In good times and bad, there's one customer that always has a shopping list and that always pays its bills and is particularly interested in minority and women owned businesses - the federal government.
The federal government procures approximately $200 billion of goods and services annually. This isn't just the exclusive playground of giant government contractors - 95% of sales to the government are for amounts less than $100,000. Even on large contracts, prime contractors are encouraged to make extensive use of small business subcontractors - especially minority and women owned businesses. State and local governments spend plenty, too.
Getting a piece of this lucrative market is within the realm of many smaller businesses if you are willing and able to play the government contracting game.
Knowledge Is Key
Federal procurement is governed by extensive sets of rules known as the Federal Acquisition Regulations (FAR). Different size procurements have different requirements and different agencies may also do things differently. Vendors may also have to pre-qualify by getting listed on a General Services Administration (GSA) schedule. The Small business Administration is a valuable resource for learning how to procure government jobs.
Most federal procurements are announced in the Commerce Business Daily, which is available, by hardcopy subscription or free online. Often, a government agency will put out a request for proposal (RFP), which lays out exactly what is wanted and, very importantly, the criteria that will be used to select the winning vendor. Understanding and complying with the RFP is critical to successfully gaining contracts.
Successful government marketers also develop relationships with the agencies' contracting officers and other decision-makers. By doing so, they can better understand the needs and sometimes help influence requirements before an RFP is issued. They also then have the opportunity to develop creditability as a qualified bidder. It may be possible to focus on one agency or a limited number of agencies in order to develop closer relationships with decision-makers.
Understand the Added Costs and Risks
Developing a stream of government revenue is a long-term undertaking that can have substantial risk. Preparing proposals can be expensive both in time and missed opportunities. Even though many RFP's discourage extensive proposal packages, most competitors ignore this requirement.
To qualify for some contracts, vendors must have affirmative action programs in place and meet minimum wage standards. Many government contracts are fixed price. That means you hold all the risk if costs escalate during the term of the contract. Some contracts are also for an indefinite quantity and are non-exclusive. In other words, you make a promise to sell at a specified price and terms, but the government has no obligation to buy. In other instances, competition may be too great, driving margins down.
States, counties, and cities are also tremendous consumers of goods and services. They typically follow procurement processes similar to those of the federal government, but often (though not always) with less red tape. And like the federal government, many states have set up technical assistance centers and Web sites to provide information to potential suppliers as well as small business set aside programs.
If you're willing to learn from experience, focus on opportunities where you have a competitive advantage, and manage your risk, you can have a profitable piece of this huge market.
Follow the Web sites below for additional information.
Opportunities And Information Online
The small business Administration is one of the best sources of information on doing business with the government.
Online version of the Commerce Business Daily, which prints notices of all federal government procurements over $250,000.
Information on business opportunities
with the Department of Defense.
Federal Acquisition Regulations online.
These are the regulations that govern federal purchasing activity.
Private subscription service listing state opportunities.
Lots of good information and resources.
See homepage for open RFPs
Resources and program information, especially good for women and minority owned business.