If someone were to ask you whether or not your business was ready for government contracting, what would you say? Most small-business owners would, truthfully, respond with a timid “maybe” as their response. Why is that? It’s simple.
Most small businesses are not confident in their ability to perform on government contracts because of two very common mistakes:
- They place too much focus and attention on being really good at providing the product or service that they sell, and don’t consider many of the other important factors involved with owning and operating a business.
- They’ve accepted that the path of least resistance is the same as being efficient.
The good news is, those types of business practices actually work in many business environments; the bad news is, they don’t work in the complex world of government contracting. By design, government contracting rewards those willing and able to endure a path wrought with complexities, like reading and complying with wordy clauses, navigating and adhering to the intricacies of Sections A – M of a solicitation, and more. And yes, there is a lot more.
First Things First
If the thought of government contracting conjures negative thoughts and feelings, then that is exactly what your experience with government contracting is going to be. Government contracting is not for the faint of heart, as it truly requires patience, persistence and positivity. Assuming you have positive thoughts and feelings about government contracting, now you need to make sure that you are clear with a few additional pre-requisites. Specifically, the government will not enter into a contract with any business that:
- owes back taxes
- has a current or pending legal judgment with the government
- does not have a checking account
- is on the government’s excluded parties list
- hasn’t completed the basic regulatory requirements for doing business with the government
The Basic Necessities for Government Contracting Readiness
One thing’s for sure, all businesses that are legitimately and legally capable of doing business with the government have completed a few basic regulatory tasks. Specifically, the government requires that you register your business with Dunn and Bradstreet (D&B) and the System for Award Management (SAM). The D&B system uses a nine-digit unique identifier number to manage a business’s credit profile, so that lenders and potential customers or business partners can better ascertain another firm’s reliability and financial stability, and SAM is the government’s central registration repository for all businesses, both large and small. However, before you can begin completing the D&B or SAM registrations, you’re going to need to know your North American Industrial Classification System codes, better known as NAICS codes. The purpose of the NAICS is to provide the government with a uniform method of classifying its purchases, so that it can track spending for reporting, funding and budgeting.
Assuming you know your NAICS codes and have completed your SAM and D&B registrations, are you now ready for government contracting? The short answer to that question is: maybe. Before you can confidently answer yes, you’re going to need to make sure you’ve got all of your i’s dotted and t’s crossed.
Preparing Your Business for Government Contracting
Some of the most important items needed prior to becoming ready for government contracting aren’t specific tasks related to becoming legally compliant, like D&B and SAM registrations. The items a business really needs to be considered ready for government contracting are tasks and activities that aren’t listed on any government website. Specifically, there are five additional “unstated” requirements that promote or prevent a business’s readiness for government contracting:
1. Past Performance
Past performance, defined by the accumulation of work completed by a business with customers in the public and private sectors, is an essential component in determining a firm’s readiness for government contracting because it is a quantifiable metric, like revenue or years in business. Equally important, many government proposal requests utilize past performance as an evaluation criteria. Therefore, the more relevant past performance a firm has, the more ready they are for government contracting. Typically, the government requires two years of steady past performance.
2. Strong Financials
Strong financials are defined by positive cash flow and year-over-year increases in revenue. Therefore, the stronger the financials a firm has, the more ready they are for government contracting.
3. Access to Capital
The more access to capital a firm has, the more ready they are for government contracting. Is your company able to access a line of credit or capital in order to support the costs to perform on a contract?
4. Strategic Partnerships
These are the professional relationships maintained by a business with other businesses that offer the same or complementary services in order to support their pursuit of government contracts or performance on government contracts. Therefore, the more strategic partnerships a firm has, the more ready they are for government contracting. In my experience, the most effective method for identifying and creating business relationships is by attending outreach events and networking events.
5. An Orderly Office
A business with an orderly office is efficiently operated in terms of its administrative, operational and accounting activities. Therefore, the more organized a business’s administrative affairs are, the more effective the business will be able to perform as a government contractor. Specifically, your business should have: a well-organized filing system that retains government issued documents, financial statements, receipts, employee records, entity formation documents and related documents; an approved accounting system as well as a software program capable of managing your firm’s accounting activity; formalized and well-documented standard operating procedures; a quality assurance plan; and an awesome website.
Now that you have a thorough understanding of what is required to be ready for government contracting, ask yourself: Are you ready?
Procurement Technical Assistance Centers (PTACs) can provide free assistance to small businesses looking to compete for government contracts. You can locate the PTAC closest to you at the Association for Procurement Technical Assistance Centers.
For more government contracting resources, visit openforum.com/governmentcontracting.
Photo: Eric Ryan Anderson
The information contained in this article is for generalized informational and educational purposes only and is not designed to substitute for, or replace, a professional opinion about any particular business or situation or judgment about the risks or appropriateness of any government contracting strategy or approach for any specific business or situation. THIS ARTICLE IS NOT A SUBSTITUTE FOR PROFESSIONAL GOVERNMENT CONTRACTING ADVICE. The views and opinions expressed in authored articles on OPEN Forum represent the opinion of their author and do not necessarily represent the views, opinions and/or judgments of American Express Company or any of its affiliates, subsidiaries or divisions (including, without limitation, American Express OPEN). American Express makes no representation as to, and is not responsible for, the accuracy, timeliness, completeness or reliability of any opinion, advice or statement made in this article.