Research Paper

Selling to the United States government is a multi-billion dollar market – per year. The size of this market cannot be given a specific monetary value, due to the fact that every year, the U.S. government spends more money than it did in the previous year. Trends are showing that government spending increases every year sometimes by as much as ten to twenty percent. Back in the mid-1980s, selling to the government was roughly a $30 billion per year market (Black 1989). Since then, government spending has increased more than ten fold. This is especially apparent in the defense segment of the government. The United States government will not hesitate to spend whatever it needs to satisfy the wants of its defense, regardless of how much it stands to lose or gain.

With a market this big, there is no end to the opportunities that exist for the small business man or woman. This paper will focus on the opportunities that exist for disadvantaged small entrepreneurial firms who would like to sell to the government and touch on what would be required for such a firm to do so. The thought of having the government as a consumer of these small disadvantaged businesses seems like an awkward situation, but it provides for much of the growth of these small firms, both domestic and foreign.

[See Definition in Appendix for Small/Disadvantaged/Minority Firm]

Department of Defense (DoD) - Brief Information

The United States Department of Defense, created in 1949, is the executive department of the government that watches over everything involving or relating to national security and the military (DoD “About DoD” 2007). Its headquarters is the Pentagon, located in Arlington County, Virginia. The DoD has more than 5 million employees, most of which are military personnel, others high ranking officials and civilians. The DoD is comprised of many agencies and organizations. To name a few of the agencies that make up the DoD, there is the Department of the Army, Department of the Navy (which includes the United States Marine Corps), the Department of the Air Force, Coast Guard, Department of Traffic (DOT), and the Department of Homeland Security. These are just a few of the many agencies that work together under the DoD.

Probably the most interesting thing to those interested in this document is that IBM Corporation and the Department of Defense have been recognized for their support and use of small businesses outside of the government (McCrea 2003). Another reason for mentioning the DoD is that it consumes a large portion of the government’s budget to finance its operation. The DoD encourages the use of small businesses whenever possible. This business is contracted, and a minimum percentage of these contracts must go to these small businesses.

With the current war situation, the DoD’s budget has been increasing rapidly. The U.S. has been at war with Iraq since 2003. In 2005, the Department of Defense’s budget was estimated to be $402 billion (DoD “Office of Management and Budget” 2005). This estimate does not account for some research, weapons testing, and design. In 2006, the budget was $425 billion. In late-October 2006, the President raised the defense budget for 2007 to $532.8 Billion (Garamone 2006). In just two years, the defense budget increased roughly 30%. Since last year alone, this is a 25% increase (an additional $107 Billion). Again, this is just to show that the government will not hesitate to spend whatever it feels is necessary when it comes to its defense.

There are a lot of things going on right now – with the war overseas, the heightened state of security after September 11th 2001, there are so many jobs/chores that need to be taken care of. Even with the large workforce of the government, there are just too many things that need to be done for these individuals to take on additional chores with their other responsibilities. The government certainly has the money, so why not use it and hire others to take on these assignments and help out business for others?

Laws, Rules, Restrictions/ Limitations

Procurement and acquisitions by the government are regulated by the Federal Acquisition Regulations found in Chapter 1 of the Code of Federal Regulations (CFR) and maintained under the authority granted to the Secretary of Defense, Administrator of General Services and the Administrator, National Aeronautics and Space Administration (FAR 1.000). The FAR is amended and revised as needed by a council made up of the Defense Acquisition Regulations Council (DAR Council) and the Civilian Agency Acquisition Council (CAA Council) and published by the General Services Administration (FAR 1.04). DoD procurement is further governed by the Defense Federal Acquisition Supplement (DFARS) found in Chapter 2 of the CFR (DFARS 2.101). The public may propose changes to FAR and DFARS by issuing a memorandum, in a specific format contained in the FAR, which is then published for public comment and reviewed by the attendant councils (FAR 1.501-2).

General certification requirements exist under these two guidelines with the possibility for additional requirements by branch of the DoD. Under the Office of Federal Procurement Policy Act (41 U.S.C. 425), any new certification requirements must be imposed by statute or be submitted in writing to the Under Secretary of Defense for Acquisition, Technology and Logistics (USD(AT&L)) and approved by the Secretary of Defense (FAR 1.01).

