Government contracting can be a lucrative business if you have the time, patience, knowledge and resources to do it the right way. There are no shortcuts, but with focus, and an understanding of the unique market risks, business owners can be successful in the government space.
The Federal Government purchases many items that commercial businesses sell, but the process and sales cycle are starkly different from typical business-to-business transactions. I regularly speak with business owners desiring to expand into this potentially lucrative Federal Government market, but many have not done their homework and are just not ready to compete in this sector.
The Federal Government is comprised of more than 400 departments, and agencies, each with its own budget and it is just not practical for most businesses to try to sell to them all. Before you get started, do some research to determine which agencies buy your goods or services and study the agencies’ processes for buying what you are selling.
Here are five things to understand before you jump into the Federal Government contracting world.
1. Government Procurement Cycle. The government procurement cycle is typically much longer, and government funding is more restrictive than for-profit businesses. It is not uncommon for a company to spend 18 to 36 months pursuing one opportunity, and then witness a change in the government’s procurement strategy. Typically, agencies issue a Request For Information which provides industry the opportunity to share their offerings, and capabilities, with the government. Based on the feedback received, the government will then issue a Request For Proposal. These two steps can take from 6 to 18 months. Unlike commercial business practices, there is no wining and dining of government personnel. It is very important that you understand the rules, and avoid conflicts of interest when doing business in this space.
2. Government Regulations and Acronyms. There is a regulation for everything and there are acronyms for everything as well. You must have a working knowledge, and a firm understanding of government regulations, and you must be comfortable having an acronym filled conversation with the agency you are pursuing. Each agency has its own culture and lingo. Having someone with you that understands the specific agency culture is critical to having a meaningful conversation. For example, you won’t get past first base if you can’t have a basic conversation which indicates you can speak to the following: FAR, DCMA, DCAA, SBA, SAM, NAICS, to name a few. Plan on hiring a good contracts manager, business development professional or consultant that can help you in these areas.
3. Partnering and Partnerships. We have been successful in federal government contracting because we approach winning as a team sport. Good partners can help open doors, fill knowledge and experience gaps, as well as help, assure government clients. Although we have great experiences as a prime contractor, we also value the importance of being a sub-contractor to other businesses. A great way to gain government contracting experience is through subcontracting.
4. Backoffice Investments. We started our company in 2007 by servicing small business and nonprofit clients. Once we became more focused on the federal government, our expenses increased significantly. An accounting system designed to meet Federal Government timekeeping, and cost segregation requirements, is essential for demonstrating that you are billing the government properly. You may have security requirements and will likely have HR compliance issues, as the government must follow its own regulations and policies.
5. Payment for Goods or Services. Now that you have done a great job on a Federal Government project, you expect timely payment for your goods or services. For many businesses, new to federal government contracting, this is where the frustration begins. A few of our government projects make payment within 14 days of an approved invoice. On the other hand, some have taken as long as 90 days to make payment. Many departments, and agencies, have their own systems for payment and it’s important to read and understand your contract and have conversations with your contracting officer upfront regarding payment schedules and the invoice submission system their organization uses.
Although venturing into the federal government marketplace may seem daunting initially, with the right people, the right attitude, the right approach and a willingness to learn and work hard, many businesses can be successful and diversify their revenue streams. ♦
Brian Butler is president and CEO of Vistra Communications. Vistra Communications (Vistra) is an integrated marketing communications agency with corporate clients in health care, information technology, food and beverage, energy, entertainment, nonprofit and other industries. Vistra also provides a broad range of communications and professional services to over a dozen federal government agencies including the Department of Defense, Department of Veterans Affairs, Department of Homeland Security and Department of Justice.