Government Contracting Consulting Services

I was a guest speaker for a college class recently. Although my subject wasn’t about networking, I was surprised to learn that is was something that had never been discussed. I spent about an hour after class talking about the importance of developing a professional network and growing it.

Networking is an important part of a successful business person’s daily work. A strong professional network can:

• Learn about the market you’ve entered
• Help you find a job
• Help you find new opportunities for your company
• Advise you on professional and company growth

These things are critical for long term success. I was surprised by the lack of understanding these students had related to networking. In this day people’s social skills are limited and people see to be uncomfortable dealing with others face-to-face. As I explained to these students, you have to get over your shyness and talk to people. You can’t do business without other people. Whether you’re starting a new business or looking for a job, you need other people to make it work.

I’m considering sometime in the near future writing more about professional networking and some techniques to help grow your network. For now I just wanted to address the subject at a top level and stress how important it is to network.

I’m frequently asked about finding subcontracts. Finding subcontracting opportunities can be more difficult than finding direct Government contracts. Typically there isn’t a common website where large defense companies advertise their subcontracting opportunities. Networking and “beating the bushes” is how to find subcontracting opportunities. Another difficulty of subcontracting is many companies won’t subcontract small businesses they don’t know. That seems like a revolving door. They won’t hire you if they don’t know you so how do you get them to know you? That is where networking and relationship building comes in. You have to get to know people within the company and develop a relationship with them.

I just returned from Tinker and the Primes. I spent 12 hrs a day for 2 days talking to people. Telling them what I can do for them and listening to what they can do for me. I made some new contacts and reinforced existing contract. I attend about 1 show a month. As you build your network, people within your network with introduce you to people in their network. I tell people “if my company can’t help you I probably know someone who can”. As you have probably gathered, the key to finding subcontracts is networking.

So you’re gotten to know the subcontracts administrator or a procurement officer within a large company, so how do you convince them to give you a subcontract. Lean all you can about what services and products they provide to the government, Then look for opportunities that fit their capabilities. For example, if they do aircraft modifications find a NEW solicitation related to aircraft modifications. Ask your contact if they are planning to pursue the contract. Chances are they already know about it and are discuss it. What you are doing is demonstrating your knowledge of the market and that you want to help them succeed. Have a plan to talk about a small niche within that larger effort you can support with great efficiency and a low cost. Its not uncommon for it to be cheaper to contract some tasks out to small businesses than it is to pay their own internal rates.

You have to market yourself to larger defense companies to get the subcontracts from them. You have to be a salesman or hire one to succeed. That can be hard if you’re a small business with a very small budget. You’ll find many of your small business owners and business development people are diamond and titanium travel rewards member. You can’t market on the internet. You must attend conferences, meet people, ask to visit them at their office. You have to be persistent and show them you add value to their business.

Once you get a contract, perform above and beyond expectation. If you’re a good small business to work with you will get more subcontracts. If you fail for any reason, move on to another company. Why should they give you a second chance. I know I usually won’t.

There is a lot of talk about how to win Government contracts and how to get started in contracting, but you don’t see much being said about executing the contract once its awarded. I saw a recent reddit question about what to do when your supplier notifies you they can’t deliver according to the schedule you bid to the Government. So lets look at this question and see what the options are. To start with, based on the context and wording of the sentence, I going to assume this is a broker contracted to deliver a product to the government. Once the contract was awarded to the broker a PO was sent to the supplier who notified the broker they can’t meet the quoted delivery date.

The thing to remember is you accepted the contract so you are obligated to deliver to the government. Not your suppliers or anyone else. You alone. So this is your responsibility to resolve. Unfortunately, this happens more often than I would like to admit. So what do you do? Look at your contract to verify if their are any incentive or penalty clauses. A liquidated damages clause can really hurt.

First, you can’t automatically get mad at the supplier. You don’t know what circumstances may have changed from the time they quoted the product until you sent the PO. Talk to your supplier. Try to negotiate a solution. If they refuse to work with you in any way then its time to get mad. Don’t cancel the PO until you have a solution. You don’t want to cancel the PO then find out you have to re-issue the PO. That puts you in a really bad position. They could refuse the second PO.

Now it’s time to contact the Government. See what kind of relief they are willing to give. There is a negotiating tool call “Trade-Offs” where you give them something to gain some relief. You have to be creative. What can you give the Government that will allow them to give you some relief on the delivery date. Maybe you can offer a partial order on the expected date and discount the items delivered late.