Section 203.7001 of the DFARS requires that a contractor’s system of management controls provide for (1) a written code of business ethics and conduct and a training program for all employees in these subjects; (2) periodic reviews of company business practices, procedures, policies, and internal controls for compliance with standards of conduct and the special requirements of the government; (3) a mechanism by which employees may report any suspected instances of improper conduct; (4) internal and external audits; (5) disciplinary action for improper conduct; (6) timely reporting to appropriate government officials of suspected or possible violations or irregularities in connection to government contacts; and (7)full cooperation with government agencies responsible for investigative or corrective actions. Contractors with DoD contracts worth $5 million or more must display DoD Hotline Posters prepared by the Inspector General unless the company establishes its own hotline and actively encourages employees to use it to report improper conduct or irregularities or the contract is to be performed oversees (DFARS 252.203-7002).

The Anti-Kickback Act of 1986 (41 U.S.C. 51-58) makes it illegal for subcontractors to make any kind of direct or indirect payments to prime contractors in exchange for favorable treatment in connection with a prime contract. Violators risk a halt in payment of money owed to the subcontractor, criminal penalties and lawsuits by the government to recover civil penalties 41 U.S.C. 51-58 (FAR 3.502-2). Each company with a prime contract of over $100,000 must institute the same kinds of training and reporting practices as in the general contractor requirements of the DFARS, but with a concentration on kickbacks. Employees must also annually declare the gifts and gratuities received from subcontractors.

Inconsistencies in contractor cost accounting practices led to the establishment if the Cost Accounting Standards Board to create a more consistent, uniform basis for negotiating and administering fixed-price and cost-type procurement contracts. Though not a set of rigid rules, the CAS does create a system of options for the measurement of costs, assignment of costs to cost accounting period, and the allocation of cost to cost objectives (CAS 48 CFR 9903.302-1).

Confidentiality and Security

Because contracts with the government, in particular the DoD, are often matters of national security, the DFARS has severe restrictions on what kind of information may be disseminated by contractors. Contractors may not release to anyone outside the organization even unclassified information, regardless of medium, that pertains to the contract or any program related to the contract. (DFARS 204.404-70(a)). The only exceptions are if the information is already in the public or domain or the contractor submits a request for approval, in writing and 45 days prior, to the Contracting Officer specifying the information to be released, the medium to be used, and the purpose for the release (DFARS 204.404-70). Contractor employees approved for the Top Secret (TS), Special Access Program (SAP), or Sensitive Compartmented Information (SCI) must orally attest that they will conform to the conditions and responsibilities imposed by law or regulation on those granted access (DFARS 204.404-70).

Small Businesses Programs

The Small Business Reauthorization Act of 1997 increases the overall government-wide procurement goal for small business from 20% to 23% and increased funding for the Defense Loan & Technical Assistance (DELTA) program to be administered by the SBA to qualifying businesses effected by defense spending cuts (SBRA 15 USC 631 note). The DoD’s goals for small business contracts stand at 23% for prime contracts and 35% for subcontracts, with $219.3 billion in prime contracts and $121.5 billion in subcontracts awarded to small businesses in 2005 (DoD OSBP Executive Summary). The DFARS states that contracting officers shall give consideration to tiered small businesses (HUBZone small businesses, service-disabled veteran-owned small business, women-owned small businesses, etc) unless the contracting officer performs marketing research and determines that the agency’s needs cannot be met by a small business (DFARS 219.201). All small businesses must qualify under the requirements of the Small Business Administration size standards, which vary based on industry and specific area of business. For instance, a farm must have below $750,000, while fishing operations must have less than $4 million, and steam-and-air conditioning supply companies must have less than $11.5 million (13 CFR part121). Some, like HUBZone and Small Disadvantaged Businesses must get official certifications from the SBA in order to qualify for DoD Small Business Programs.

To that end, the Department of Defense has several Small Business Programs. The Mentor-Protégé Program pairs small, disadvantaged businesses with large companies in individual, project-based Agreements. The Agreements specialize in environmental remediation, engineering services, information technology, manufacturing, telecommunications, and health care and have become integral to many of the Mentors’ sourcing strategies (“OSBP Program Overview” 2007). The Protégé companies develop their business and technical capabilities while creating long-term business relationships. The Small Business Innovation Research Program (small technology firms) and Small Business Technology Transfer Program (small firms working with an educational institution) offer up to $850,000 ($1 billion annually between them) to small companies engaged in early-stage R &D that will result in products that will fill DoD or have a commercial purpose (“OSBP Program Overview” 2007). Funding is awarded on a competitive basis and the companies retain intellectual property rights to innovations created under this program.

