Steps and Insights for Becoming a Federal Government Contractor
Government Contracting: Covers the basics of becoming a government contractor so that you, too, might be able to seek some assistance from the President’s economic stimulus package.
By Chaille Brindley
Date Posted: 3/1/2009
The largest purchaser of goods and services in the country is the federal government. Each year Uncle Sam buys $300 billion worth of goods and services covering everything from jet fighters to coffee cups to pallets and even lumber.
But you can’t just go down to your local federal government complex and ask for the guy who buys pallets and lumber. Federal agencies have complex purchasing practices that follow established protocols. The good news is that getting approved to sell to the government is not as hard as you might think as long as you are willing to fill out some paperwork. Some pallet companies, especially those with brokerage businesses, have found success selling to Uncle Sam.
Here’s what you need to know to court some of the money that will be doled out by the federal government.
Why Be a Contractor?
• The government frequently buys in very large volumes and over a long period of time. It can provide a solid foundation for growing your company.
• Government contracts are based on established procedures designed to promote fair market conditions.
• Laws set aside all or part of many contracts for women-owned businesses, small businesses, minority-owned businesses, and other firms the government wants to support.
• Being an established government contractor can give your business a stamp of approval.
• Although the government may not be the fastest to pay, it is a low risk of non-payment. You don’t have to worry about the government going out of business.
• There are downsides to selling to the government. It can be hard to find the proper purchasing agent amidst a large network of agencies and locations.
• The rules and paperwork necessary to supply the government can be somewhat daunting. But once you get the hang of it, you may have less competition than some accounts because of the high barrier of entry.
• While price is a key consideration, the government also considers quality and wants to work with companies that abide by all federal and local laws. Thus, if you are a quality conscious company, you might have an easier time selling quality to the government than a private business.
How Do I Get Started?
Well, the process starts with lots of paperwork. So if you like paper, you’ll love the federal procurement process. At a minimum, you have to be registered with the government entity that you are trying to sell.
The best place to start is the Central Contractor Registration (CCR). It the primary registrant database for the U.S. government and is single source from which agencies receives business information on all vendors. Both current and potential federal government registrants are required to register in CCR in order to be awarded contracts by the federal government. Registrants are required to complete a one-time registration to provide basic information relevant to procurement and financial transactions. Registrants must update or renew their registration at least once per year to maintain an active status.
Registration does not guarantee business with the federal government. But it is the first step to get in the door. There are a few exceptions that do not require a CCR. This includes purchases paid with a government-wide commercial purchase card, micro purchases and classified military contracts.
Registering with CCR automatically registers you with every Department of Defense (DOD) agency. The DOD is one of the largest purchasers of pallets within the federal government.
Before registering with the CCR, you will need the following:
• Data Universal Numbering System (DUNS) number – Can be obtained free of charge by calling Dun & Bradstreet at 800-833-0505 or visiting www.dnb.com.
• Commercial and Government Entity (CAGE) code – Unique identifier for each federal agency/organization. Look up more information at http://www.dlis.dla.mil/cage_welcome.asp
• Taxpayer Identification Number (TIN) –Is either the Employee Identification Number (EIN) issued by the Internal Revenue Service or the company Social Security Number (SSN). Contact the IRS at 800-829-1040 to verify your TIN.
• North American Industry Classification System (NAICS) codes – Numbering system used to identify various types of products. Visit http://www.census.gov/eos/www/naics/.
• A Marketing Partner ID Number (MPIN) – A personal code that allows you to access other government applications such as the Past Performance Automated System (PPIRS) and Online Representations and Certifications Application (ORCA). The MPIN acts as your password in these other systems.
• Finance and banking information
You can find federal government business opportunities over $25,000 in value by visiting www.fedbizopps.gov. Smaller contracts may be procured by contacting individual agencies.
What Is a GSA Schedule?
A GSA Schedule is an unfunded, five-year contract listing the prices the federal government has agreed to pay for a vendor’s commercial products or services. Many agencies rely on GSA Schedules as the favored purchasing mechanism. They are a necessary step for many companies to obtain federal contracts.
Although a GSA is an official contract, it is not a real world sale until an agency signs a purchase order to fund it. Basically GSA Schedules do the hard-work of vetting suppliers and negotiating prices up front.
