Small businesses are winning an increasing number of government contracts at a climbing rate. In fiscal year 2013, the federal government awarded 23 percent of federal contracts to small businesses, and continues to aim for this percentage with each coming year.
But winning contracts is the first step, not the last. After you have a government contract in hand, what’s next? How do you properly handle the contract—managing expectations, delivering quality service, and financing the operation prior to payday?
“It’s exciting to win. But sometimes you’re not quite sure what you won,” said Ron Perry, CEO of Teya Technologies, an Alaska-based small business that launched in 2006 and now employs around 75 workers.
In January 2015, Perry moderated a panel discussion called “You Won a Contract. Now What?: Lessons Learned and Best Practices” at the American Express OPEN for Government Contracting: Success Series in Atlanta. Here are four tips Perry and the other panelists shared for making sure the government contract you've won becomes a success.
1. Know the Specs, But Handle Conflicts With Tact
Every government project includes detailed specifications, or specs, that contractors must follow. Read and re-read the specs, so that you understand exactly what the project requires. But if the client asks you to perform work that’s outside the specs—or worse, that contradicts the specs—handle the situation with tact and diplomacy.
“It’s up to you to do your due diligence,” said Trish Summers, president of Advantage Building Contractors, an Atlanta-based construction and facilities management company. “When you’re right, use that as an opportunity to help your customer; don’t use that as an opportunity to say that you’re right.”
Contract compliance is critical, she said, but at the end of the day, you’re still maintaining human relationships with the other agencies and contractors that you work with.
Necole Parker, founder and CEO of The ELOCEN Group, a Washington, D.C.-based program and project management firm, agreed.
“You are there to provide [your client] a good or a service, even when they are wrong. Offenses may happen, but your approach is very important.”
2. Monitor Your Cash Flow
One of the toughest challenges that small-business owners face is the question of how to cover the cost of production, services and fulfillment up front.
Your contract will detail the payment terms, and each contract will vary, but it's not unusual for a contract to pay some percentage as an upfront fee, followed by monthly payments, with the remainder of the balance upon completion. The upfront fee often isn't enough money to cover all of the initial expenses, especially if you need to pay employees or invest in capital expenditures. (Depending on the terms of the contract, even the "upfront" fee might take weeks or months.)
Tina Baker, CEO of the Cadence Group, an Atlanta-based information and records management company, advised retaining earnings within the business to cover these costs.
“We keep money in the company year-to-year so we’re really building equity, building cash flow,” she said. She also advised opening a line of credit with a bank, although this may require personal collateral, such as home equity.
If a bank isn’t willing to issue credit, and you're searching for money required to perform the project, try approaching another company that may be interested in partnering, said Summers.
“Go to someone and say, ‘Hey, I got a contract. What kind of deal can we work out?,” Summers said. “Once you get a contract, you’ll be surprised how money can show up.”
She noted that many banks aren’t “friendly” to small businesses.
“You’re going to have to leverage your house, run up your credit. Hopefully it's good because you’re going to have to rely on your personal [assets] a lot,” she said.
3. Create Strong Written Agreements
If you rely on teaming partners or subcontractors to carry out part of your contract, make sure you have a strong written agreement from Day One, Parker recommended.
“Put everything in writing; don’t assume anything,” she said. “Effective communication is the best communication. Discuss everything up front.”
She described an incident in which her company was a subcontractor that maintained a loose teaming agreement that wasn’t written out well. This mistake cost her $40,000, and she spent several years trying to get that money back.
4. Focus on Winning a Second Contract
You won’t win the second contract by resting on your laurels. Continue aggressively pursuing contracts by knocking on doors, forming relationships, finding teaming partners, searching online for bidding and procurement opportunities and asking for feedback.
Perry won one of his first contracts after he signed up for a 15-minute slot at a meet-and-greet with the small-business liaison office at Langley Air Force Base in Virginia. He flew from his home in Alaska to attend the meeting, and returned home with a contract in hand.
“People do business with people,” said Perry. “You have to get out of your office; they have to see you face-to-face.”
Parker recommended that small-business owners target a few government organizations and introduce themselves in person.
“Don’t spread yourself too thin,” she said. “Pick two or three agencies that you want to market towards; go to their OSDU [Offices of Small and Disadvantaged Business Utilization] offices. When you come to events like this, connect with the suppliers and buyers who are here.”
To win a second, third, fourth and beyond contract, Parker and Summers both advocated searching for bidding opportunities on websites like FPDS.gov, the Federal Procurement Database System, and FBO.gov, the website for Federal Business Opportunities. Parker also recommended soliciting feedback on defeated bids.
“I’m a big advocate of not winning many proposals, and some of my biggest successes have come from asking for those debriefs. I’m not asking ‘Why didn’t I win?’ I’m asking, ‘What could I have done better?,'” Parker said. “Our failures are our best successes.”
OPEN Forum: Government Contracting is a program designed to connect small-business owners to government contracting opportunities, which are an often-overlooked revenue stream. To learn more, visit openforum.com/governmentcontracting.
The information contained in this article is for generalized informational and educational purposes only and is not designed to substitute for, or replace, a professional opinion about any particular business or situation or judgment about the risks or appropriateness of any government contracting strategy or approach for any specific business or situation. THIS ARTICLE IS NOT A SUBSTITUTE FOR PROFESSIONAL GOVERNMENT CONTRACTING ADVICE. The views and opinions expressed in authored articles on OPEN Forum represent the opinion of their author and do not necessarily represent the views, opinions and/or judgments of American Express Company or any of its affiliates, subsidiaries or divisions (including, without limitation, American Express OPEN). American Express makes no representation as to, and is not responsible for, the accuracy, timeliness, completeness or reliability of any opinion, advice or statement made in this article.
Photo: Donna Permell