The Indian Incentive Program offers prime contractors a 5% rebate on work or products subcontracted to Native American organizations (“OSBP Program Overview” 2007). The Woman-owned Small Business Program aims to reach the DoD’s goal of having 5% of prime contracts or subcontracts awarded to woman-owned and controlled businesses (“OSBP Program Overview” 2007). All DoD subcontracting plans are required to have a separate goal for awards to these businesses, with a focus on effective outreach, training and technical assistance. The Historically Black Colleges and Universities and Minority Institutions Technical Assistance Program provides technical assistance to minority institutions on the Department of Education's annual listing of Accredited Postsecondary Minority Institutions (“OSBP Program Overview” 2007). The Comprehensive Subcontracting Plan Test Program authorizes the negotiation, administration, and reporting of subcontracting plans on a plant, division, or company-wide basis in an attempt to determine whether comprehensive subcontracting plans increase the number of small businesses contracting with the government (“OSBP Program Overview” 2007). Eligible large prime subcontractors (those who in the previous year have performed 3 DoD contracts totaling at least $5 million and have a SDB contracting rate of over 5%) allow the DoD to oversee and plan their subcontracting for them.

There are two programs for veterans which use set-asides—the regular Veteran-Owned Small Business Program and the Service-Disabled Veteran-owned Small Business Program –which court small businesses owned by veterans and the spouses/caretakers of severely and permanently disabled veterans and conducts market research on how to further include those businesses in prime and subcontracts (US “Executive Overview” 2007). The DoD in concert with the SBA also participated in the Historically Underutilized Business Zone (HUBZone) Empowerment Contracting Program, which provides contracting preference to U.S.-citizens-owned businesses located in HUBZones and with 35% of its employees also living in the HUBZone. The DoD’s goal is to award 3% of prime contracts to HUBZone businesses, which will be partially achieved through the use of set-aside contracts (US “Executive Overview” 2007).

Finally, the DoD encourages the use of Small Disadvantaged Businesses (SDB) and 8(a) businesses. These businesses must be certified by the SBA, and in the case of 8(a) businesses, be active in the Business Development Plan for 9 years (US “Government Contracting” 2007). SDB & 8(a) businesses are likely to take part in the Mentor-Protégé program due to the assistance and guidance they receive from the SBA and they also qualify for some set-asides (“OSBP Program Overview” 2007).

DoD Program Goals for 2007

Small Business Category	Prime Contracts	Sub-contracts
Small Business	23%	35%
HUBZone	3%	*******
Service-Disabled Veteran-Owned Small Business	3%	3%
Small Disadvantaged Business*	5.8%	5%
Women-Owned Business	5%	5%
Historically Black Colleges & Universities/Minority Institutions****	5%	5%

* Includes 8(a)

*** HUBZone subcontracting program does not require a DoD-wide goal but requires the negotiation of HUBZone goals in all DoD contracts and subcontracts that require "Small Business Subcontracting Plans."

**** Defense Components are not required by DoD to establish separate HBCU/MI subcontracting targets. Instead these awards should be included when developing the subcontracting targets for Small Disadvantaged Business.

Contracting Methods & Bidding Procedures

Contracts worth less than $3,000 are not advertised and qualify for the Micro-purchases policy, which means that contracts are equally divided among qualified suppliers on the government contractor list and payment may be made using government purchasing cards (FAR 13.202) Contracts between $3,000-$25,000 are also not advertised nationally, though they are sometimes advertised locally and solicitations are oral or in the form of a Request for Proposal, are usually reserved for small businesses, and are governed under the Simplified Acquisition Procedures (US “Government Contracting” 2007). Contracts between $25,000 and $100,000 are advertised on the FEDBIZOPPS website, solicited orally or through RFQ, qualify for SAP, and reserved for small business set-asides. Contracts over $100,000 are also advertised on FEDBIZOPPS, solicited through an Invitation for Bid, RFP, are only subject to set-asides if there are at least 2 capable 8(a), HUBZone, SD-VOSB, or SB firms, and must be negotiated under formal contract rules (US “Government Contracting” 2007).

When using Simplified Acquisition Procedures, purchasing officers retrieve potential contractor information from the Central Contractor Registration database and use the company’s listed eligibility for DoD Small Business Programs(FAR 13.102) The contracting officer can then post a combined synopsis and solicitation on FEDBIZOPPS provided that it includes enough information for prospective contractors to submit a quotation and indicates the basis on which the contract will be awarded (FAR 13.105). The purchasing officer then evaluates the quotations, determines whether the price is fair and reasonable, and awards the contract, with the discretion of paying for most contracts valued less than $25,000 with the government purchasing card (FAR 13.106-3).