There are 62 categories of commercial products and services that vendors may apply for a GSA contract under. Vendors have to be approved after going through a process that determines real world costs and fair pricing. If a contract is successfully negotiated, the vendor is placed on a list of approved suppliers for that particular schedule. Buyers for federal agencies can order using GSA Advantage, the online marketplace for GSA schedule product/services.
Price increases based on commercial cost increases or economic indices can be negotiated under GSA schedule contracts. Vendors may offer discounts for an individual agency order without affecting the prices listed in the contract.
GSA Schedules are also referred to as Multiple Award Schedules and Federal Supply Schedules. GSA Schedules offer the potential benefits of shorter lead-times, lower administrative costs, and reduced inventories. When using GSA Schedules, ordering activities have the opportunity to meet small business goals, while promoting compliance with various environmental and socioeconomic laws and regulations.
Most federal agencies have an Office of Small and Disadvantaged Business Utilization (OSDBU), which promotes small business prime and subcontracting opportunities. The small business specialists in these offices are important marketing contacts. The OSDBU can assist you in navigating through the agency to identify the end-user of your product or service.
The GSA offers training courses and tutorials to help newcomers navigate the federal procurement process.
There are also Mentor Protege programs in which a large company is incentivized by the Government to help a small business get started in Government contracting. Of course, you can turn to a number of private resources and training organizations that provide assistance for a fee.
The GSA offers an annual expo where vendors can directly interact with government purchasing agents. The 2009 GSA Expo will be held in San Antonio, Texas from June 9-11. Exhibit floor space is available to companies holding a current contract with GSA.
More Insights & Considerations
The rules for the standard federal procurement process are outlined in the Federal Acquisition Regulation (FAR) guide. Although the shear size of the document might be imposing, the good news is that these rules mostly apply to service businesses. If you deal in off-the-shelf products or commodities, doing business with the government can be as easy as processing a credit card.
Similar to the procedures for many large companies, there are spending thresholds that trigger different rules. Below a certain amount, federal agencies can pay with a government purchase card. More expensive purchases must go through a competitive bid process.
Beyond CCR, consider filling out the Online Representations and Certifications Application (ORCA). This database allows potential vendors to submit detailed business information.
Some companies have to change accounting procedures to provide pricing in the right formats required by the GSA. Be aware that the learning curve can be somewhat steep although this also means you might not find as much competition for this business as for most private industry accounts.
Another major consideration before you get started is how you want to be classified. For example, there are special programs for small businesses, and even special programs for small businesses that are considered economically “disadvantaged.” Getting started as a government contractor will be significantly easier if you are a small business or small disadvantaged business because a certain amount of business is required to go to these suppliers.
If the entire process seems a bit much, you can also work on a government contract as a subcontractor. Along the way you gain valuable experience. All you need is a good relationship with a prime contractor and a reason for them to do business with you.
As with any business experience, you never know how it will work out until you try it.
Myths & Realities
Myth: Doing business with the government is too complicated, involves too much red tape and it takes forever to get paid.
Reality: The government uses many commercial and business-friendly practices, such as buying off-the-shelf items and paying by credit card. Payments are generally received within 30 days after submitting an invoice.
Myth: There’s no one I can turn to in trying to obtain government contracts.
Reality: SBA and its network of resource partners have programs and hands-on assistance for small businesses contemplating selling to the Federal marketplace.
Myth: I must compete head-to-head against large businesses and multinational corporations to win contracts.
Reality: The government has many categories of contract opportunities reserved exclusively for small businesses to level the playing field.
Myth: All I need to do is register in the Central Contractor Registration system and the contracts will come rolling in.
Reality: Although the CCR is a primary way Federal agencies learn about prospective vendors, it’s up to you to aggressively market your firm to those agencies that buy your products and services. Remember, agencies don’t buy, people do.
Myth: The low offer always wins the contract.
Reality: While price is always a consideration, the government increasingly awards contracts for goods and services based on “best value,” in which both technical and cost factors are weighed in the final assessment.
(Source: U.S. Small Business Administration)
Resource Web Sites
CCR Registration Guidance
Federal Acquisition Regulation Guidebook
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