The important things to remember are:

• You accepted responsibility for the contract which includes the performance of any suppliers and subcontractors
• The contract is the defining document. Verbal agreements with the Government don’t count. Any changes require a contract modification
• You performance on this contract WILL impact your award of future contracts. Your CPAR rating will reflect your performance and be considered during future contract awards
• You accepted the responsibility for the contract. The government expects you to uphold your responsibility. Remember, they can consider you a default on the contract and cancel it.

I have always be a little suspicious of people on YouTube telling me they can help me win a Government contract. I have been in contracting for over 20 years. Part of that time as a full-time consultant advising large and small businesses in business development and contract execution. There are a lot of variables that change with each contract. There is now way one standard process is going to assure I win major contracts. Here’s an outline of my process.

• Read, Read, Read
• Gate 1
• Create a Requirements Matrix
• Perform Gap Analysis
• PWin
• Conduct a Win Strategy Session (proposal lenses, capture strategy, unique qualifier)
• Gate 2
• Update PWin
• Implement Capture Strategy (NDAs, Teaming Agreements, JVs, ect.)
• Gate 3
• Update PWin Again
• Transition to Proposal Phase

This is just a top level overview of the way I approach contract opportunities before I even start on the proposal and pricing. I have another process for developing the proposal. The problem is each process is tailored for each unique opportunity. Keep in mind, I’m not a parts broker. My last proposal was for $750mil. If you’re a parts broker there is a whole other process.

I started getting off track, but some of the people on YouTube have made selling you their training program their primary business. There are companies that have grown pretty large just selling their training programs. I have had companies pay for me to attend some of their training. I can give you the definition of a unique qualifier, but until you have tried to identify your company’s unique qualifier for a proposal it doesn’t mean a lot.

The government provides all the information you need to understand the processes of Government contracting for free. Their classes are not always the best quality, but take them multiple times with different instructors. All you need to know is available for free. Join NDIA and network with other contractors. They will usually answer questions for you as well.

By the way a unique qualifier is what is the one qualification/capability you can offer the Government/Customer that your competition can’t.

In the previous post I gave an example of how I’ve seen people start out being a broker for products to the government. Not all of them have failed, but most don’t last doing broker work alone. The successful companies that start out as a broker quickly expand into A&AS or other contract areas.

There are a lot of training sources available that promise to show you how to get rich being a broker for companies selling to the Government. They don’t all call it being a broker, but that’s what it amounts to in the end. Consider this…if they are making so much money as a parts broker why are they selling the training service at such a high price. I would venture to say that most companies who claim they have got rich selling to the Government and are now offering to teach you how for a fee are making more money from their training programs than they are selling to the Government. Teach people how to get rich quick is a big industry. I have considered jumping into the training market, but I’m afraid the honest real life training I would want to offer would discourage a lot of people new to the defense industry.

Before you start paying for “How to Sell to the Government” training checkout all the free training that is available. The Government wants to support small businesses so they have a lot of free training available. Start with the Apex Accelerator. It used to be called PTAC. I took several of their classes. I have even been a guest speaker at some of their classes. Its good training to learn the basics. Keep in mind, it’s being taught by Government employees most of who have never worked as a defense contractor. They are teaching a lesson plan. So if you don’t feel you learned much from a class you attend, find the same class taught by another instructor. Another source of reading material is Defense Acquisition University (DAU). This is training for Government contracting officers and is not open to everyone, but you can find articles discussing specific contracting topics. I actually found some good information using SCORE when I started my consulting company. It’s worth looking at.

The Government wants your small defense company to be a success, but they are not going to just give you money. Defense is very competitive so you have to do your part and offer something the government needs. Don’t just chase any Government contract you think will make you money. You’ll just end up in trouble and out of business. Focus on your areas of expertise. If you’re not an expert in your area of interest, become an expert.

A lot of people ask about mentors. There is a Government Mentor/Protégé program. Each department of the Government had their own program, but they were finally all consolidated under SBA. As far as I know the program is still out there. However, Joint Ventures (JV) (not an SBA program) has taken the place of the Mentor/Protégé program in most cases because it’s easier to initiate. It’s your responsibility to find your mentor. You can’t just jump up and say I want to be mentored. You have to offer something to your mentor, not just paying a fee. Offer your expertise in exchange for their expertise. Whether your expertise is logistics, engineering, management or whatever, find a company that needs help in your areas of expertise. That’s where you’ll find a good mentor/protégé relationship.

