Get In The Game.

How to take advantage of public procurement opportunities

DOING BUSINESS WITH THE FEDERAL

government for 12 years has been a prosperous roller coaster ride for entrepreneur Eleanor Andrews. As president and CEO of the Andrews Group Inc. in Anchorage, Alaska, Andrews has built a solid reputation as a contractor with the Department of Defense (DOD) under the Army and Air Force and several others providing facilities operations and maintenance, logistics support and information technology services.

Yet her work with the federal government hasn't been without its adventures. Indeed, Andrews recalls she was once called on to fulfill a multimillion-dollar project with just three days notice.

The contract, awarded through the Small Business Administration's 8(a) program, was a $3.4 million, nine-month endeavor that involved overseeing housing maintenance of 1,600 units at Elmendorf Air Force Base in Anchorage. But because Andrews had experience with logistics and had recently won a much larger Army housing maintenance contract, she was able to successfully manage the massive assignment despite such short notice.

"Being successful at landing contracts depends on opportunities, your track record, your ability to respond quickly and having capital resources," she says. "The challenge is that it's very competitive."

Andrews is just one of many African American entrepreneurs who looked on with cautious optimism when the Clinton administration vowed to "mend, not end" affirmative action's role in the billion-dollar landscape of procurement. Since that vow there have been numerous procedural changes. Firms must now be certified to obtain minority status, and preferential treatment is considered only in industries where minorities are underrepresented--a modification that some minority business advocates predict will mean minority firms receiving fewer contracts. But despite contract bundling and legislation that curbs procurement for African Americans, opportunities are out there--if you know how to play the game.

In a two-part series, BLACK ENTERPRISE will examine where these opportunities are in both the public and private sectors and instruct entrepreneurs on how to successfully go after them. In Part 1, we examine federal procurement: how to get started, where to go for help, you need to do to be prepared and the process works.

GETTING STARTED

Audwin Helton, president of Spatial Data Integrations (SDI) in Louisville, Kentucky, provides digital computer cartographic and geographic information systems to the Bureau of Land Management and military maps to the DOD. About 85%-95% of his company's $1 million revenues come from two prime DOD contracts. Helton was director of the DOD office in Louisville. He started SDI in 1994 when the department was downsized and brought his most experienced map makers with him. "Mapping is a niche a lot of companies aren't focusing on," Helton says. "It takes special knowledge, skills and, often, security clearance. In thinking about my business philosophy, I tried to focus on my experience and contacts."

Four years ago, when Helton won his first contract, he went through a structured process. "My firm had to be certified and I was required to submit my technical and professional capabilities in a proposal that was well over 100 pages," he recalls. "We had to be painstaking in following requirements and specifications. It took them about three months to review the proposal and visit our facility. Once I was accepted, I had to get my facilities up to speed to do classified work."

Helton says it's easy to underestimate the amount of marketing, time and cost to prepare a bid. "For one bid, we had the best technology but didn't have the lowest price," he says. "It's very important to develop a good reputation with the federal procurement people. They talk to other agencies about how your firm has performed. If you have a good reputation, other opportunities will follow."

Seeking out those opportunities in federal contracting begins with getting your name out there. In the wake of the U.S. Supreme Court's 1995 Adarand vs. Pena decision, which sharply curtailed the circumstances under which the government could assist minority businesses in securing federal contracts, the Clinton administration issued new procurement regulations designed to increase minorities' access to federal contracts and subcontracts while also complying with the decision to eliminate affirmative action from the process. African Americans must now be certified for Small Disadvantaged Business (SDB) status with the SBA. In the past, the government relied on companies to identify themselves as disadvantaged. However, the revised federal rules actually make it easier for business owners who aren't members of minority groups to become SDBs by demonstrating their disadvantage, such as businesses run by white female CEOs.

Certified SDBs are then eligible for preferences under new federal procurement regulations. Under this revised system, an SDB can win a prime contract with a bid that is 10% over the lowest bid, but only in industries where disadvantaged companies are underutilized. Large businesses that use SDBs as subcontractors also receive preferences.

More than 6,000 firms currently participate in the SBA's 8(a) program, which helps small disadvantaged businesses compete for federal contracts. Last year, the SBA also reformed 8(a) regulations in an effort to encourage competitive versus set-aside procurement, says Calvin Jenkins, deputy associate administrator for government contracting and minority enterprise development. The SBA implemented mentor-protege and HUD (historically underutilized) zone programs to increase procurement opportunities for SDBs and streamlined the 8(a) contracting process with 25 federal agencies so they would work more directly with 8(a) firms, eliminating the SBA as the middleman.

Next, you'll need to qualify with the General Services Administration (GSA), the agency that coordinates federal buying policies and is the fourth largest government agency in contract dollars spent annually with the private sector for goods and services.

