From the October 1999 issue of Entrepreneur

When most entrepreneurs think of selling to the government, Uncle Sam is the first prospect that generally comes to mind. But there are many other agencies to consider, says Rick Grimm, executive vice president of the National Institute of Governmental Purchasing.

According to Grimm, state and local government agencies are expected to spend $1.02 trillion in 1999; five years from now, that figure will jump to $1.31 trillion. The federal government, by comparison, spends approximately $200 billion a year.

And while city and county government contracts have generally been perceived as small potatoes, they're actually excellent training grounds for selling to the federal government, says Judith Roussel, the SBA's associate administrator for government contracting. "A lot of what the [federal] government does today is award contracts based on past performance. Because it's harder for a new company or one that hasn't had a [government] contract before, businesses should [first] look to work in the commercial market or earn smaller contracts in the same line of work so they can get a reference."

So what does it take to get that first government contract? The process is similar for federal, state and local agencies. "The first step is to find out who buys what you sell," says Roussel. Also important is understanding how the government buys. "In some cases, buying is done for the entire country, and in other instances, departments buy certain services for one area."

The federal government's General Services Administration (GSA), for example, typically buys items used by every agency and department. They also oversee all federal property purchases and management, buy all government automobiles, and set up the Federal Supply schedule for all agencies. "If anybody wanted to buy paper, for example, GSA would set up the schedule, and any business that met the qualifications could apply to get on the schedule," says Roussel. "An agency must go to at least three firms on the schedule and make the best value decision on which businesses to buy from."

According to Grimm, most states' equivalent to the GSA, as far as overall purchasing, is a local administrative services agency. Practically every state has a department of transportation, and most have a health and human services or welfare assistance program that makes big purchases. In addition to participating in overall buying, each agency and department purchases its own items and services.

In order to get your business's name circulating among these agencies, you have to get registered. At the city and state level, contact the purchasing department to find out where to register. Cities rely greatly on business registration because they typically don't have enough staff to proactively seek suppliers.

At the federal level, Roussel believes the best place to start is with the PRO-Net database. "PRO-Net is an Internet listing of 171,000 small businesses interested in doing business with the government," she explains. "Users are federal agencies and larger prime contractors, both of which have goals to do a certain percentage of their business with small firms. And it's free [for small businesses] to register."

To Market Or Not To Market

Determining who buys what and how they buy it are among the first steps of the process. Next, you have to use marketing to get people thinking about your business. "Many small companies find marketing somewhat prohibitive because they don't have many resources. But there's no way of getting around it," says Roussel.

Grimm isn't as convinced about the benefits of marketing. "There are limited results on this. I've worked for large county governments and small to midsized colleges, and typically if a brochure came in touting an organization, I gave it to the person handling bidding to see if that business was on the bid list," he says. "If they were, we usually didn't look at the brochure."

Still, some entrepreneurs claim to have benefited from the power of marketing. "One of my keys to success has been networking and target- marketing the agencies, and going through the Procurement Forecast," says Michelle G. Simmons, founder of M.G. Simmons & Associates Inc., a Chicago-based environmental and construction services consulting firm projecting $3 million in sales this year. M.G. Simmons does about 60 percent of its business with government entities. "Marketing works because it can expedite the relationship-building process." Simmons advises marketing to both ends of the spectrum--government officials who do the buying and major corporations that enlist subcontractors and garner the monster contracts.

"E-mail is a very effective way of marketing," says Simmons, who believes cold-calling can be a waste of time. "We still do the standard letter, but now I also e-mail. And when I contact people, I have in mind a specific opportunity I'm interested in pursuing."

In addition to e-mailing and writing, Simmons attends networking and procurement conferences. She believes these are critical ways to get "face time" with buyers and prime contractors.

"It also helps if you can be of technical assistance to buyers," she says. "For example, I can be a resource on contaminants they're not familiar with. This allows you to open doors and keep them open."

Once you get a contract, the rest is all about performance. Can you complete the project on time and within budget? Is the workmanship of top quality? If the answers to these questions are a resounding yes, you've just taken the first step on an extremely lucrative road.

For more information, see next month's issue for a listing of Fortune 1000 companies that offer sub-contracting opportunities to small businesses.

Dollars And Sense

Need further convincing? Consider the following statistics:

  • Federal contracting with small businesses averages about $40 billion annually.
  • The federal government must spend at least 23 percent of its prime contract dollars with small businesses; of that percentage, 5 percent each must be spent with small, disadvantaged businesses and women-owned/operated firms.
  • In fiscal year 1998, small firms received $33.2 billion, or 18.3 percent of the $181.7 billion spent by the federal government in prime contracts of at least $25,000.
  • Government contracting isn't always complex: Federal government purchases of up to $2,500 can be made with a government credit card; contracts from $2,500 to $100,000 can use a simplified offering where purchasers obtain just three bids.

