NCMA Dayton hosted “Small Business & Government Relations” as part of it’s monthly Bagels & Business series.
Tom Krusemark, Procurement Center Representative, Small Business Administration
Bill Cox’s opening statement to small businesses “You need to understand how your potential customer contracts for your goods or services – understand the sales cycle and the sales chain.” In particular, does the Government have a need for your widget? Does your potential customer buy off the GSA schedule? Just because your friend down the street sells product to the Government via GSA doesn’t mean you will. He also warned small businesses about affiliation issues that could put their small business status in jeopardy.
Dave London spoke from the perspective of a small business owner that is still a small business (about 20 employees). “When we started Tridec, we asked ‘what skills do we need and who has those skills?'” When starting a company, know the risks. A very high percentage of companies fail – some estimate as many as 90%. Cash flow is absolutely essential as a small business. When you win that first contract, you have to hire personnel, pay salaries and benefits, and wait for payment. The cycle from paying the expense to reimbursement (payment of invoice) is usually at least 60 days, if not longer.
Partnership or co-ownership in a business is very personal and intimate, like a marriage. You spend a lot of time with these people, deal with stresses, and make decisions together. It can be very rewarding, it can also be very intimidating.
As a small business owner, you need a good accountant and you need to learn about HR and business development. All of this is about fostering and maintaining relationships.
Michael Bridges spoke from the perspective of a small business that has grown from its roots as an 8(a) with expected graduation in 2017. Bridges talked about winning and not-winning contract awards, protests, and debriefs. Over the past 18 months there have been over 4,000 protests filed – 50% of those related to Defense. Protests are adjudicated in one of four ways: dismissed, denied, withdrawn, or sustained. 98% of protests fall into the first three categories. That means only about 2% are sustained – not that the protester won, but that the GAO found reason for the claim to be valid.
Michael spoke of a recent example at Peerless regarding a NASA contract awarded in February 2014, but delayed until this week because of multiple protests by an unsuccessful offeror. Bridges’ advice to all bidders is to attend the debriefing if you win or lose. “It can be a painful, but constructive 90 minute conversation to learn more and be better the next time. It helps to know we have been treated fairly.”
Bridges closed his remarks with the advantages and disadvantages of joint ventures (JV). On the up side, JV can help companies get something (a contract award) that they can’t get on their own, and once a JV is in place, you have two years to bid on other opportunities. The downside includes the time, money, and legal expertise necessary to setup the operating agreement (a new legal entity) – often 12-18 months. The biggest complication is being a co-prime – the smaller firm manages the venture which can be a real challenge to a larger firm.
Tom Krusemark rounded out the opening remarks with a focus on compliance, key transition points of graduation from small business economic status, and H.R. 1481 a bill “to amend the Small Business Act to strengthen the small business industrial base, and for other purposes” which includes enhancing competition in contracting for small business concerns. Tom stated that a woman-owned set-aside is coming and expects the law to change in about two years. Trends he has noticed are more size protests and lots of certificates of competency.
Question for Dave and Michael: “Do you want to stay a small business?”
Michael – some 8(a) firms are no longer able to win contracts after graduation because they are not competitive. At Peerless, we have focused on finding new capabilities and making investments. Tom – part of the problem with growing too quickly from 8(a) programs is that you need a certain percentage of competitive and non-competitive business as you grow. Dave – some of us like the feel and atmosphere of a small business. We can remain agile and responsive to customer needs.
Question: “What is contract bundling?”