How to Succeed as a Small Business Government Contractor
With government spending at an all-time high, government contracting has become a popular topic recently. Social media is filled with many so-called experts claiming to hold the keys to government contracting success. Many have no real track records of success. In 2020, I was named a game changer by the White House Policy Advisor for Entrepreneurship & Innovation. This recognition is underpinned by years of education and perseverance. I became a government contractor while in high school. I was selected to participate in an inaugural school-to-work program facilitated by my high school and the Department of Energy (DoE) as a high school senior. As a high school senior, I worked two days each week at the Savannah River Site (now known as Savannah River Nuclear Solutions) in Aiken, SC. After high school, I continued providing contracting support while completing my undergraduate studies, in computer engineering, at the University of South Carolina. As a computer engineering student intern on the DoE site, I worked for various contracting organizations include Bechtel Corporation, the South Carolina Universities Research Education Foundation (SCUREF), and Westinghouse Electric Corporation.
Upon completion of my undergraduate studies, I was recruited by the Department of Defense (DoD), specifically Space and Naval Warfare Systems Center (SPAWAR). SPAWAR was recently renamed Naval Information Warfare Systems Center (NAVWAR). While working for SPAWAR, I provided direct support to the Chief Engineer of Communications, served as the SPAWAR liaison to the Assistant Secretary of Navy’s for Research, Development, & Acquisitions Chief Engineer’s Office (ASN RDA CHENG), served as the Ballistic Missile Defense In-Service Engineering Agent (ISEA), and Program Manager for various programs before leaving federal service. After leaving federal service, my team and I created a successful government contracting firm with millions in annual revenue within the first year of operations.
In 2020, I was named a game changer by the White House Policy Advisor for Entrepreneurship & Innovation. This achievement was unpinned by successes and failures along the way. However, I am thankful for all the successes and failures over the years. My biggest lessons came on the heels of adversity. As a result of some notable failures and successes, I am often asked why small businesses government contracting organizations fail. Our organization has had the opportunity to both Fortune 100 organizations and federal agencies directly over the years provide cyber, intelligence operations, information technology, and language operations support to the Department of Defense, federal civilian agencies, and the Intelligence Community (IC). Based on my own personal observations, I am going to list and briefly explain my top five (5) recommendations for greater success in the federal marketplace.
1. Small business executives should not lead with their organizations socioeconomic designations to win work.
Many small businesses focus on their socioeconomic designations as their differentiator when trying to secure opportunities as either a prime contractor (direct to the federal government) or as a subcontractor (supporting another company with a direct contract award from the federal government); this is a major mistake. Too many small business executives begin every marketing encounter with their socioeconomic designation which may include: 8(a), HUBZone, Service-Disabled Veteran Owned Small Business (SDVOSB), Woman Owned Small Business (WOSB). I encourage small business executives to focus on their unique value to the customer, not their organization socioeconomic status. Focusing on socioeconomic statuses is not a long-term strategy for sustainability. People do business with people they like and trust. A firm’s socioeconomic status alone does not provide any tangible value to the customers. Federal agencies and prime contracts will track the utilization of vendors for reporting purposes. Socioeconomic status will sometimes open doors of opportunity, but value delivery will allow small business executives to kick the door down. Socioeconomic status is a great designation to obtain, but it should be viewed as a great addition to a strong product or service offering. As a result of the great marketing efforts of socioeconomic certification companies, far too many small business executives spend more time trying to obtain specific designation from the Small Business Administration than focusing on than building organizations. I encourage small business executive to master the art of winning business and performing first before trying to obtain a socioeconomic designation. Socioeconomic designations should serve as a catalyst for winning addition work, not the reason for pursuing work. I recommend business executives they are business first and should not be defined by their socioeconomic status. Work to be known as a great business which happens to have a specific socioeconomic status.
2. Small businesses executives must communicate their value proposition effectively to potential customers
It is great to obtain one or more socioeconomic designations from the Small Business Administration, but small business executive must work to articulate and clarify their organization’s value proposition and differentiators. In short, why should the federal agency or prime contractor partner with your organization to deliver a product or service offering. I am baffled by how many small business owners do not understand corporate strategy basics. Small business organizations must effectively communicate how they plan to win work and how they plan to compete. Executives must understand how they are positioning their firms in the marketplace. Executives must develop a basic understanding of corporate strategy to thrive in the federal marketplace. The companies that win repeatedly have invested the effort, energy, and time needful to design, implement, and execute their strategy. As the market changes, executives must adjust their strategies according to maintain competitive advantage. It is important that executives develop the appropriate strategy for this business based on the competitive landscape and market conditions. When given the opportunity, I gladly explain common business strategies to small business executives so these organizational leaders can better position themselves in the marketplace and obtain a competitive advantage over time.
Common business strategy themes include cost leadership, cost focused, differentiated, or differentiated focused strategies. The names of the strategy being pursued is less important, but how to properly position the organization within the marketplace is of paramount importance. However, understanding the framework helps executives to better cement their organization’s position within the federal marketplace. At all times, an organization is either gaining market share or losing market share. How well one navigates their firm’s strategy will help the organization to hold and encroach on the market share of the organization’s competitors over time. An organizations strategy and pricing must address human capital availability, market conditions, performance thresholds, pricing considerations, supply chain constraints, etc.