According to the Federal Procurement Data Center in Washington, D.C., federal agencies awarded nearly $190 billion in prime contracts for goods and services in 1997. The amount awarded 403,000 small disadvantaged businesses totaled $10.7 billion. That, figure nearly tripled to $29.7 billion when accounting for the 6.2 million small businesses overall.

Yet the total number of procurements decreased in 1997 to 310,445 from 316,813 in 1996, and the amount spent on contracts declined by more than $4.1 billion. Set-aside contracts declined by more than 4,200 and $500 million, while the number of 8 (a) contracts rose by more than 11,964 and $64.9 million.

Due to downsizing, most government agencies now purchase products and services through the GSA, making it more difficult for agencies to conduct their own procurements. Reform legislation over the past four years has also encouraged procurement of commercial items including information technology, which are sold on GSA federal supply schedule (FSS) contracts.

The Office of Enterprise Development of the GSA will also serve as a resource in helping you assess which agencies to approach with your products and services, and whether to pursue prime or subcontracting. A subcontractor is hired by a prime contractor to assist in completing a specific portion of a project. Small firms often team with other companies to become prime contractors. Prime contracting has its rewards, too: small firms gain experience because there are more opportunities and they can earn significant revenues in the process. But there's also a downside.

"You don't always get the work after you get the contract; there are no guarantees," says Jack L. Ezzell Jr., president and CEO of Zel Technologies L.L.C. in Hampton, Virginia, which provides software and systems integration for the DOD. He also mentions a common problem. "Minority firms should be wary of large majority companies looking to use their minority status to help them win contracts. Make sure you establish a relationship with your prime contractor and have assurances you'll get the work."

Ezzell says there's little the SBA or government can do to help because essentially, the business deal is between you and your prime contractor. However, you might have legal recourse in some situations, depending on what is stipulated in the contract.

It's to your advantage to apply for FSS contracts which cover the gamut of supplies and services at discounted prices. Any authorized federal official may make purchases from a GSA Schedule contract. Business and banking references are required. Once the GSA accepts your bid, you're granted a five-year contract. This doesn't necessarily mean that you have business in hand, but that your name and product or services appear on the list of approved government contractors. Actually getting the business requires aggressive marketing on your part once you've targeted the agency you want to do business with.

"Focus on a few agencies, discover what they buy and meet with the small business office director to help you understand what that agency is looking for," says Dietra Ford, associate administrator for enterprise development at GSA. Ford encourages small business owners to attend GSA networking sessions where they can meet agency procurement officials and prime contractors with whom they could eventually team on bids.

You can also find out about contracting information and opportunities in the GSA's Government Business Daily; Commerce Business Daily, published by the Department of Commerce, which has a printed and online version; and Set-Aside Alert, a newsletter on minority federal contracting published by Washington Business Information (703-247-3434).

KEEPING PACE WITH TECHNOLOGY

To stay competitive in the contracting arena, you must have the capability to bid on contracts, invoice and accept payment for purchases electronically via the Internet.

As part of the move to cut costs and simplify the procurement process, most business today is conducted electronically rather than on paper. (See "Electronic Commerce and the Future of Money," June 1997).

"In the Army, we are working toward digitizing all of what we do, leading to a paperless environment," says Gen. Johnnie Wilson, commanding general of the Army Material Command. "Companies have to invest in technology so they can link with other agencies and companies."

Federal procurement officers can place orders up $100,000 using. government cards, via electronic ordering system, GSA Advantage! (www.gsa.gov) or the SBA's PRONet database (http://pronet.sba.gov), says Ford. In this way, agencies can narrow their search for a contractor to just a handful of names and contact them directly, thereby expediting the process.

In 1997, credit card purchases increased among 18 federal agencies by more than $1.75 billion, and the total number of credit card purchases increased by 3.9 million, indicating that more agencies are purchasing on their own.

All government agencies have Web sites that provide pertinent information about procurement such as solicitation lists and RFPs. To prepare for electronic commerce, find a financial institution and software and hardware provider to create site or online product catalog and establish a connection with your buyers. (See "The Top Seven Tips For Business Owners, Techwatch, this issue).

MODELS FOR SUCCESS

Another successful 8(a) participant, Symtech Corp. in Alexandria, Virginia, has become a $3 million, award-winning Web site design firm by focusing on what it does best--information technology--and finding niches to fill within government agencies, such as NASA, the Department of Energy and the Navy.

Symtech provides information services, technical training, Web technology design and maintenance. The firm's largest federal contract is with NASA, which was won in 1995, says Seymour Metters III, president and CEO. Metters developed his technical skill as an AWACS (Airborne Weapons and Control Systems) radar technical engineer for the Air Force and management and service engineer on personal computers and mini copiers at Xerox.

