Month: June 2024

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.