While many contractors are big businesses, the government has set aside funds specifically to attract small businesses to take on government contract work. In addition, the government has put in place procedures to allow for "micro-contracting," which facilitates getting extremely small contracts.
How much opportunity is there in doing business with the government? Some statistics from fiscal year 2009 will give you an idea of how much opportunity there is. (While fiscal year 2010 figures are not yet available, recent reports indicate that procurement spending continues to grow about 20 percent per year.)
In fiscal year 2009, the federal government wrote 6.6 million "actions," commonly referred to as "contracts" for products and services needed during the year. In addition to this activity, the federal government's use of credit cards resulted in another 30 million transactions. This is a lot of activity, but what are the dollars? The contracts represented about $626 billion, while the credit cards amounted to an additional $300 billion.
Since any contracts that fall between $2,500 and $100,000 are reserved for small, small disadvantaged, small women-owned and small veteran-owned businesses, that means that almost 10 million contracts were reserved for small businesses in just one year! Only 5 percent of the contracts were for more than $100,000 in value, and many of those were for major weapon systems, information management services, or large construction projects.
Looking at it from a small business perspective, most contracts use simplified procedures and are not much different that those found in the commercial world. According to a recent congressional report, government contracting has increased over 100% between 2000 and 2008 and with the Stimulus Act added in, there will be many opportunities for small business.
The government has the following designated goals for awarding prime contracts to small businesses:
Keep in mind that these are government goals, not government quotas. Quotas are set objectives that one must achieve; goals are set objectives that one must attempt to achieve. In any event, you probably will not get a contract just to help the government reach its goal. As in any commercial setting, contracts are awarded on the basis of what makes good business sense, with price, quality, and performance being the ruling factors.
Now let's get a better picture of where the government spends its money.
| Fiscal Year 2007 (10/1/06-9/30/07) Total Federal Actions and Contract Dollars |
||
| Agency | Actions | Dollars |
| DoD | 1,889,101 | $269,312,039,976 |
| Civilian | 4,786,794 | $109,193,661,513 |
| Total | 6,675,895 | $378,505,701,489 |
As you can see, there are two basic areas in which the government spends its contract dollars: the Department of Defense (DoD) and civilian agencies, such as the Department of Veteran Affairs and Department of Justice. Based on the numbers, it looks like DoD is the biggest opportunity, but remember that many of the dollars went toward major systems and thus to larger companies.
Next, let's look at what small businesses have done for the same period.
| 2007 Small Business Dollars by Type | |||
|---|---|---|---|
| Small Business Type | Percent | Dollars | Actions |
| Certified HUBZone Small Business | 2.22% | $5,977,808,192 | 57,682 |
| Women Owned Small Business | 2.87% | $7,725,076,037 | 191,280 |
| Service Disabled Veteran Owned Small Business | 0.69% | $1,860,328,366 | 29,425 |
| Veteran Owned Small Business | 2.41% | $6,479,372,855 | 125,004 |
| 8(a) Procedure | 2.39% | $6,427,087,570 | 37,482 |
| Small Disadvantaged Business | 5.75% | $15,483,505,702 | 143,048 |
| Small Business | 20.44% | $55,047,154,697 | 1,018,847 |
| Total Small Business Eligible | $269,312,039,976 | 1,889,101 | |
As this data shows, small businesses, overall, did very well at over $269 billion. It also shows that businesses that can be classified as small disadvantaged businesses (SDB) or women's business enterprises (WBE) have a lot of room to grow.
And how many small businesses were new to the game? In fiscal 2007, a total of 11,446 small businesses received their first federal contract with the government. These businesses were either women-owned or disadvantaged-owned, and were split almost 65/35 between female and male ownership.
Here's the top ten government agencies looking for contractors in fiscal year 2008.
| Top Ten Federal Agencies | |
| Agency | Contract Dollars |
| Department of Defense | $401 billion |
| Department of Energy | $24.8 billion |
| General Services Administration | $18.1 billion |
| NASA | $16.7 billion |
| Department of Homeland Security | $15.8 billion |
| Department of Veteran Affairs | $15.3 billion |
| Department of State | $6.3 billion |
| Department of Agriculture | $5.8 billion |
| Department of Justice | $5.8 billion |
| Department of Transportation | $4.7 billion |
| Top Ten Totals | $514.3 billion |
Another useful web site for information on government contracting is Win Government Contracts. This site can help you to navigate some of the government's databases or to find a PTAC counselor near you.
In addition to government contracting, there is a whole new area of opportunity: credit card buying, often referred to as "micro-purchasing," using IMPAC cards, now called Federal SmartPay.
In Fiscal Year 2008, the federal government spent an additional $19.9 billion in credit card purchases. Yes, you read that right, $19.9 billion in business just using that little old piece of plastic money. Since 1984, when credit card purchases were first authorized, the number of credit card transactions has grown to 25.5 million in Fiscal Year 2008. This means that, on average, over 69,000 transactions were placed each day. The amount of dollars spent with credit cards by government personnel, not just official government buyers, grew from $1.6 billion to almost $19.9 billion.
In all, about 70 percent of all procurement transactions in government are for micro-purchases (i.e., sums under $3,000) and are done with a credit card. This is similar to the situation in the corporate world. There are over 275,000 cards in use today.
Although the largest credit card user was the Department of Defense, every government office utilizes credit cards for almost everything it needs. This means that you can potentially have a government customer right next door. And the best news is there is no contract.
Does your company accept credit cards? If not, you might want to think about the advantages of offering credit card purchasing as a part of your business strategy. You can do this by establishing a merchant account so that you can accept credit cards.
Getting a merchant account is different than it used to be. A bank will want to know what I was going to use it for, who my customers were, how many charges there might be, and so on. Actually, what they wanted was a business plan. If your bank asks for that information, consider it an opportunity to create a plan that helps you think about where you're going and how you'll get there.
The government most often uses MasterCard or Visa, but does use others like American Express and Discover. If you decide to set up your account for either MC or Visa, you should be OK. It is best to shop around because the charges vary significantly. Something else to consider is using the newer wireless systems that allow you to use it where needed without being hard-lined to a given location. Depending on the usage level, it may pay to buy the hardware rather than rent it. Choose the most cost-effective method for you.