Month: May 2024

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.

I hear a lot of talk about wanting to start a company to be a Broker. Resell stuff to the government. A&AS could be an alternative to the Broker idea, but it’s just as competitive.

A&AS is what I generally refer to as “butts in seats”. It’s providing qualified labor to fill government positions as a contractor. These contracts are generally awarded as 5 year (1 year with 4 options) contracts. The way they work is the government will provide a list of positions they need filled. It may be anything from a pest control person to an aircraft engineer. You provide the bodies. The people will be employees of your company, but will generally work at a government location and report directly to the government. What you are is a staffing agency for the government. You generally provide the bodies for a minimum of 5 years.

If you think about it, it’s easy money if you can win one. They frequently require you use the fair labor rates established for the location so competition comes down to markup. Who is willing to accept the lowest markup rates. The same thing happens when you’re looking to be a reseller for the government. You and all your competitors are getting quotes from your suppliers. The quotes are generally fairly close to each other. So it comes down to who will accept the lowest markup with those as well.

One downside to competing for A&AS contracts. They are frequently set aside for ANC 8(a) companies. However, you can find some that are not. You occasionally find some difficult requirements related to security. I recently spent 2 months writing a proposal for a $70mil A&AS opportunity only to have the government make a change requiring we have a secret security clearance before the proposal was submitted, which disqualified me. So you have to be careful when reviewing the requirements.

I just wanted to point this type of contract out as an alternative to those looking at becoming a broker company.

I have seen a lot of discussion on reddit lately about becoming what I call a parts broker. I know it doesn’t always apply to aircraft or vehicle parts, but it’s the same process.

People seem to believe being a broker for the government is an easy “get rich quick” scheme that doesn’t take much effort to be successful. There are companies that are successful doing this type of work. I have known a few be very successful, but I have seen a lot of them fail. So the question becomes why to so many fail? There are all kinds of specific reasons for their failure, but the primary cause is they don’t have a strong executable business model to start with. They just jump in and start losing bids.

Here are a couple thoughts you should consider when creating your business model.

• What are you going to sell? – Many people want to jump in and sell anything the government will buy from them. So let me make a very simple example. Your company finds a solicitation to buy flux capacitors, so you call a flux capacitor company and get a quote for 10 units. Which is the solicitation quantity. You add say 25% OH, 10% GA, 15% Profit Margin on top of the price you were quoted. So lets say your price comes out to $100 per unit, or $1000 total contract value. Everything sounds good. You competitor company A also calls the same flux capacitor company and gets the same quote, add similar markups and submits a quote. So now your competition comes down to who is willing to accept the lowest markups. Now company B takes a different approach. They have done some research and estimated the quantity of flux capacitors the government buys in an average year (this is public information). They contract the same supplier in advance of the solicitation being release by the government and negotiate a 15% discount if they agree to quote their parts exclusively to the government. So now their starting price is already 15% less than your company and company A’s. They win the bid, because they have a price advantage.
• How do you verify your supplier maintains a quality product? – remember you’re the seller, so if the government has a quality issue they come to you to resolve it not your supplier. If your supplier refuses to honor a warranty you are still obligated to honor any quality requirements within the solicitation. That is a common area for companies to get in trouble with the government.
• Can you support your price? – The government in accordance with the Federal Acquisition Regulations (FAR) can require certified pricing.
• You’re putting a lot of trust in your supplier. How strong is your relationship with them?

I could continue on with this list, but this post is getting longer than I intended. You can be successful being a broker or middleman, but it’s not as easy as people seem to think.

Networking and making contacts within the defense industry can be challenging for someone just starting a new defense business or moving their existing business into the defense market. Conferences are a good way to build your network. I spent last week at the Quad-A conference in Denver so I thought I would explain how I prepare for a conference.

I have a list of key companies and people I always try to talk to because they are current customers or I want to make them customers. Usually, the conference website or app will show how the attendees are by company and name. I review the list to see if my key list of companies and people will be there. If I have a good relationship with them I usually email them and ask if they will be there. Setting up a scheduled meeting is much better than just stopping by.

Second I go through the attendee list and look for possible new contacts. Find companies that could support your business as a supplier and companies you could support. Make a list of these companies. These are your secondary targets to visit.

Finally, I make a list of talking points to discuss. If it’s one of my key contacts, I want to discuss future business that has a benefit to them. That may sound a little odd, but you should know what kind of business they are in so go to sam.gov and find some opportunities they may be interested in bidding. When you talk to them ask, are you looking at this opportunity? That’s a good way to lead them into a discussion about the projects they are looking at. Also have talking point for possible supplier and potential new customers. Know what your company needs and what you can provide to another company.

A final tip is I always carry a notebook. Don’t write while your talking to someone unless they are giving you contact info or something to write down immediately. As soon as you walk away from a good conversation stop and make notes about the discussion and what you need to do to follow up. I don’t like to make notes during the discussion because it makes people feel like you’re going to use what they say against them in the future. Wait to make you notes until after you walk away.