Finding Your Way

Government contracting is like a maze with an often bewildering collection of twists and turns--leaving you at one end and your goal at the other. Navigating this course by yourself is a surefire way to achieve frustration overload. That's why it's best to get some guidance. Fortunately, you have several resources to choose from:

1. Every federal government department has a small-business office whose function is to counsel firms on doing business with that agency, says Judith Roussel, the SBA's associate administrator for government contracting. This office can also help you get in contact with the right people.

2. The SBA has procurement center representatives stationed at federal agencies that do a lot of purchasing. They not only ensure that small-business contract goals are met, but also give entrepreneurial firms information on getting their foot in the door.

3. The SBA's commercial market representatives work with the very large businesses--prime contractors--who have a responsibility to subcontract with small businesses.

4. The government holds workshops and conferences nationwide to provide information on how to sell to various agencies. At procurement conferences, businesses can meet face-to-face with buyers and prime contractors. Roussel says most agencies have a bulletin board or Internet site where they list these events. Also check out the PRO-Net database).

5. According to Rick Grimm, vice president of the National Institute of Governmental Purchasing (NIGP), more state and local government agencies are tying in with local chambers of commerce as an avenue for supporting the local economy. Grimm suggests entrepreneurs also consider working with one of the 61 chapters of the NIGP located throughout the United States and Canada. Many of the chapters also sponsor trade shows--a good way to get your name in front of key decision-makers. The national organization also holds a products expo every summer. For details, visit www.nigp.org.

6. The U.S. Department of Defense (DOD) funds Procurement Technical Assistance Centers (PTACs) nationwide to help small firms gain access to contract opportunities, and market their goods and services to the military and other local, state and federal governments. The centers also offer individual counseling to entrepreneurs. Visit http://www.dla.mil/ddas for a list of PTACs.

7. The National Minority Supplier Development Council Inc. certifies minority-owned firms and maintains a national database of almost 15,000 minority business enterprises. The organization's 38 chapters conduct trade fairs, seminars and training programs, plus host networking opportunities to connect minority firms with corporate buyers (some of whom are prime contractors).

8. The Women's Business Enterprise National Council certifies women-owned businesses and maintains a database of women-owned and -operated firms. The National Women Business Owners Corp. also has a national certification process designed to help women better compete for corporate and government contracts.

9. Central Contractor Registration is a federal database that enables commercial companies to register as a trading partners with the DOD.

10. The DOD publishes the handbook Selling to the Military, available online at http://www.acq.osd.mil/sadbu/publications/selling/main.htm.

11. The SBA has an Office of Government Contracting that provides information about every aspect of the process as well as a calendar of events.

12. Commerce Business Daily contains information on all government solicitations in excess of $25,000.

13. The SBA's U.S. Government Purchasing and Sales Directory gives the code to every product and service the government buys as well as contact numbers for the small-business office of each agency.

14. The Minority Business Development Agency maintains the Phoenix database, which lists minority-owned enterprises in the United States and matches listed companies with contracts and other business opportunities via e-mail and fax.

In Sam We Trust

Selling to the government may be one of the most frustrating tasks you ever encounter as an entrepreneur. Yet, if done properly, it could be one of the most lucrative business moves you'll ever make.

Michelle G. Simmons knows that well. Chicago-based M.G. Simmons & Associates Inc.--which Simmons launched in 1994 after working in both the public and private sectors addressing regulatory compliance, environmental, and risk management issues--offers environmental, industrial hygiene and safety consulting, and general contracting and construction services. She has successfully obtained contracts from federal, state and local government agencies--her largest contract was from the Department of the Army, valued at $3.5 million.

"I got my first contract, worth $10,000, with the U.S. Postal Service for environmental consulting services," Simmons says. "Initially I saw the contract in the Procurement Forecast and followed up with the department. I marketed to the purchasing department by sending them materials directly. I had also been active in professional associations and presented at conferences, so my name had gotten out there."

In short, Simmons positioned herself as an expert in her field. That first contract led to an additional $50,000 opportunity and an ongoing relationship with the same agency.

"The biggest difference between state and local contracts and working with the federal government is politics. Politics are much more intense on the local level," Simmons says. "If you aren't comfortable treading the political waters, then you have to find a means to develop that savvy or make sure you have someone in your business who [has it]."

Contact Sources

M.G. Simmons & Associates Inc., http://www.mgsimmons.com

National Institute of Governmental Purchasing, (800) 367-6447.