Government contracts are generally closed either through sealed bidding or through negotiation. The sealed bidding procedure involves the preparation of invitations for bids, which requires that all specifications be stated “clearly, accurately, and completely” and all relevant documents be included; publicizing the invitation for bids through electronic and other public posting; submission of bids, which must be sealed and opened only in the designated time and place; the evaluation of bids without discussions; and the contract award, which must be firm-fixed-price in nature (FAR 14.101-14.103). All proposals must be in exactly the format given by the solicitation or they will not be considered.

Negotiated acquisitions begin with Requests for Proposals or Requests for Information and are to be used in sole source and competitive contracts in which price and price-related issues are not to be the main determining factor (FAR 15). This method of bidding does not always lead to contracts and may be used for investigative purposes as when Requests for Information are posted to gather information for market research. This method also does not actually require negotiations unless the contracting officer originally intended for negotiations to take place and feels then necessary, so bidders should offer their best terms in initial proposals (Lieberman 2007). The negotiated procurement process also allows for a post-award debriefing, at the written request of the bidding firm, which will inform the rejected firms of the basis upon which the award decision was made, which can help the firm with future bids (Lieberman 2007).

The contracting officer must provide pre-award notices to bidders who did not win the contract informing them that they were excluded from competition, the basis for the decision, that revisions will not be considered, and information on the apparent winner (FAR 15.503). Once the contract has been awarded, a similar notice must be sent to bidders who were in competition, but did not win the contract along with specific information on the awards, including quantities, items, and prices (FAR 15.503). Rejected contractors may lodge written protests, though the case will be reviewed by the contracting officer, who will issue a written decision after reviewing the case and consulting with legal counsel (FAR 33.206). The contracting officer’s decision may again be appealed to the agency’s board of contract appeals within 90 days or the United States Court of Federal Claims within 12 months (FAR 33.211).

Contracts

Contracts may be competitive, sole source, or full and open competition. Competitive contracts are open to all applicants who pass security screenings, sole source contracts are those awarded when only one business fitting the criteria is available, and open competition contracts are awarded when at least two companies fitting the same criteria bid. Contracts must identify separate products or services as separate contract line items and use the Accounting classification reference number (ACRN), an alpha/numeric code used as a method of relating the accounting classification citation to detailed line item information (DFARS 204.7001). Requests for payment must identify the contract line items on the payment request that reasonably reflect the work performance and separately identify a payment amount for each line item included in the payment request. (DFARS204.7109)

Line items must fulfill four characteristics. Line items must have a single unit price, unless the item is not separately priced and its price is included with another line item, when there are associated sublime items; when the products or services require a cost-reimbursement contract; when the contract is for maintenance and repair services whose price are already included in total price; when the line item is only for reference; or when it is of an indefinite delivery type and has a variable price (204.7103-1). Line items must be separately identifiable with only one national stock number, item description or manufacturer’s part number for products and only one scope of work and description of services for services. Line items must also have separate delivery schedules, periods of performance, or completion dated expressly stated and which may lead to the establishment of additional line items. Finally, line items must have a single accounting classification citation unless it is for a single non-severable deliverable to be paid for with R&D money incrementally over several years, to be paid for with different authorizations and appropriations, or it a modification of an existing line item where the modified items are to be paid for with different classification citations (DFARS 204.7103-1).

Once a contract is signed, it is sent to the Defense Contract Audit Agency, which will determine whether it is of the cost-reimbursement; time-and-materials, labor-hour; fixed-price provisions for redetermination of cost incentives, economic price adjustment based on cost, or cost allowability; or any other contract requiring audit services (DFARS 237.2). The DCAA has the right to determine whether or not the pricing in the contract is allowable under DoD standards.

General Services Administration – GSA

The General Services Administration is in charge of all products and services that the government sells or buys. Like any other client, there are several rules which each business must adhere to in order to sell to the US government (GSA “How to sell” 2007). Most companies that sell to the US government do it through contracts, and therefore deal with the awarding agency. GSA contracts are advertised, awarded, and managed by GSA headquarters and GSA regional offices. Managers of federal buildings also purchase products and services which can be contracted out to small businesses.

GSA contracts usually demand/ask for the following:

· General-purpose supplies, equipment, and services;

· Building construction, repair, and maintenance; and

· Information Technology and network services.

GSA also buys or leases:

· Office space and other real estate; and

· Vehicles for all federal agencies.

GSA advertises locally and nationally, all contracts over $25,000 (USD) are advertised on fedbizzops.com. This site is available 24 hours a day, seven days a week, and allows vendors to register to receive e-mail notification of opportunities in their areas of interest (GSA “How to sell” 2007).

