How to Make Money Doing Business with the Federal Government

 

What business would want to ignore the world’s largest customer?

In my experience, more than you’d think ‒ because the world’s largest customer is the United States government.

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On the surface, the reluctance seems reasonable. Businesses are afraid of selling to the government: afraid of delayed payments, afraid of the “faceless bureaucrats” doing the buying, afraid of red tape. But my 40-plus years as a government contracts lawyer and instructor for government buyers has shown me that these fears, though apparently reasonable on the surface, do not reflect the realities of today’s federal marketplace.

Delayed payments?

The Prompt Payment Act makes the government pay you within 30 days ‒ and in some instances, even sooner.

Having to deal with “faceless bureaucrat” buyers?

Many government buys are made pretty much the same way we consumers buy items off of the Internet; there’s no need to deal with a live person.

Fear of red-tape?

If your business sells anything – goods or services – that is available for purchase by members of the public, you can sell to the government without having to deal with red tape much different than the red tape involved in selling to individuals and private companies. Of course, if you make F-35 fighter planes or submarines, you WILL see a lot of red tape. But for more than 20 years, the federal government has been simplifying its buying procedures for “commercial items” and government buyers can now demand only the key terms and boilerplate contract provisions you typically put in your contracts with non-government buyers.

There are, of course, some differences.

It’s true that you can’t sue the federal government in your local small claims court ‒ you have to go through a federal “forum.” But even those forums, the Boards of Contract Appeals, do not require you to hire a lawyer and have expedited small claims procedures. Plus, lawsuits are few and far between because the government typically wants to work things out, especially if you have a good record of delivering exactly what the government needs and doing it on time.

 

How can you get started in the federal marketplace?

The best way, and the safest way, is “slowly” and “gradually.”

Start working as a subcontractor to a government prime contractor.

Large government contractors must promise to give small businesses a significant share of work. This opens up opportunities for small businesses as subcontractors to these large primes. It’s helpful to know that Congress has recently and increasingly cracked down on abuses a small business might fear from large business primes, including sanctions for large contractors delaying payments to small business subs.

Consider being a small business prime.

The federal government also wants to have small businesses as prime contractors, and each federal agency sets its own small business prime contracting goals. Recently, the Small Business Administration proudly announced that, for the first time in 8 years, the federal government exceeded its small business contracting goal by awarding more than 23% of procurement dollars to small businesses.

So the government is serious about working with small businesses. By cracking down on large businesses masquerading as small ones and relaxing limits and regulations for legitimate small businesses, the government has also made it easier than ever to qualify for the special deals only available to the little guys. Just take your time and watch your step.

 

There’s strength in numbers.

The federal government has also made it easier for small businesses to become part of joint ventures eligible for small business set-asides. If your business wants to avoid a more formal joint venture structure, you could also just team up informally. Hypothetically, makers of left-handed catcher’s masks could team with makers of right-handed catcher’s masks to serve the government’s catcher’s masks needs in every context.

One unique teaming alternative is encouraged by the General Services Administration to help companies sell to the government from GSA’s Federal Supply Schedule, a modern-day equivalent to the old Sears catalogue that allows government agencies to buy a wide range of consumer goods from “already- qualified” vendors at “already-established” prices.

Getting on the GSA schedule is not for the faint-hearted, but there are plenty of organizations ready to help, and for free. Especially helpful are the Procurement Technical Assistance Centers located in local government economic development agencies or at local colleges and universities. I know first-hand how qualified and dedicated PTAC staff are when it comes to helping any business become a government contractor.

 

To borrow a cliché, “this is not your father’s” government contracting.

Changes made over the past several decades, changes made recently, and changes that will continue to be made into the future will keep making government contracting more and more attractive to businesses, especially small businesses. At the end of the day, any business with a track record of delivering on time and on budget would be a welcome addition to the federal marketplace.

 

Terrence M. O'ConnorTerrence M. O’Connor is the Director of Government Contracts at Berenzweig Leonard LLP. He can be reached at TOConnor@BerenzweigLaw.com