"For my first contract, I searched Commerce Business Daily to find out which contracts were up for re-bidding," Metters says. "I assessed whether I had the money available to bid and whether to team with another firm. Then I gathered intelligence about the company that already had the contract and waited for the solicitation to appear in Commerce Business Daily." Metters says when the contract came up for bid, he prepared his request for proposal (RFP). "And once I got the contract, I had to develop a business plan to map out how I would complete the job."

As part of the $2.5 million, five-year contract obtained through the 8(a) program, Symtech provides technical vices for data analysis, technical maintenance and software programs. tech maintains the Lunar Prospector Web site.

Approximately 14.5% of contracts and subcontracts are awarded to SDBs, representing $1.75 billion, says Ralph Thomas, associate administrator for small and disadvantaged business utilization at NASA.

"Two of the biggest challenges I've faced are marketing and getting my company off the ground," Metters says. "I watch the of other companies similar in size and scope to mine. I use to go after $20-$30 million contracts based on my contacts, but the government was downsizing and companies were consolidating. I didn't recognize this."

Metters now teams with 8(a) firms and large companies as a subcontractor and says he carefully chooses large contracts to bid on as a prime because of the expense involved. He also pursues outsourcing opportunities in the wake of government downsizing.

"I should have taken small steps in finding my niche, Metters says. "I was successful one time, but there were many losses because of going after so many contracts. Now I have references and the to back me up."

As a prime and subcontractor for the Departments of Defense, Army and Air Force, Eleanor Andrews has also expanded her market by partnering with other firms in joint ventures and mentor protege programs along with sole contracting.

"Successfully bidding on contracts depends on opportunities, your track record, your ability to respond quickly and having the capital resources," says Andrews, whose company's 1997 revenues were $14.5 million. "A lot of firms that are shouldn't be. who take the time to rare can be successful." the commissioner of administration for the of Alaska, Andrews the needed experience start her own firm in 1987, having overseen a $250 million budget and more than 1,200 employees. A friend encouraged her to apply to the SBA as an 8(a) contractor. Despite the fact that she had little savings and couldn't obtain a loan, Andrews qualified and, for a five-month period, reviewed the solicitation of proposals and all logistics for two Alaskan Army bases. To obtain this $20 million contract, Andrews prepared a proposal and spent a month in negotiations with the DOD before proceeding with the project.

"The process is very competitive, but the benefit of set-asides and the 8(a) program is that I bid against other companies my size rather than big firms, which levels the playing field," Andrews says. "But as a small firm, it's important to make sure you have enough labor and materials to get the job done when you bid, because if you don't, you still have to continue to perform, even at a loss."

To ensure prompt payment (so you can cover payroll and other capital expenditures), Andrews suggests negotiating to receive payment every two weeks or offering discounts. For example, Andrews might offer 1% or 2% off invoices for early payment. The downside is that you lose a little profit, but you save the agency money.

Andrews also advises small or inexperienced firms to lease equipment for short-term projects if they can't afford to buy and partner with more experienced firms and exchange technology or experience, as she did with her first contract.

HELP WITH THE GAME PLAN

BOOKS:

Successful Proposal Strategies for Small Businesses: Winning Government, Private Sector, and International Contracts by Robert S. Frey. (Artech House, $59.95). Provides a clear and accessible guide for small business entrepreneurs and managers for writing effective contract proposals.

AGENCIES:

Small Business Administration. Regional offices provide information on government contracting such as procurement contacts, writing proposals and financing. 800-8275722 or www.sba.gov

SBA Office of Minority Enterprise Development. Qualifies minority businesses for the 8(a) Business Development Program and Small Disadvantaged Business Program. 202-205-6416

Office of Small and Disadvantaged Business Utilization, Department of Commerce. Maintains an online database of Commerce Department contracting opportunities for small businesses. 202-482-1472 or www.doc.gov/osdbu

U.S. General Services Administration, Office of Enterprise Development. Conducts monthly seminars on government contracting for minority businesses and publishes Government Business Daily, which lists procurement opportunities. 202-501-1021 or www.gsa.gov/oed

Commerce Business Daily, which lists procurement opportunities for small businesses, is available from the U.S. Government Printing Office by calling 888-293-6498 or online at http://bdnet.access.gpo.gov/index.html

Electronic Commerce/Electronic Data Interchange (EC/EDI). An electronic commerce network of select government agencies that issue requests for quotations, receive quotations and issue purchase orders up to 5100,000 for contracts. 800-334-3414

Procurement Marketing and Access Network (PRO-Net). An electronic search engine for contracting officers, marketing tool for small firms and link to procurement opportunities and information, http://pronet.sba.gov