Advantages and Disadvantages of Selling to the Government

One advantage of selling to the government is limited liability thanks to the 1988 Supreme Court ruling in Boyle vs. United Technologies Corp establishing the government contractor defense, which protects government contractors from liability for acts committed in the performance of a government contract as long as it met government specifications (Napoleon and Kinosky 1989). To use this defense, however, contractors must seek approval for specifications from an ordering official who is at least as knowledgeable as the contractor, the contractor must warn the government of any damages in the use of the contracted equipment, and the contractor should request contracts contain specific language affirming that the government inspected and approved the product (Napoleon and Kinosky 1989).

Multiyear contracts with the government are more difficult to get, since appropriations acts only allow them if the cost of the multiyear contract is less than the cost of annual contracting based on an analysis of present value. However, once the contracts are signed they are more difficult for the government to cancel because the DFARS requires that the head of the agency provide written notice 10 days before termination of multiyear contracts. (DFARS 217.170). The DoD also practices prompt payment which, according to section 32 of FAR, means that payments are due 30 days after receipt of invoice or after the agency has accepted supplies or services performed. Some small businesses, however, may be eligible for a higher maximum in progress payments, a lower threshold for progress payments or loans of up to $1.3million from the SBA through the DELTA program to cover costs of purchasing working capital, acquisition of assets, raw materials or inventory, capital improvements or refinancing of current debts (SBRA 101).

Effects of Political Change

Because so many contracts are awarded annually, political change can mean the end of a contract. The newly-elected President and installed Secretary of Defense have the power to exert some pressure—explicit or implicit—on contract awards to people and organizations that contributed to campaigns or have personal relationships with said officials. Recent scandals involving corruption in the Legislative branch indicate that Senators and Representatives also exert power over the awards. For that reason, overdependence on DoD awards is inadvisable unless in an industry where there are not many alternatives.

Best Prospects for Small Businesses Entrepreneurs – By Industry

There are many growing industries that might allow the best growth opportunities for small/minority businesses. In 2005, The Boston Consulting Group released a document titled “The New Agenda For Minority Business Development.” The document goes on to mention the various opportunities that exist for these firms with the government and agencies such as the DoD. Though the document did not tell of specific industries which were growing and/or receiving more government contracts, it did highlight the industries in which minorities saw the most growth. There seems to be difficulty finding census, market research, and/or statistical data on ‘specific government contract industries’ and ‘job subsets’; narrowing the search down even more to ‘small and or minority businesses’ often drives the results down to zero. Government document centers still could not locate this type of information. In a way, it does make sense – the government does not approve of discrimination. The contract bidding process is supposed to be fair and equal for all bidders. It does not have required percentages for contracts in each industry; it has set goals and tries to make sure that a minimum percentage of contracts reach the entire small/minority business population.

In the research found, industries that offered the best potential for these entrepreneurs included (The Boston Consulting Group 2005) [See Figures 1 - 3]:

Services

Things such as maintenance, housekeeping, janitorial services, advertising, printing, et cetera. This also includes personal services to individuals such as barber shops, dry cleaning plants, laundries, and photo development studios.

Retail and Wholesale Trade

Supply chain channels that provide merchandise (example – distributors that carry items such as computers, hardware, equipment, food, general purpose supplies, et cetera).

Special Trades/Skill Contractors (Mainly Construction)

Take on activities such as building construction, mobile home and auto repair, and other non building projects.

Manufacturing

The manufacturing of products and components; usually at a reasonable capacity (examples – pharmaceuticals, parts, et cetera).

Transportation

The transportation of goods and other products - referring to logistics, shipping, trucking, et cetera.

Information Technology, Communication, and other Utilities

This includes software, products & services, as well as technical support services and personnel.

Food Stores & Eating and Drinking establishments

Provide food preparation and consumption (example – dining establishments and catering).

Apparel and Other Textile Products

Needle trades that produce clothing and other fabricating products by cutting and sewing purchased materials such as leather, rubberized fabrics, plastics, and furs (example – vests, flame-retardant fabrics, et cetera)

The consulting group did a great job of showing the different industries that minority businesses should consider, represented in a BCG matrix (The Boston Consulting Group 2005).[See Figure 4] The matrix gives firms a better idea of what these businesses should avoid and pursuit. It also allows them to make more strategic and rational decisions, such as considering if it is worth it to discontinue pursuit of low-growth and no-growth segments.

