Alf's Articles

Grab A Slice Of The Government Pie

by Alf Nucifora

For anyone who has ever perused the Federal Budget, it becomes obvious that the U.S. Government acquires a vast quantity of goods and services. In 2001, Federal contracting totaled approximately $215 billion covering the waterfront from diapers to nuclear reactors. In fact, there are 1,140 categories (or codes) of goods and services that the government contracts to buy, at least one of which probably fits the product offering profile of most American small businesses. The codes are derived from the North American Industrial Classification System and are known in government-speak as NAICS (pronounced "nakes"). The best place to locate the NAICS listing... www.naics.com.

As a review of the top 20 NAICS categories reveals, research and defense- related spending are the biggest ticket items chewing up more than 40% of the available contracting pie. Yet it's the less exotic, more mundane categories that offer hidden opportunity for the average business next door. For example, a contracting pool of approximately $26 billion is available for such services as "facilities support," "computer systems design," "custom computer programming" and "commercial and industrial buildings." In the latter case, the Federal Government requires massive facilities support simply because it's the largest holder of commercial and industrial property in the country.

Despite the common perception that the promised land of government contracting is the exclusive and private domain of a relatively small cadre of large corporate insiders or "beltway bandits," the truth is that small-to-medium sized enterprises are currently active suppliers to a full range of government agencies. In 2001, small businesses accounted for about 20% or $43 billion in direct contracting dollars. Interestingly, the government departments most accepting of small business participation were not the heavyweight spenders such as the Departments of Army, Navy and Air Force, but the less visible entities such as Public Buildings Services, U.S. Coast Guard, Agricultural Marketing Services, Forest Service, DEA, and National Park Services. Which raises the question, is there room in your revenue stream for a piece of the government spending action?

Not As Impenetrable As It Seems

Although there are more than 30 million small businesses filing tax returns in the U.S., most are discouraged from the bidding process because of lack of knowledge of the opportunity itself, or because of the perception that the bidding process is both complex and resource-intensive resulting in a situation where only the experienced and well-connected can succeed. It is undeniably true that the bidding process is infected with politics, excessive paperwork, long decision cycles and abstruse contracting rules. In many cases, it's impossible to determine where the final decision is made and who makes it. And many so-called open bid competitions are already a fait accompli even before the RFP hits the street.

Yet according to Matt Nussbaum, Principal of Thomas Associates International, a consulting firm that provides assistance to businesses seeking partnerships and opportunities in both the government and private sectors, "government contracting need not be as daunting a process as many believe. Federal and many state programs have explicitly mandated procurement procedures that are intended to favor small business."

How It Works

In general, a company can identify itself as a small business (either directly or as a subcontractor) through a simple process of self-certification. As Nussbaum notes, many Federal contracts may have small business participation requirements, but the only demonstration of a small business credential takes the form of checking a box and appending a signature on the big proposal documents. Only in the case of a subsequent challenge would a small business have the need to further document its small business status.

In its efforts to promote small business participation in government contracting, the Federal Government has also established additional programs that provide mandated benefits to small businesses but require more paperwork and the meeting of stricter certification requirements in order to partake in the programs. The Small Disadvantaged Business (SDB) and the (8A) are two such programs. Both favor small disadvantaged businesses that meet specific criteria with respect to size and disadvantaged status.

Nussbaum also points out that large contractors should not be ignored as a source of government largesse. These contractors actively seek small business subcontractors in order to satisfy their own small business participation requirements, also know as "set asides." Notes Nussbaum, "Subcontracting to the larger prime contractors can be an excellent way for a small business to enter the government arena because the main burden of the bid preparation and submittal process is typically born by the prime contractor. A good prime may also mentor the small business contractor through the preparation of its own bid materials."

Admittedly, seeking a piece of the government pie is not for everyone. But, the truth is that there are enormous dollars at stake, especially if State and Municipal contracts are factored into the equation. In these tough times, when traditional revenues streams have dried up, now may be the time to learn the ropes, fill out the paperwork and endure the pain in applying for some of that government money. It's going to be spent and if you don't get it, somebody else will.