3. Small businesses executives must understand the dynamics federal pricing.
When granted the opportunity, I explain how executives how to develop their pricing models (also known as a wrap rate) from a 30,000-foot perspective. Furthermore, I encourage small business executives to obtain a basic understanding of basic and managerial accounting. It is extremely important for small businesses to consult or hire accountant with a working knowledge of government contracting accounting. Government contracting accounting is derived from cost accounting. Cost accountants, especially those with government contracting experience, will prove essential in helping small business executives to develop their organizational wrap rates. It is important that executives understand their pricing before pursing contracting opportunities. Erroneous pricing can destroy a small business. It is imperative that business executives understand the basic cost pools needed to properly establish organizational rate structures. I encourage small business organization to build robust cost accounting standards, although many will argue that small businesses are often exempt from cost accounting standards. At a minimum, direct labor, overhead, general & administrative (G&A), and profit pools must be established to construct a robust wrap rate. I also recommend establishing fringe pools fringe pools, but some small business executives may elect to include fringe in the overhead pool. Either option is fine, but separating fringe provides executives with the additional flexibility when building when simulating cost scenarios while developing cost proposals for proposal pursuits. With a sound understanding of pricing, executives can approach the bidding process (whether as Prime or Subcontract) more confidently and pre-determine cost implications if awarded the contract opportunity. It is dreadful when small businesses win opportunities they cannot afford to maintain and successfully perform. Sometimes, executives will strategically take a loss from a cost perspective, but this should be properly planned with the necessary reserves in place to cover the anticipated shortfall. I do not recommend small businesses to pursue loss leading contract, but many successfully navigate the terrain in pursuit of a long-range goals sometimes. Lack of sufficient funding is the silent killer which will destroy a firm’s performance. Executives are severely handicapped when a fundamental understanding of pricing is not present.
4. Small business executives must understand the business development and capture management process
Executive must resist the temptation to chase every major contract. Small business executives must be narrowly focused and refuse the temptation to chase every contract buzzword. Instead, small business executive must develop an effective bid no-bid process; the bid no-bid process need not be overly complicated. However, a few key considerations must be considered when determine whether to pursue an opportunity or not:
· Based on the award criteria outlined in the solicitation, are we well positioned to submit a viable response as a prime or should be subcontract to someone else
· Does our organization have any viable differentiators which would be valued by the customer?
· Does our organization have a previous relationship with the customer (customer intimacy)?
· Does the contract type outlined in the solicitation provide our organization with a competitive advantage? For example, low price technically acceptable vs. firm fixed price
· Does the organization have the requisite past performance as outlined in the solicitation?
· If the organization does not have customer intimacy, can we leverage the customer intimacy of a strategic partner
As a result of the contract solicitation, Small business executive must be mindful of their win probability might be. Self-proclaimed government contracting experts advise small business executive to simply bid on new work without equipping small business executives without the know how needed to properly win; I reject this guidance. I encourage business executives to become subcontractor to large prime contractors and participate in the proposal process to learn. Proposal development can be an expensive undertaking for newer small businesses. Even for established small business executives, the proposal development process is not for the faint at heart. To be truly successfully in the proposal process, the real work may begin one year before the solicitation is announced to properly position the organization for success. Successfully navigating sections L, M, and C of the request for proposal (RFP) solicitation are necessary first steps before embarking on the bid no-bid process. If executives decide to pursue the opportunity, executive must determine are they better suited to pursue the opportunity as a prime or sub. If your organization learns about an opportunity only by monitoring contract opportunities, https://sam.gov/content/opportunities, please refrain from chasing this last-minute pursuit. If the first time a small business executive is made award of a contract opportunity is by seeing the RFP announcement in contract opportunities, the probability of a prime contract award is very slim. Strong business development and capture management processes allow focused firms to “shape” or influence the statement of work and its discriminators in hopes of suppressing viable competition months (or possibly years based on the size of a contract opportunity) before an opportunity is announced.
5. Small business executives must invest in competent program management expertise.
Pricing aside, small business profitability is a direct result of program management expertise. If a customer program has money, a well-trained program manager can effectively grow a contract over time. I encourage small business executives to employ program managers who truly understand program management, not someone who simply passed the program management professional (PMP) exam. One can pass the PMP exam without truly understanding the nuances of project/program management. Therefore, it is important that newly employed program managers understand cost management, critical path vs. critical chain, performance management, project initiation, risk management, schedule compression techniques, stakeholder engagement, etc. Program manager will work directly with contracting officer/contracting specialist, government program manager, subcontract administrators, etc. to successfully deliver products or services. Effective program managers will balance cost, performance, quality, and schedule while creating new requirements (task orders) by successfully coordinating with the contracting officer and government program manager. Well ran programs better position small businesses to address additional customer demands or needs; in short, effective program managers will help their organization win more work (make more money).
Closing Thoughts
I can easily list additional consideration to better assist executives in obtain their organizational goals. However, I believe these five (5) recommendations if followed will help small business executives to better position themselves in the marketplace. Business is a truly a contact sport; as a result, I encourage executives to continue learning. In John Maxwell’s book, the 21 Indispensable Laws of Leaders, Maxwell explains the Law of the Lid. The law of the lid states that executives cannot successfully recruit and maintain leaders of higher pedigree than themselves over the long haul. In short, as executives we attract teammates on equal footing as ourselves or lower. Therefore, is important for all leaders to continue investing in themselves. As a result of the continual investment in ourselves, the organization we lead will continue to thrive over time by attracting, recruiting, and maintaining a superior workforce. Setbacks are inevitable, but the consistent investment in ourselves and our organizations will allow us to better weather the storms. Trials and tribulations come to us all. I often say, you are in a storm, leaving a storm, or heading towards a storm. As a result, we must position our organizations to be learning organizations to achieve continual process improvement over time.
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