Top 6 Mistakes New Government Contractors Make

Hello and welcome to Federal Contracting Made Easy where we take the complex world of government contracting and break it into simple steps that anyone can follow.  In episode number 110 I will be discussing my reasons for not becoming a government contractor.

 

-intro-

 

Over the last 35 years I have had thousands of companies approach me about becoming a government contractor.  As a result, I feel that I have the experience necessary to tell you like it is.  Government contracting is not for those that are not in it for the long haul.  For example, it takes time to build relationships, learn the government language, learn how to capitalize on your proposals to win contracts, get through the numerous databases that the government uses and ultimately time and experience to become successful. 

 

 

Mistake #1 – Not Performing Market Research

 

Market research is not just something you do when putting together your business and marketing plan.    It is a necessary step to ensure that you spend your valuable time and resources appropriately.  The number one resource that any business does not have enough of is time and money.  Marketing your business to a government agency that does not use your product or service is a waste of not only your time (And the Governments) but also your money.  If you had spent just a few hours performing market research this would not have happened.  In

addition, you could have already reached out to a Federal Agency that does use your products or services.  This happens more than you realize and is very frustrating not only for you but also the government representative.  Remember that you only have one chance to make a GREAT First Impression.  What do you think that government representative’s impression of your business is going to be? 

 

Mistake #2 – Limited Bonding Capacity

 

For general contractors the number one limiting factor for this business is bonding.  Without bonding they cannot bid on a contract.  Yes, bonding is not required on a lot of commercial contracts.  Therefore, most new construction companies will not even know that they need bonding.   But if you reviewed a few solicitations you would see that bonding is a common requirement on all contracts. Also reaching out to several free resources they would have informed you of the bonding requirement and provide a listing of bonding agents for you to contact.  

 

Mistake #3 - No Working Capital

I cannot tell you the number of small businesses that want to get into government contracting and do not have access to a Cash, Line of Credit or loan to use as working capital. It may take the government 30 days at the earliest to 90 days worst case to pay you. Can you cover the operating expenses until you receive payment? What happens if you need to purchase inventory, equipment or materials? How are you going to continue to perform the statement of work without any cash? This happens more than you think. Plan ahead and save as much money as you can. That is what smart government contractors do. They get a line of credit before they need it if they don't have the cash reserves available. Don't wait until you get the contract to look for a loan.

Mistake #4 – No Past Performance

 

To be brutally honest, trying to get a government contract without any past performance is not feasible.  Your chances of winning a contract is less than 1%.  The biggest help you can do for your business is to get as a minimum a few commercial contracts prior to bidding on government contracts.  For one thing, it is much easier to get a commercial contract than a government contract.  Secondly, contracting officers are going to question any business that happens to win a contract without any past performance.  Depending on how the solicitation is written they could pass over your bid.  Even if you happen to win, they are going to request a Certificate of Competency (COC).

 

Mistake #5 – Teaming with Another Business

 

Now don’t get me wrong.  Teaming with an experienced business has a ton of benefits.  However, it also has a ton of pitfalls.  For example, I have seen experienced businesses take 

advantage of a small business.  The experience business may offer to use their bonding on your joint proposal.  However, in exchange since their bonding is at risk they are going to insist on an agreement (either written or oral) to protect themselves.  This is not necessarily bad.  However, if the agreement has stipulations that restrict your ability to meet the required self-performance requirements on the contract.  Or you are not in control of the project that is an issue.  The experienced business is not necessarily trying to stop you from completing the project.  Again, they are protecting their bonding because without bonding you can’t get a government contract.  Also, the experienced business may not know the rules for small businesses.  You the non-experienced business needs to insist ensure that whatever agreements you agree to do not stop you from being incompliance with federal regulations.  You must be willing to stand up for yourself.  That may entail hiring an attorney to protect yourself.

 

Mistake #6 – Get 8(a) Certification with Less Than 2 Years’ in Business

 

Let’s be honest here.  Most businesses that come into the 8(a) BD program that have less than two years in business at not utilizing the 8(a) programs to its fullest.  Why?  Because they don’t have the clientele, resources or experience to capitalize on the program. I have had a number of small businesses tell me that they wished they had waited to come into the 8(a) program until they were better established.  Why wait?  Because to fully benefit from the program you need to be able to continually market your business and perform the work.  It would be ideal to be able to hire an experienced employee that can help you through the process.  I have seen many businesses come into the program and get a contract perform the work, then have no money coming in until then get the next job.  If you could hire an employee with experience, then you can utilize their contacts to get a constant workflow into the business.  Constant cash flow can help you grow the business. 

 

Summary

 

I am not trying to distinguish your burning desire to become a government contractor.  What I

 

am doing is trying to open your eyes that proper preparation is key in order to have the best possible outcome.  As they say preparation is key.    Government Contracting is extremely competitive marketplace.  Without the proper preparation you will not receive the results that you are looking for.  Yes, even with proper preparation does not mean you will be successful.  That is the life of an entrepreneurial.  You take risks for the chances of the ultimate award.

So, do yourself and your business a favor and take the time to perform market research. Please wait to get 8(a) certified, and spend that time getting more past performance.  Also wait on teaming with an experienced contractor until you have performed at least 20 contracts.  By then you should be comfortable knowing what the government expects from you and your past performance and the question of being overly reliant on the subcontractor may not come into question.  Finally, save every penny that you can to keep in the business.  You will need the money if your business requires bonding.  Also, that money can be used as working capital or expansion.  Until next time be safe.

 

 

 

 

 

 

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