I see a lot of people on YouTube, LinkedIn and Reddit promising if you pay for their training course you’ll start winning Government contracts right away and make a ridiculous amount of money each month. Be cautious. I’ve been a Government contractor with large companies, small companies and my own company. There is no “get rich quick” scheme in Government contracting. There are companies who get lucky and win a contract quickly so lets walk through what usually happens based on my observations and experience. You win a contract to deliver 100 Flux Capacitors as a “broker”. So you sign the contract with the government. Your supplier quoted a 90 lead time for delivery so you quoted the Government 120 day lead time. That sounds reasonable. So you contact your supplier to issue the PO. Your a one person company so you don’t have a lot of the company infrastructure established yet because it cost money, but now you need to create a PO so you invest in Quickbooks or something similar. Now you’re ready to issue the PO to your supplier. Lets say that process took 3 days to resolve. So you supplier reviews your PO and about a week later they tell you they have issue with your Terms & Conditions (Ts&Cs). So you spend another 2 days negotiating and resolving your Ts & Cs. So now we’re 12 days into your lead time. Its common for a supplier to require an upfront deposit or full payment upfront for a new supplier. So they send you an invoice for $150k stating they’ll start work as soon as they receive payment. So now you have to go to the bank and ask for a lone to pay your supplier. The bank wants your house as collateral, but your not real happy about that. Or maybe you don’t have enough collateral for the bank to give you a lone. Now you’re stuck and your 19 days into your lead time. Let’s say you got lucky and found someone to put up the $150k for you. So you pay your supplier and he gets started. Now his 90 day lead time clock starts counting. Let’s assume your supplier is ready to deliver on time. So you’re at 109 days. Your supplier gets the parts shipped and at 112 days you have delivered everything, but you still haven’t made a dime. Now its time to invoice the Government, but you didn’t know you need an account in Wide Area Work Flow (WAWF) to invoice the Government. So you spend a couple days getting the account set up and submitting your invoice. So now you’ve worked 115 days without pay, your $150k in the hole and waiting for your invoice to be paid by the government. Government payment terms area usually 30-45 days. With a small business they usually give 30 day payment terms. So for 115 days work you have made about $30k minus expenses. That’s assuming a 20% markup. That doesn’t sound too bad, but remember 15% of that goes to Small Business taxes which you have to pay quarterly. Now its time to start again and find your next order. You were so busy fill you last order you didn’t have time to find your next one. Hopefully you can win another order before the money runs out.

I know how people think. I’ve had a hundred people tell me they will do things differently and won’t be that unprepared. I don’t care how prepared you are you will run into something you didn’t know about or weren’t prepared for. I have seen a lot of company win a contract and when that contract is over they go out of business. The gap between one contract ending and starting the next kills most small businesses.

I’ll do another post soon that gives an example of an IT or Engineering company that falls into a similar trap.

One of the top questions I hear is “where do you find opportunities?” Generally those asking have no idea what they want to sale to the government they just want to find an easy contract. I’m going to make the assumption that you have an established business that generates a product or service already. Say a machine shop, or engineering services, or IT services. For those who are an established company, lets look at several common sources of opportunities.

Sam.gov. You’ll see a lot of people complain about sam.gov and I agree with every complaint. It’s not user friendly at all, but it does have a lot of information once you learn to navigate it. There are services like GovWin, EzGovOpps and others that provide a more user friendly system, but they get their info from sam.gov. GovWin would be the exception which has a team of consultants that contract government sources to provide updates. I don’t know if their added information is worth the very high annual subscription fee they charge. Learn to use sam.gov. It’s free and it provides a lot of valuable information.

Conferences are another good way to find opportunities. Unfortunately, I believe most people approach conferences with the wrong goals in mind. They go to a conference hoping to come home with a contract. In the defense community that doesn’t happen very often. Your goal should be to make friends. Find companies that have some experience working with the government that you can work with to enhance their capabilities. For example; if you meet and IT company that primarily handles hardware and communication software and your company focuses primarily on cloud computing maybe your companies can work together. Build a relationship with them beyond the conference.

Study DoD programs related to your market. If you’re a drone company study the DoD Replicator Program, if you’re an IT company know about the Kessel Run program, if your a machine shop know about DMSMS issues. That’s what your competitors are looking at so you need to be able to talk about them. Every market has a program trying to make it better.