Other Government Trends

Today, a good amount of the government’s effort is going towards finding solution providers and better IT infrastructure. Global communication is always adapting to technology. Improvements have cost the federal government more than $58 billion of its annual budget in this area alone (Dunn 2004). The United States government wants to improve these technologies to allow for better interagency defense communication. This means everything – satellite and wireless communication technologies, VOIP (voice over internet protocol) systems, and many others. Bringing it down a level, federal law enforcement agencies have launched a project to build new wireless communications networks to allow agents and personnel from the FBI, Department of Homeland Security, Secret Service, and many other agencies (including state and local agencies), to communicate with each other. The military has shown strong interests in these developments because it allows soldiers to communicate and send/receive information all around the world – even in the most remote locations. Some of the most advanced communication systems exist within the military. However, even the simplest communication systems are appreciated by those serving in the military. For example, the U.S. Army recently established a number of working "internet cafes," employing Segovia satellite communications technology that allows U.S. soldiers in the Middle East to go online and communicate with friends and family back home (Dunn 2004).

CASES AND SUCCESS STORIES:

Cynthia Petterson & Princess Knitwear Inc. – New York, Apparel Company

In July of 2003, Cynthia Petterson, President of NY Princess Knitwear Inc., won a bid for a $4 million DoD contract with help from Small Business Services (“Mayor Michael R. Bloomberg announces” 2003). Her business will now be responsible for providing the Navy with 150,000 jerseys per year, for a total of for years (600,000 jerseys). The contract would allow her business to remain open after economic pressures and September 11th. During the recession, Petterson was not sure how long she was going to be able to remain in business. When she won the bid, she knew that she had a promising future for the business. At the time she had fewer than 20 employees. It allowed her to expand her business and hire more workers.

· In New York, 98% of the businesses are owned by small businesses. The State has several small business programs that help to see that they do have business – the business is good for the state. (http://www.nylovessmallbiz.com/growing_ a_business/ technical_assistance.asp).

Rose Wang &Binary Consulting Inc.

Rose Wang worked in Silicon Valley for several years before moving east to launch her entrepreneurial career. At first, she had what she calls a "rent-a-CTO" practice, serving large and small companies. But that quickly changed after the terrorist attacks of Sept. 11, 2001. He’s the founder and CEO of Binary Consulting Inc.

Binary Consulting expects to earn close to $20 million this year, compared to $13 million in 2005. Its biggest clients are the Defense Department's Office of the CIO, Defense Information Security Agency, Navy and Office of the Assistant Secretary of Defense for Networks and Information Integration. The company expects to have more work from the Air Force soon. However, Wang has declined to name the contracts or go into specifics. Binary Consulting is number eight on the Fast 50 list, with a compound annual growth rate over five years of 125.2 percent (Gerin 2006). ** The Fast 50 list is the governments list of the fifty fastest growing small businesses for government contracts.

Lurita Doan & New Technologies Management Inc.

Mrs. Lurita Doan was the founder and owner of NTMI before becoming administrator of GSA (Palmer 2007). While she owned NTMI, she won a bid for a $250,000 Navy contract in 1993. At that time, the bid allowed her to hire her first three employees. Mrs. Doan was eligible for the contract because her business was wholly-owned by herself, a woman. She supplied the Navy with technological products before selling the company off after the contract was over. Since then, NTMI has won several federal contracts in excess of $200 million a year to supply technology products to many additional agencies, such as the Army, Air Force, Customs, INS, and Homeland Security (Palmer 2007). These products provide information to workers and help with this such as border patrol.

Turkish Firms Using DoD Procurement Programs

The International Turkish Mentor-Protégé Program was set up in order to help match qualified Turkish firms with qualified U.S. small, minority-owned firms (Steelman and Asciola 1992). It is a strategy Turkish firms are using to access the DoD market and make use of its capabilities for small, disadvantaged firms. Foreign participation in the U.S. defense market was said to be helped by two factors at the time: DoD attitudes toward the acquisition and use of foreign equipment; and, the U.S. government’s insistence on broadening the competitive base of its defense procurement.

Bavarian Nordic – Denmark, Biopharmaceutical Company

In June 2007, the United States government awarded a $500 million contract to the Danish biopharmaceutical company Bavarian Nordic (Scott 2007). The company was paid $125 million up front for the first two years that it will be in production. The contract requested the production of more than 20 million doses of the smallpox vaccine. Reasons for the U.S. request for these vaccines are to combat illnesses for at-risk individuals such as children, the elderly, those infected with HIV. It would also be a measure to protect itself from bioterrorist attacks.

