Biz Features

Why Government Contracting is STILL Worthwhile For Small Businesses

by . February 6th, 2013

The first person sentenced to the stocks in Boston was Edward Palmer, the man who built the said stocks. His crime? Overcharging the people of Boston for the stocks.

Government contracting and related shenanigans is old hat. But in the past few generations, there has been a general movement towards the privatization of functions government agencies used to perform. Not just in far more controversial areas such as public utilities and services either. Following trends in the private sector, government agencies now mostly rely on private contractors to do everything from mundane tasks like maintenance and HR, to more specialized duties including training and consultancy.

Of course, the government is also a huge customer for nearly everything. For instance, UPrinting has done some work for government agencies in the past. However, larger businesses still hold the majority of these contracts. Smaller businesses have in the past decade, struggled to get some of these lucrative government contracting gigs. Small business government contracts seem to be all but impossible to get.

Why US Small Businesses Are Losing Government Contracts

This is a recognized problem, and the Small Business Administration sets yearly goals for the percentages of contracts to be awarded to small businesses. In 2011, 21.7% of contract money went to small businesses – which is short of the SBA’s goal of having 23% of contracts go to entrepreneurs.

The numbers for the 2012 fiscal year have not come in yet, but it seems that the SBA will not meet its goal which still stands at 23%.  This says nothing of other goals set by the SBA aimed at empowering businesses owned by women and minorities – next to none of which have been met in the past year.

Missed Target - Why Government Contracting Sucks

Small businesses are defined by the SBA as those with $7 million or less in annual revenue or fewer than 500 employees in most industries. However, loopholes that have resulted in as many as 4 out of  5 small business contracts go to larger businesses owning multiple smaller enterprises. Government agencies may also claim an exemption if no small business can perform the job needed.

Tight budgets are also partly responsible for the dropping share of contracts awarded to small businesses. Many small businesses simply lack the scale needed to compete on several contracts.

Sandy Baruah, former administrator of the SBA from 2008 to 2009 explained in an interview “Federal dollars are just like household dollars… They are scarce and need to be spent efficiently”.

Others also point to an alleged culture of exclusivity that permeates top government agencies that effectively locks out legitimate small businesses and makes them turn a blind eye to big companies .

Why it Shouldn’t Stop You

On the other hand, there are plenty of new contracts being awarded to small businesses. It’s just really difficult to get them. Then again, getting a business to last beyond a year is hard work too., a site that helps small businesses get government contracts posits that the numbers are low because a disappointingly low number of entrepreneurs are playing their cards right.

Selling to the government is different from selling to other companies. The motivations are quite different, and different agencies will have different track records or picking up contracts. What many small businesses fail to do is create a plan specifically tailored to the agency they’re trying to get a contract from.

Play It Smart

An egregious error small businesses make way too often is not doing enough research on the agencies they plan on winning contracts from. Before calling anyone try to identify what agencies need your product or service. Next step would be to find their Forecast of Procurement/Contracting Opportunities online or in hard copy —all government agencies will have one. Your NAICS code will help you match your business with appropriate agencies much better and help you compete online on among other sites.
Pile of documents - Why Government Contracting Sucks

Lastly there’s no such thing as above and beyond when it comes to research for these contracts. Otherwise how else would you know if you’re talking to the right people? Research will allow you to build your network the right way, and help make your efforts winning a contract much more efficient.

Getting a government contract is not going to be easy. And if you do get one, it’s going to be a weird and wonderful world the likes of which you probably won’t see in the private sector. But it’s a worthwhile effort. With the right plan, it can be the way for your enterprise’s continued growth and development.



Arthur Piccio manages YouTheEntrepreneur and has managed content for major players in the online printing industry. He was previously BizSugar's contributor of the week. His work has appeared multiple times on The New York Times' You're the Boss Small Business Blog. He enjoys guitar maintenance and reading up on history and psychology in his spare time.