Finally networking. Be open to teaming. two small businesses have a lot more capability than one. Also when you build a relationship with a large company they may offer you some subcontracting opportunities. People are impatient. These things take time and effort. You have to build your network and become a trusted partner to your peers. What would it take for someone to convince you to allow them in your house alone to do a job for you. You would have to be confident they are trustworthy, reliable and will accomplish the work you’re paying them to do.

Remember, it’s your responsibility to read and understand every word of every document. It’s not the Government’s responsibility to make sure you understand. If you sign a contract that has a requirement that you didn’t understand when you priced it you are still responsible to fulfill that requirement without additional funding. Here is one trick I use to identify every requirement of a solicitation. Do a word search for the word “shall”. Most of the time it will state something similar too “contractor shall…”, copy and paste that statement into an excel spreadsheet. Repeat the process for the word “will”. You should get similar results. When you copy the statement be sure you get enough context so later you understand what it means. I also add the paragraph number next to each statement so I can find them again it I need. This process will help you identify 95% of the requirements, but there still may be more that are not as clearly defined so you still need to READ everything.

The spreadsheet you create in this process is the start of building your requirements matrix. I compare the requirements matrix to Section L (Instructions to Offeror) and highlight all the requirements that are listed in section L. These are the subject you must write about in your proposal.

A requirements matrix is an important tool when getting ready to develop a proposal. What I point out to many of the small businesses I work with is it’s a tool all your large business use. They may have different names for it, but they have a version of it. Many of your large defense companies started out as small businesses, but won large contracts. This is one of the tools that will help you win a large contract.

I have seen a lot of people asking about mentoring or training services. I know PTAC training is basic and those conducting the training are usually government employees who have never worked on the contractor side of the business. I have also seen a lot of YouTube videos of people saying I can show you how to make $100,000 with this simple trick. I’ve been in government contracting for over 20 years and there are not simple tricks to winning a contract. I do have experience providing training. I have been considering developing a training program people can enroll in that will teach the basics of government contracting. Unfortunately, due to the time involved developing the training programs I would need to charge an enrollment fee. I’m not trying to make this a full-time business because I still work as a government contractor myself, but there would be expense and a lot of time involved in getting it up and running. I still need to do some calculations, but I would love to hear your opinion about this type of training (I’m thinking of live zoom training) and what you think the value may be. Would you pay $200 for a basic live “How to Get Started Class”?

This is a subject I think a lot of people are not sure about but are afraid to ask so I’ll point out a few things to consider when building your pricing.

Overhead – Overhead is pretty common so I’m not going to discuss it too much. The one thing I will point out is overhead should not be an arbitrary percentage you add to all your pricing. It would be calculated based on operating costs and forecasting. It should be re-calculated at least annually.

General & Administrative (G&A) – Small businesses generally lump G&A into their Overhead calculations. Some companies choose to separate G&A and OH. G&A is your cost of doing business such as rent, utilities and insurance. OH typically covers your staff positions that don’t charge directly to a contract, such as receptionist, CEO and other overall positions.

Margin (Profit) – Margin is the percentage you add to the overall project. I have seen markup on products as high as 50%, but those are usually achievable when you have the market cornered and the government has no choice but to buy from you. For services, a typical margin is about 15%. Remember, bidding is competitive so you need your price to be lower than your competitor’s.

Price Breakdown – Depending on the type of the contract, the government can ask you to provide a breakdown of your pricing. You don’t have to get overly detailed in the price breakdown, but they are general interested in 2 parts of your pricing. 1. They are typically looking to see what material is driving the cost and lead-time. 2. They want to see you margin. That is the only part of your pricing the government can really ask you to negotiate. If you’re providing services they have an unwritten target of negotiating your margin down to 15%.

Management Reserve – Management Reserve is a small fund that most sr. managers and company executive would not like me talking about. Management Reserve is a small percentage or fixed amount of funding a manager at the execution level of the project sneaks in to give himself a small cushion if something goes wrong and he gets into a price overrun situation. If you don’t use it your company will enjoy increased margin and you’ll be a hero for completing the project underbudget.

Of course you could spend a lot of time discussing pricing. Just remember government contracting is very competitive so Low-Price-Technically-Acceptable (LPTA) is who will win so you need to make sure your pricing is accurate and complete. You can’t afford to forget to include something in your pricing. A big mistake small businesses make is underestimating the level of effort for program management and the requirements for the data package. Be careful.