by callum85 on 9/25/15, 9:49 AM with 69 comments
by patio11 on 9/25/15, 2:26 PM
Small businesses can absolutely get government contracts, but becoming very adept at doing this is a skill, comparable in execution difficulty to, I don't know, SEO or cold calling. There exist many businesses in your town which, month in and month out, respond to RFPs for government services in the five figure or six figure range.
If there is any interest, I'll share Appointment Reminder's (unsuccessful) bid for a government contract in Hawaii. That's not ordinarily a huge portion of our business, but I became aware of the opportunity and it felt like a lay-up. It wasn't, as I failed to discover a key piece of information (namely, that an enterprise competitor had won the contract the year prior on a bid that was half of the minimum that I'd contemplate), but the process was not extraordinarily oppressive by the standards of An Adult Who Occasionally Plays Like This Is A Real Business.
Long story short: the white-hot competition to deliver 100k phone calls a year produced exactly two responsive bids, for $30k and $15k. The competitor, who won, won with a one-pager that said "Details substantially same as last year; if you don't have our old brochure on file let me know and I'll re-fax. Signed, an employee whose only job is to file 250 bids for $15k a year and probably gets a gift certificate if more than 50 turn into sales."
My model for that bid, by the way, was "$5k of AR services, $10k budget for extra Twilio calls, $10k for software customization, $5k for anticipated hassle." That's an internal model: Hawaii only cared about the final number. (I can buy my competitor having economics which made their bid profitable at $15k, particularly if they amortize engineering costs over multiple years of anticipated renewals and/or they do enough similar business to amortize customizations over multiple accounts.)
The cost of the process for us:
Two hours of reading accessible online documentation of vendor qualification requirements for Hawaii, written at a 5th grade reading level.
One hour to understand the bid requirements.
Four hours writing a proposal which, like all proposals responsive to government RFPs, is basically "The system will be capable of Copy Paste Language From RFP Here. One sentence of elaboration."
Two hours of pushing faxes around to supplement the data collected by Hawaii's (fairly painless!) online vendor qualification process.
One hour responding to a general excise tax audit occasioned by a filing of Hawaii state business registration mandated by the process. (Result: we do not owe it, as anticipated.)
$60 in out-of-pocket costs for various regulatory fees.
Plenty of companies do this stuff week in and week out, for everything from "dig up a military statue and transport and replant it to a new location without causing structural damage; $40k" to "400 orange jumpsuits; must not contain any structural element capable of causing suffocation; remove all elastic; shipping included; $8k." It's like any other sales process: you win some, you lose some, you build processes such that your win rate costs you a percentage low enough to allow you to still make money on the business.
by drewpc on 9/25/15, 2:10 PM
Selling to the government is very similar to selling to any other industry/company: you (the seller or maker) have to understand the customer's acquisition process. The big difference is that the federal government is the largest customer--millions of people and trillions of dollars. Therefore, they have a lot of rules and they all attempt to ensure "fairness" when the government tries to acquire something.
How do you do begin to understand that behemoth? Here are some tips:
-You invest some (a lot) of time understanding the Federal Acquisition Regulations (FAR) https://www.acquisition.gov. There are training classes available online and in person.
-Speak with acquisition specialists or contracting officers to understand the regulations specific to your product/industry.
-Learn about the specific rules/advantages that may apply to your company. There are many many preferences for small business, veteran-owned companies, disabled-owned companies, women-owned companies, etc.
-Understand what "fair" means to the federal government in the context of acquisition. It doesn't mean "the best solution". It doesn't always mean "the cheapest solution".
-Learn how to navigate the government's Request for Proposal (RFP) and Request for Information (RFI) processes so that you can be a part of delivering answers/solutions to the problems that the government has determined they have. The big government contractors have this stuff figured out. They know how to read an RFP and respond, even if they don't have the solution themselves.
-Understand the concept of "prime contractor" and "sub contractors". Prime contractors often win large government contracts but decide to/have to "sub" some of the work out. There are often regulations on how and what types of companies they must sub work out to. For example, AT&T may win a large networking contract but sub the work out to 10-15 other smaller companies to execute.
by ejcx on 9/25/15, 2:23 PM
Most founders have intimate knowledge of the contract process and a large network from previously working at a large DoD contractor. Once they have this information and rolodex, they normally have an easy time running a small defense contracting firm as a sub on large contracts and winning their own through contract vehicles like SBIR.
This is also the story of how all those mega-mansions in Great Falls and McClean VA came to exist.
by something123 on 9/25/15, 3:12 PM
All the big projects force the big guys to subcontract to smaller companies
The problem is actually completely different:
There is no way for a "little guy" to become a midsized company b/c the government is completely incompetent and relies on the huge defense contractors for guidance. The gov't has VERY little internal expertise - so if you have a brilliant new idea that is perfect for a midsized company to execute (which will often have to be on an existing platform built by one of the big companies) they have to go to the big companies to see if it's feasible. The big companies ofcourse say it's impossible and then (if it actually was a good idea) they steal the idea and implement it themselves.
So unless you can go from doing SBIRs (ie. under 200 employees) to build a whole tank on your own - you're fucked
by Spooky23 on 9/25/15, 2:23 PM
- You must certify that you don't use certain tropical hardwoods.
