Dispelling myths about selling to the government
September 14, 2004
The government is looking for companies like yours: machine shops, fabricators, and other manufacturers, that can provide it with what it needs to fulfill its mission and that of the armed forces. However, many myths stop businesses from thinking about doing business with the government.
When businesspeople get together these days, one topic they discuss is where to find new markets. Inevitably, someone will say, "How about selling to the government?" And that starts a series of "Oh my god, they don't pay"; "The paperwork "; the eternal "Yeah, they paid $200 for a hammer, they're not worth it"; and "Man, you have to have the fix in if you're going to sell to them, the bids are rigged." One of the best myths is the first one: that the federal government doesn't pay. In reality, the federal government—by law—must pay its vendor within 30 days of receiving an invoice. The government also can pay using progress payments. This technique allows payment based on incremental shipments, which can help small businesses.
Another common misleading concept is "the government market." The government isn't one market; it's made up of thousands of markets, including federal agencies, states, cities, counties, towns, boards and commissions.
Many myths start with confusion about these different entities. They buy the same types of products and services, but the way they do it, how they pay, and their goals differ.
The federal government actively seeks small, disadvantaged, women-owned, and veteran-owned businesses. Twenty-three percent of more than $370 billion is earmarked for small business; that's a chunk of change, even for Bill Gates.
Many small machine shops, fabricators, and general businesses look at the government as if it's a forbidding and mysterious world that requires massive investments of time, energy, and labor. The truth is, if you want your company to sell to government, you first have to commit yourself to that undertaking.
Your first step might be to look at the area of interest and determine if it's worth your commitment. If you see enough opportunity, then go for it. Remember that help is available; you don't have to go it alone.
Now, let's dispel some typical myths about selling to the government.
Myth: The government doesn't pay.
Fact:The Prompt Payment Act was signed into law in 1982. This act states that companies doing business with the federal government must be paid within 30 days of submitting a properly prepared invoice. If your company's invoice hasn't been paid and it's been more than 30 days, you're entitled to interest for every day it's overdue.
In addition, the government now pays using electronic fund transfer, which means that you can be paid more quickly, usually within 14 days after you submit your invoice. If you accept credit cards, you can get paid immediately.
Myth: Working with the government is complicated because of its paperwork, red tape, and regulations.
Fact:Since 1994 the federal government has increased its use of simplified forms and paperwork in the procurement process. By 2005 the federal government expects to have a paperless buying process.
The government uses new forms as well as the Internet to supply bids, forms, information, and updates.
Much of the paperwork and regulations are meant to protect you, the taxpayer. It takes more than a verbal agreement if you're going to do business with the government. You'll find that the process can be taxing but not complicated for the average business. If you're used to doing business with any large contractor or the automotive industry, it actually might be easier to do business with the federal government. In addition, most of the regulations that contractors have to comply with don't apply to small businesses.
Myth: The government works with big businesses only—small businesses don't have a chance.
Fact:All federal buying activities must provide opportunities for small business based on goals. The government sets goals and grades its department and branches on how they do. The government also encourages large, prime contractors to subcontract to small businesses.
Any contract over $500,000 awarded to a large business must have a subcontracting plan that sets forth a procedure and goals telling the government how the business plans to work with small, minority-, women-, and veteran-owned businesses. Small businesses have a chance, by law, because the government has a goal to do 23 percent of its buying from them. That's about $40 billion a year. By law, the government has reserved all buys of $100,000 or less for small business, so no large business can bid on them without specific justification.
Myth: Contracts go only to companies that already are doing business with the government.
Fact:The federal government is moving more and more toward electronic bid evaluation to remove the impression that contracting officers can play favorites and give contracts to their friends.
You can use competition advocates who are in most major agencies. They're like bulldogs looking for contracts that can be put out for competitive bid, for open sources, and to enhance competition for small business. The government is looking for you; it spends millions of dollars trying to find new contractors and helping them enter, market, and understand the business. Any company interested in assistance can contact any one of 86 Procurement Technical Assistance Centers in the U.S. They provide free services to companies and are match-funded by the Department of Defense and local resources.
Myth: All federal government contracts are preselected. The government already knows who's going to get the contracts before it puts the bid on the street.
Fact:The majority of contracts are bid competitively. Offers are evaluated strictly according to the bible of contracting, the "Federal Acquisition Regulation," and they're awarded to the company that offers the best value—not necessarily the cheapest price.
Some contracts are considered sole-source or noncompetitive in nature, but usually those are for items that have a patent or technical expertise that's not available on the open market. The contracting officer must justify that decision.
Myth: The federal government is so complex that you can't find out what opportunities are available.
Fact:Many federal agencies post their bid opportunities on their Web sites. However, all federal agencies must post their bids of at least $25,000 on www.FedBizOpps.com. This is the official Web site for federal bid opportunities, and if you're going to work with a Procurement Technical Assistance Center, it can provide you with an automated bid service that scans this site, hundreds of other government bid sites, and, in some cases, European and Canadian bid sites.
If you're looking for work, bids also can be delivered to your e-mail inbox every day through your local Procurement Technical Assistance Center so you can bid on them.
Myth: The government isn't a dependable buyer.
Fact:The federal government is always going to be in business. When the commercial markets are drying up and going overseas, the federal government buys just like it has over the years, paying its vendors and contractors on time.
The preconceived notion that doing business with the government is bad business and the myths and stories of bad buys and overpayment tend to make you think that the government is run by morons and people who serve only their best interests.
The fact is, the federal government wrote more than 10.5 million contracts last year. It had a problem with less than 3 percent—that means that 97 percent of all government contracts ended up being successful for the government and the contractor.
The government is looking for companies like yours: machine shops, fabricators, and other manufacturers that can provide it with what it needs to fulfill its mission and that of the armed forces.