Steps to Consider

The Department of Defense’s Office of Small Business Management offers the following steps to small businesses aiming to do business with the government (“Guide to DoD” 2007):

1. Identify Product or Service

Products and services must be identified using the Federal Supply Class or Service (FSC/SVC) and North American Industry Classification System (NAICS) codes as they are listed according to these codes.

2. Register Business

Obtain a Data Universal Number System (DUNS) identification number from Dun and Bradstreet and register with the Central Contractor Registration (CCR) database. The CCR database stores information on contractors and transactions, facilitates electronic payment and is used to identify small businesses for contracting opportunities.

3. Identify Target Market within DoD

Use the DoD Personnel & Procurement Statistics page to gauge procurement opportunities, especially the Standard Tabulation 28 report, which provides general information on what the DoD has purchased in the last year. Specific information can be gained by comparing this report with the needs of the Small Business Specialists within each agency.

4. Identify Current DoD Procurement Opportunities

Check the Federal Business Opportunities website (www.fedbizopps.gov) for posted procurement opportunities.

5. Familiarize Yourself with DoD Contracting Procedures

Learn the Federal Acquisition Regulations (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) procedures/

6. Investigate Federal Supply Schedule (FSS) Contracts

Federal Supply Schedule (FSS) contracts administered by the GSA supply many of the DoD’s purchases.

7. Seek Additional Assistance as Needed

Assistance for small businesses is available through several areas. Procurement Technical Assistance Centers (PTACs) are provided by the DoD in most states to provide information and marketing, financial, and contracting counseling to small businesses at minimal cost. The eBusiness (http://www.defenselink.mil/bta/) section at the DoD DefenseLink website assists in the basics of the DoD marketplace. Small Business Specialists within agencies assist small businesses in marketing to the DoD. They provide information on procurement procedures, help place businesses on solicitation mailing lists, and help identify prime contract and subcontract opportunities.

Other small business owners and even personal employees can offer assistance. Communication and networking can help to solve many problems. Read about how things changed for Vistage International when a Mr. Alfredo Casta started working for the company.

“Alfredo Casta joined a local chapter of Vistage International Inc., a company that facilitates monthly meetings of CEOs in different locations around the world. The executives advise their peers to share opinions and advice on business plans, talk about challenges they have faced and present solutions to problems” (Gerin 2006). These practices help to solve some of the inefficiencies and problems that exist within the business.

8. Explore Sub-contracting Opportunities

Use the Subcontracting Opportunities with DoD Prime Contractors directory to find larger firms or Small Business Liaison Officers who may offer opportunities in the secondary market. These opportunities do not end at simple subcontracting, but may actually include subcontracts from subcontractors. Another place to look for subcontracting opportunities is the SBA’s SUB-Net resource, which includes postings from prime contractors, and other government, commercial, and educational parties.

9. Investigate DoD Small-Business Programs

Learn the specifics of the various Small Business Programs the DoD offers and contact SBA and DoD coordinators to ensure participation.

10. Market the Firm Well!

Using knowledge gained from the previous steps, present capabilities in as succinct and specific a manner as possible to the DoD procurement agents involved.

Difficulties

There are six main weaknesses in current local government data gathering and analysis methods that contribute to the disparity in support of minority contracting programs (Martin 2007):

Appropriate data is not tracked: the government must use availability figures of qualified firms. Firms that are qualified mean that they are ready, willing and able to compete for contracts.

For example a survey done in Denver to determine the number of

qualified firms in the area. The questions included revenues, length of

time in the business, ethnical, race, religion, and gender classifications.

But the survey neglected to ask whether the firms where pre qualified,

bonded, insured, licensed or certified.

Local information is not used: When looking for data most localities used surveys conducted in minority and women owned businesses, which is released every five years. Some of the data is inconsistent.

Data gathered is too general: Databases used should be as specific as possible and updated as well. All groups within the locality must be evaluated separately. If this is not the case then groups may suffer from discrimination seeing as all of them are in one entire category.

Inconsistent sources of information are used: Figures must come from the same areas and use the same methods of analysis and collection.

The term minority is not defined consistently: The definition of the term “minority” is different from that of the program’s legislation which has to be the same definition as in the programmatic documents.

Disparity is not always linked to discrimination: A regression analysis can tell if there are disparities factors involved and after these factors have been ruled out discrimination can be cited as the cause of inconsistency. In other words, do not confuse both terms.

