How to Prime Your Small Business to Win More Prime Government Contracts Pt. 2

Austin, TX

Last week we explored the discrepancy behind reports that small businesses are losing ground in government contracting, even though the SBA reports that the federal government has once again met its annual small business contracting goal for the third year in a row.

This week we are going to share 6 things small businesses can do to be more strategic in their “sales” approach and more diligent in their market research and response preparation when competing for prime government contracts, or even subcontractor opportunities.

Know Which Agencies Award the Most Contracts – and the Highest Dollar Contracts – to Small Businesses

The federal government is required to award a minimum 23% of total contracts to certified Small Businesses. Each state also has its own Small Business goals. But, that doesn’t mean that each agency at the federal or state level has to adhere to those minimum awards. Those percentages are collective goals. Therefore, it benefits small businesses to understand which agencies have a track record that leans in their favor.

The Small Business Association publishes an annual federal contracting scorecard that grades each agency’s Prime Contract and Subcontract Spend with regards to small business contract awards. This one summarizes each federal agency’s grade for the last five fiscal years, while this government-wide performance scorecard shows overall agency progress against small business Prime and Subcontract award goals. Each state and local jurisdiction should have similar scorecards that they can provide to you. At a minimum, you should be able to find their small business contracting goals. For example, the State of California mandates (through a slew of regulations, codes and executive orders) that its “state departments must meet contracting goals of at least 25 percent for certified Small Businesses (SBs) and 3 percent for Disabled Veteran Business Enterprises (DVBEs).”

Don’t Hesitate to Claim Disadvantages

Some think that being a certified small business will arbitrarily disqualify you from large contracts for some of the reasons mentioned above. On the contrary, there are many cases in which being small can give you quite a few significant advantages. Remember, every government agency at every level has small business and diversity contracting goals. That means that every agency has set-asides for small businesses. Even more, agencies will further categorize set-aside contracts for 8(a_, minority, women, veteran, service disabled veteran-owned small businesses. HubZone small businesses also receive scoring advantages when competing against non-HUB Zone businesses. The point? Disadvantaged business entities should be taking advantage of these unique priority considerations. Just be sure you secure the proper certifications to validate your eligibility.  

Diversify as Appropriate, Within your Means

While you don’t want to stretch yourself too thin, or lose credibility due to your company’s lack of focus, it could pay off to adjust your business strategy when you’re getting started if you find the competition is thin – and the opportunities bountiful – in a particular government subsector. Just read this first. Then evaluate the risks vs. rewards of pursuing certain government contracts outside your typical categorical strengths.

Be as Aggressive on Pricing as Possible

Small businesses are often outbid on Lowest Price Technically Acceptable (LPTA) contracts for one of three reasons:

  1. Larger competitors can secure volume discounting on goods from their established supply chain network
  2. Larger competitors can afford to shrink their service and labor cost margins enough to hit the customer’s target pricing goal
  3. Small businesses, especially those trying to penetrate new markets, simply don’t have the relationships with third party suppliers needed to reduce markups.

That doesn’t mean that you should overextend your business, overbuy materials or compromise your standards to submit the lowest bid and secure the win. Just realize that government contracts may not help you “get rich quick” – at least not at first. Like we noted in our last blog discussion, know your bottom line and set your anchor price accordingly heading into negotiations. For sealed bid opportunities, be ready to drop your pricing as much as possible – without taking a loss – if you’re serious about getting your foot in the door to prove your value and establish a performance record that will pay off more in the long run via more government contract wins. Plus, competitive bidding has its benefits for suppliers, as we note here. 

Demonstrate Your Value

Whether you’re required to prove your skills as part of an agile project sprint, or simply asked to provide some advice to a contracting officer given your known subject matter expertise, never discount the opportunity to “show” exactly how valuable you, your business, or your goods and services can be to a government agency. That doesn’t mean you should be stalking customers or contracting officials to boast about how you’re so different or, worse, how you’re better. Nor should you be pitching them every chance you get. Just know that contracts aren’t always awarded on price alone. Showing how your specialized expertise or unique competencies deliver directly improve tangible and intangible ROI can prove invaluable, particularly when agencies score quality or “best value” higher than other evaluation criteria.

Find Out if There’s a Prime Time to Secure, Well, Prime Contracts

This means you have to do your market research. It also helps to maintain strong relationships with contracting officers and customers who can give you a heads up that solicitations are coming. (Government contracting 101, right?) Find out when certain contracts are set to expire, identify the incumbent, understand why they won last time and whether or not they have been meeting performance standards. Also understand if there is a “season” for certain types of contracts. For example, we know that nearly a 1/3 of commodity purchases are made during fiscal year-end when agencies start spending their “use or lose” funds. These insights will give you a head start on resource planning and pricing negotiations with your suppliers, if applicable, and enable you to balance the time spent pursuing new business and managing your current business. They will also help you determine if you should consider teaming with another business to increase your chances of meeting customer requirements, including non-pricing evaluation factors.

Last, but not least, don’t forget the fundamentals. Take advantage of the many free resources available to small businesses. And, remember that state and local agencies offer just as many contracting opportunities to small businesses as federal agencies do, if not more.