Despite the obstacles, some savvy small companies have played the contracting game well. After his initial frustration, Abraham eventually won contracts by hiring a full-time proposal writer. "You [need to] get the capital to have people focused on contracting full time," says Abraham.
Similarly, Cecelia McCloy, 51, president and CEO of Integrated Science Solutions Inc., a 55-person Walnut Creek, California-based science and engineering company, has been so successful, she now does about 95 percent of her business with federal government-related entities. Today, the company, which was founded in 1999, boasts over $7 million in 2005 revenue.
McCloy follows a specific formula. She avoids contracts with international components, which can require high security costs. And she rarely attempts to get a main, or "prime," contract, instead accepting smaller subcontracts given out by big companies with prime deals-companies that can also teach her more about contracting.
Most important, McCloy doesn't bid on contracts when she knows she doesn't have a shot at winning them. "You need to investigate--look at who the incumbent contractors are," she says. McCloy either speaks with federal procurement officers or accesses the federal database of contracts maintained by the General Services Administration , an agency that oversees procurement.
Judith Nelson, director of government contracts at EZGSA , a Bethesda, Maryland, consulting company focused on small-business contracting, says smart entrepreneurs also get a GSA schedule--a contract that paves the way for government agencies to do business with you. Normally, small companies identify what type of GSA schedule they should get--there are different schedules for different types of companies--and submit an offer to get one. The GSA evaluates the companies, but it often takes four to eight months to do so. "Getting a GSA schedule takes so long, there's a huge backlog of people trying to get [one]," says Castillo. (When Entrepreneur called to inquire about the lengthy waiting period, the GSA took several months to respond, then failed to make any officials available to speak.)
Successful contractors also focus their energies on federal agencies known to welcome entrepreneurs. "It comes down to people, and the people at the Department of Homeland Security are active in trying to ensure small business plays a role," says Murphy of Eagle Eye. Entrepreneurs also praise the Air Force, the EPA and NASA for their outreach efforts to small businesses.
Other entrepreneurs team up with peers to create larger consortiums that can compete with big corporations to claim a prime contract. Trade groups and contracting events can facilitate this collaboration. The U.S. Women's Chamber of Commerce, for example, holds an annual Women's Federal Contracting Summit, and the National Women's Business Center has launched the Procurement Institute, a contracting academy that teaches small companies how to anticipate government contracting cycles.
While many more changes are still necessary for small companies to compete, the SBA is attempting to move things in the right direction. It has launched Business Matchmaking, a kind of speed-dating program for small contractors: Small-business owners and government officials meet in a large room, pair up at tables, and then rotate from table to table every 15 minutes at the ring of a bell. This gives businesses a chance to offer their proposals to several procurement officers at once. The SBA says it is also more closely monitoring its database of small contractors to weed out oversize corporations.
The SBA's new size standards, too, could mean a brighter future for small contractors, though some entrepreneurs worry the standards will set the bar too high, allowing relatively large firms with tens of millions in revenue to qualify. Abraham also points out that a provision forcing companies to renew their size status every year could add red tape and confusion to the process. They're valid worries, indeed, but at least entrepreneurs now have some changes to look forward to--and some hope that they'll one day get their fair share of contracts from Uncle Sam.
The Subcontracting Path
Entrepreneurs don't have to rely on the prime, or initial, contracts handed out by government agencies to be successful. In fact, given how tough it is for small companies to obtain primes, entrepreneurs new to contracting should have smaller aspirations.
For Cecelia McCloy of Integrated Science Solutions, a Walnut Creek, California science and engineering company, subcontracting--obtaining smaller contracts handed out by a prime contractor--has been vital to her success. "[Getting prime contracts] is very expensive," says McCloy. "You can easily spend $25,000 to $45,000 to win that prime contract, so we have a substantial analysis process to identify whether we want to be prime."
Subcontracts can often be obtained more easily because there is less competition with large companies to get subcontracts. By building relationships with key procurement officials at many of the main defense contractors, McCloy has been able to get better access to subcontracts.
Still, cautions Judith Nelson, director of government contracts at EZGSA, a Bethesda, Maryland, consulting company focused on small-business contracting, "you may want a big-business mentor, but you have to be careful." Nelson fears that some larger firms may hire small companies because they are required to do so to fulfill contracting set-asides, but may have little interest in mentoring entrepreneurs on contracting.
Ultimately, says Abe Abraham, founder of CMI Management Inc., an Alexandria, Virginia, maintenance and operations support company, if you're a subcontractor, you are still not in control of your own destiny. "You can take a subcontract, but your strategy should be organized around trying to get a prime," he says. "Then, you're not at the mercy of the big guys."
- Minority Business Development Agency ( www.mbda.gov ): The MBDA runs centers that provide advice to minority small businesses, and it also offers a website that helps minority entrepreneurs match up with federal contracts.
- Federal Business Opportunities ( www.fedbizopps.gov ): This is the official site for listing procurement opportunities $25,000 and over. You can search and find opportunities "solicited by the entire Federal contracting community."
- Central Contractor Registration ( www.ccr.gov ): The CCR database has enfolded Pro-Net's functions into the mix, providing a one-stop shop for entrepreneurs to enter their company information in register of companies that could compete for contracts.
- General Services Administration ( www.gsa.gov ): This is another portal designed to bring together government customers and potential contractors. Check their "Contractors and Vendors" section for assistance and information the federal contracting process.
- Federal Supply Service ( www.fss.gsa.gov ): The Federal Supply Service is part of the General Services Administration, and provides federal customers with supply, service and procurement options. The Enterprise Governmentwide Acquisition Contract Center (GWAC) area on this site helps businesses understand how to get a GWAC.
- SBA Subcontracting directory ( www.sba.gov/GC/indexcontacts.sbsd.html ): This is a portal that lists subcontracting opportunities. The information is gleaned from subcontracting plans that large businesses submit to the government for $500,000-plus contracts $500,000 ($1 million for construction contracts).
- Federal Acquisition Regulations ( www.arnet.gov/far ): This site provides a comprehensive overviews of the laws and statutes about contracting.
- Procurement Technical Assistance Centers ( www.dla.mil/db/procurem.htm ): This program, offered by the Department of Defense, offers assistance for entrepreneurs in marketing to the government. This site lists the locations of these centers by state.
This article was originally published as "For the People" in the February 2006 issue of Entrepreneur magazine.
Joshua Kurlantzick is a writer in Washington, DC.