In reality, there are many difficulties for small businesses. Narrow qualifications and disparities such as those listed above make it hard for some businesses to qualify for these opportunities (The Boston Consulting Group 2005). In addition to that, there is also the mindset of many minorities in which they believe they must finance everything personally – with help from the family, using equity, and other tools. Many minorities have a problem when it comes to taking on debt, so they say “no” to debt financing (The Boston Consulting Group 2005). Other difficulties include dealing with the registration process and clearances, because they can be lengthy at times. Some states, such as California with its Proposition 209, do not establish targets or objectives for disadvantaged businesses; this makes it harder for small firms to get contracts in these areas. [See Figure 5].

Foreign Firms and US Government Contracts

The United States does award government contracts to foreign firms. However, there is hardly any documented information available on U.S. government contracts awarded to small foreign business owners as small as Cynthia Petterson. The documents available report more important things such as tank production for U.S. defense and vaccine production. However there are a lot of issues surrounding national security and sometimes there are no clearances for dealing with certain foreign countries. It is a matter of security and heavily regulated by the U.S. Government.

Strategies and Final Recommendations

Based on the research, there are multiple things which small businesses, domestic or foreign, may consider. One of the first things mentioned was to deciding early on what to offer, where and when to start, and what agencies to target. Waiting until the business begins to struggle would not be a great time to start bidding on government contract opportunities. Starting early while the business is still young and healthy can allow it to move through growth stages faster and easier.

Explore subcontracting opportunities as well. There are just as many subcontracting opportunities available as there are prime contracts. Business is business; and, even though it may sound cliché, additional business won’t hurt and can only help to foster growth; ‘inch-by-inch,’ because a little can go a long way.

While it is a bit more difficult for small foreign firms to win bids on U.S. government contracts, they can try to attract venture capitalists. Or, they can form strategic partnerships and alliances with small U.S. firms. In situations such as these, both firms can enjoy technologies and other things that each has to offer. Partnering with a U.S. firm can allow the bidding process to work in a foreign firm’s favor. On top of that, the two firms working together can create a higher capacity and gain access to materials and other things that they otherwise could not. Expanding the use of mergers, acquisitions, and strategic partnerships should be considered for both, domestic and foreign businesses.

Conclusion

Selling to the United States government is a multi-billion dollar market. With the United States Department of Defense’s large budget and increases in procurement, along with its support for minority and/or small disadvantaged businesses, there is no reason why there should not be any entrepreneurs. Selling to the government has proven to be a very profitable industry for those who win bids on government contracts. These contracts often lead to business growth and unlimited opportunities. It is great that the DoD has set aside a policy to support the minority business community by setting minimum percentages of contracts to hand out to these small businesses.

Businesses choosing to operate in this market must follow the rules and regulations (FAR & DFARS) set by the many agencies, such as GSA and the SBA, that participate in government business. Business must qualify and register, as well as complete a number of steps before they can start biding on government contracts. For foreign firms, there can be a bit more difficulty – but, it is more like a challenge. There are a number of agencies that offer technical and financial support for these businesses.

After registering and completing all the requirements, it is important to develop a strategy. Determine what organizations or agencies to target and what services to offer. Is an alignment or partnership necessary? [See Figure 6] What would be more beneficial? Firms should make sure that they are aware of the terms of their contract, and urgency of time. Exploring other opportunities such as subcontracting also would not hurt. What it all boils down to is the firms’ strategic thinking and ability to market the firm well. Firms that sell to the government tend to do very well – contracts are hard for the government to get out of so it promises firms business for the length of the contract, allowing firms to expand operations, employ more workers, and generate more profits. While doing all of this, it creates more economic activity for the country and can also bring advancements and innovations in technology.

Currently, the best prospects for small business entrepreneurs to pursuit are: services (personal or general – dry cleaning, janitorial, photo development, printing, advertising), retail & wholesale (distributors of merchandise with good supply chain management), special trades/skills (construction, welding, auto repair), manufacturing (pharmaceuticals, auto parts, industrial parts), transportation (shipping and trucking logistics), IT & communications (VOIP, software, ISPs), textiles (apparel, fabrics, materials), and food & drinking establishments (food products and catering services). These were the industries that small firms saw the most growth. The information found in this research is very useful and hopefully will be used by a firm planning on selling to the government. Are all the bids in?

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APPENDIX

Small/Disadvantaged/Minority Firm:

Classified according to industry, net worth, annual profits, leadership, race, gender, and other criterion. Usually, these businesses often lack the size, scale, and capabilities of their major competitors (The Boston Consulting Group 2005).

Figure 1:

image3.png