that government agencies try to use 23 percent of their budgets on small businesses.

So, what's the rub? Red tape, for one thing. Bid on a government contract for goods or services and you can easily find yourself filling out documents exceeding 100 pages. Special conditions may apply, too — quality controls you're not accustomed to following, or packaging requirements quite different from what you normally use, especially with military projects. Plus, the government doesn't buy on price alone, but on what it calls "best value": a combination of past performance, price and technical expertise.

"Government buyers are very risk-averse," says Clyde Stoltzfus, director of the Government Marketing Assistance Program at the University of Pennsylvania, part of the Pennsylvania Small Business Development Center (SBDC) network. The Pennsylvania SBDC is one of dozens of similar centers across the U.S. that combine resources from the private and public sectors to provide management assistance to small businesses. "They're going to be looking to stay with someone they know, so breaking in is really a long-term proposition that involves building trust."

Of course, it can be done. Larry Muse has been president of LJM Engineering, an eight-person mechanical and electrical engineering firm in Rockaway, New Jersey, for 32 years, but nabbed his first federal government contract just a little more than a year ago. Since then, he's done about a dozen jobs with various Veterans Affairs hospitals. His latest award: a $33,000 contract to replace and upgrade a main water line at the James J. Peters VA Medical Center in the Bronx, New York.

"We got involved with the federal government by working as a subcontractor for some architectural firms," Muse says. "Through those projects, we got to know the players at the VA hospitals, and they eventually asked us to bid on some work."

Subcontracting is a great way to ease into the federal contracting market. Once you've built a reputation and relationships, you can parlay them into direct contracts. The U.S. Small Business Administration (SBA) even maintains a searchable database of subcontracting opportunities.

You can learn some of the ins and outs of working for the federal government by visiting an SBDC office near you. But first, take the short, easy-to-follow online class on the subject that the SBA began offering in September.

Once you decide you'd like to move forward, you'll need to obtain a D-U-N-S number — a unique identifier for your company — available free from information-services company Dun & Bradstreet. You'll also need to register with the government's Central Contractor Registration service.

Now you can start marketing your products or services to federal offices and agencies. Begin by visiting the Federal Business Opportunities Web site. There, you can search for business opportunities by industry, federal agency or location, as well as by set-aside codes that apply to special groups, such as veteran-owned small businesses. You can even search for contracts funded by the American Recovery and Reinvestment Act of 2009.

In the meantime, you also might want to call your nearest SBA district office to ask whether federal agency procurement officials will be speaking in your area anytime soon. In mid-August, the Obama administration announced that procurement officials would hold or participate in more than 200 events around the country over the ensuing 90 days to share information on government contracting opportunities.

Cracking the federal government market obviously can involve hard work, and Stoltzfus warns not to rush in without doing your homework. "Take little bites so you don't overcommit," he says. A common mistake: scanning voluminous solicitation documents rather than doing a careful reading. "You really have to be prepared to sit down and read all the FARs — Federal Acquisitions Regulations — referenced in the solicitation," he says, "because if you win, you're committed to fulfilling them."

Stoltzfus also warns that the federal government is heavily into electronic commerce, so you'll need to become versed in accessing forms and solicitations, and invoicing, online. The Department of Defense runs its own e-commerce application, Wide Area Work Flow. "It's really very complex," says Stoltzfus, whose office offers training in its use, "and you don't get your money until you figure it out."

Muse also cautions against entering into a federal contract if you're squeezed for operating capital since, in his experience, it can sometimes take three months or more to get paid.

Even with the slow pay and steep learning curve, Muse says working for the federal government is worthwhile. "When you get an economy like the one we're in today, the government is one of the few still doing work, and it's consistent," he says. "It's good work, and you're working with good people."