- You must report on minority and female employees in some circumstances. You must meet goals for hiring subcontractors owned by the same.
- You need to certify that you've divested assets in Iran
- You must certify that you don't discriminate against Catholics in Northern Ireland.
Understanding how to navigate this stuff and not get in trouble requires "fixers" (ie. lobbyists, congressmen, etc) and domain expertise to stay compliant with everything. Competitors have to meet these too, and will submit grievances to screw up your contract awards. For a startup, that's death, as you'll hire people and buy stuff, and not get paid.
by azaydak on 9/25/15, 5:06 PM
by mindcrime on 9/25/15, 6:56 PM
Hi Phillip,
I am with the investment team at In-Q-Tel
(www.iqt.org), which is the strategic
investing arm of the CIA and other US
intelligence agencies. We invest in
innovative companies that are building
cutting edge commercial technologies that
may enable the agencies we work with to
rapidly develop and deploy new capabilities.
In addition to investing, we also in almost
all cases purchase some amount of product
and services from these companies.
Our customer agencies then frequently
make follow on purchases directly
with the companies.
I recently came across some news
coverage of your company. I am contacting
you because your social collaboration
technology might be of interest to the
agencies we work with. Would you be
interested in having an exploratory conversation?
Please let me know if you have some
time over the next couple of weeks to talk further.
Possibly a good deal for people who are into that sort of thing, but we chose not to pursue it, as I don't have any interest in supporting the CIA/NSA/DIA/DHS/FBI/ETC.
by vinceguidry on 9/25/15, 2:08 PM
Should we really be surprised that the market for rocket launches into space is somewhat more difficult to get into?
by ryandvm on 9/25/15, 1:54 PM
by pmorici on 9/25/15, 1:53 PM
The reason the above happens is because people start small businesses and then when they win lucrative contracts the large companies buy them. The article is a good overview of a dysfunctional system though.
by moron4hire on 9/25/15, 2:10 PM
If you're a small startup, there are dozens of ways to get into government contracting. Start looking at your city level. My home town even has an open-access procurement website where I can sign up, register my credentials, fill out my tax paperwork in advance, and configure email alerts for different keywords on procurement contracts that they post. If I had 5 employees--instead of my company being just a loose conglomeration of three consultants working on three completely different projects but sharing our billing--then I'd be able to even bid on some of these GIS software contracts.
I know my state has a similar site, I just haven't gone through it yet. I'm pretty sure federal has such a system that a number of the different bureaus use.
by csense on 9/25/15, 2:43 PM
> "We're passing laws within an election cycle, and when administrations change, our tendency is to layer in more laws instead of reforming the ones we already have"
The problem is that our laws are simply too complex. If I was President, I would refuse to sign a law that didn't (1) expire if not explicitly renewed in 20 years, (2) fit on 10 pages (with standard font size, margins and line spacing), and (3) result in a net reduction in the size of the legal code (by repealing old laws of greater length than any new text introduced).
by tsotha on 9/26/15, 5:14 AM
And then there were the companies that couldn't deliver on time but hadn't gone out of business yet.
"What do we do here? We could fine them a bunch of money for being late, but if we do they'll go out of business and we'll never get the thing they're supposed to be making for us. I guess in theory there's a chance they could still deliver if they're still around."
by bane on 9/25/15, 3:30 PM
Rinse, recycle and repeat. There's lots of very wealthy Beltway residents who's career is just spinning up businesses to do this. It's a kind of a parallel system to what goes on in the Valley.
by brokentone on 9/25/15, 5:06 PM
by mshaler on 9/25/15, 11:15 PM
The follow-on transactions, however, were much more challenging as the Beltway Bandits (prime contractors) dramatically increased the friction for us to be able to expand our footprint. We still succeeded, mostly because our technology was superior and we had the right agency (not contractor) advocacy.
by rhodysurf on 9/25/15, 2:01 PM
by pnut on 9/25/15, 2:03 PM
by ticktocktick on 9/25/15, 2:19 PM
by zeidrich on 9/25/15, 3:11 PM
1 - Regulatory capture.
2 - Startups might be efficient because they're lean on things that might be important to government. Like a small IT firm handling a presidential candidate's e-mail server.
#2 feeds #1 because lobbyists suggest important rules and regulations that can be justified by government which increase the barrier of entry to startups. Oh, you don't have certification that you do this? Oh you haven't submitted for these checks? Oh you haven't been reporting on this? If you haven't done all of these things, then you aren't eligible to win this contract.
Individually these points can be logically argued and make sense on a case by case basis. It's just that the enterprises that are in bed with the government already put themselves in a position where they are compliant with the new regulations that they're going to make, and then lobby to make those regulations to force competition to scramble for compliance at the last minute.
by debacle on 9/25/15, 3:44 PM
by Floegipoky on 9/25/15, 4:32 PM
Simple: startups represent market disruption, and bureaucracy by definition can't deal with disruption.
by cwyers on 9/25/15, 2:50 PM
by douche on 9/25/15, 3:33 PM
It was a husband-wife owned startup, but I believe actually incorporated under the wife (the CFO), which gave a leg up in certain DOD bidding processes, through various woman-owned-business grants and policies.
by joesmo on 9/25/15, 3:10 PM