Small_Business_Opportunities

SMALL BUSINESS OPPORTUNITIES WITH THE U.S. GOVERNMENT: CONTRACTS, SEALED-BIDDING, AND MICRO-PURCHASES Principles of Federal Acquisition University February 2013 When dealing with the federal government, there are many fine points throughout the negotiating process a small business owner must remember. While the government seeks to encourage the growth and offer opportunities to the American small business, it also looks to find the best result possible at the lowest cost. Sometimes this may mean that the negotiation process steps into multiple categories of prospective contracts. Not only is each type of contract reviewed, but the price and negotiation of products and materials, in addition to the necessary timeframe, may also be included. In this, it is important for the small business owner to remain flexible, yet firm, when negotiating each aspect of any prospective contract involving, not only the federal government, but any contract litigation. It is vital that the small business owner keep in mind that while they’re aiming their end of the negotiation process to result in the highest profit, the other party is negotiating for the best deal at the lowest cost. With the federal government, the small business owner is given an ‘even playing field’ from the beginning of the negotiation of a contract. This often includes bidding, time and materials, and purchasing methods. When entering into contract negotiations with the government, small business owners must offer the most reasonable and appropriate contract and incentives that will prove to not only be most profitable for their business, but will offer the federal government the most successful avenues necessary for time and cost-efficient project completion. The acquisition of the correct contract type isn’t always clear-cut. With the presence of so many types of contracts, determining the most successful avenue for any procurement is necessary. As Memorandum for Acquisition Professionals issued by Ashton B. Carter, Under Secretary of Defense for Acquisition, Technology, and Logistics, plainly puts it, “Choosing contract type is an important way to align the incentives of the government and the contractor. One size does not fit all” (Carter, 2010). The government sees this and approaches the three different ‘families’ of contracts with caution and flexibility. The types of contracts included are fixed price contracts, cost-reimbursement contracts, and other contracts. The ‘other contracts’ leave open different avenues which may not be able to be immediately determined upon final acquisition. For example, indefinite-delivery, time-and-materials, labor hours, and level of effort contracts. Additionally, it is possible for the where/when to be established upon acceptance of a bid by the government; yet before final terms and conditions of the procurement are set to be finalized. While each type of contract holds its own pros and cons, the result of a contract which involves factors from more than one contract family is known as a ‘hybrid contract,’ and can prove to be beneficial to both parties of the negotiation. This type of contract is “a contract which involves different aspects of each [contract] type being combined, proving to be most useful [sic] for a procurement determined through an allocation of cost and performance risks assumed by [both] the contractor and government, as well as the financial incentives that the contractor can achieve by performing the services…” (Darst & Roberts, 2010, p. 17). The implementation of a hybrid contract by the government can prove to be beneficial to small business owners in avoiding unnecessary delays and additional costs, which are often seen when dealing with one specific type of contract. The sometimes-necessary level of flexibility presented by a hybrid contract offers both the government and the small business owners varying risks and incentives throughout the duration of the procurement. With this in mind, details following the acquisition can always be further investigated, if need be. When the details of the project are clear, accurate, and concise, the federal government has proven to be partial to the competitive enlistment of the sealed bidding process. This process is “…enclosed in a [sealed] envelope and submitted in response to [an] Invitation to [/for] Bid [(ITB/IFB)]. Sealed bids received up to the deadline date are generally opened at a stated time and place (usually in the presence of anyone who may wish to be present) and evaluated for award of a contract” (WebFinance Inc., 2013). Small businesses have a higher chance of landing these types of contracting negotiations because the business is usually specialized in specific areas. If the government issues an IFB, there are specific requirements for the contract they are opening. With this, small businesses specializing in the areas which the government is demanding, the odds are the smaller business will win the sealed bid. Additionally, small businesses are still attempting to ‘get their feet wet’ in contract negotiations and may, therefore, submit a reasonably lower bid than those of its competitive counter-parts. The government abides by certain methods when negotiating a contract and if the small business owner does their homework, the odds that negotiations will lean in their favor are high. The advantages of the small business owner in securing a contract with the government don’t stop with a sealed bid. There is yet another form of contract ‘bidding’ that can have the government glancing in their direction: micro-purchasing. Micro-purchasing is one of the few buying methods used by the government. Having to take additional steps within the procurement process, which are outlined specifically in the Federal Acquisition Regulations, the government makes its purchasing decisions carefully. With micro-purchasing, which is defined as “a government purchase (supplies or services) under the dollar value of $3000.00 ($2000.00 for construction)” (Defense Acquisition University, 2008). The purchases are made with an official government charge card and it offers authorized users the ability to pay smaller purchases. Unlike the other three types of contracts, there is no bidding or competition for users; however, “purchases are accepted under an individual established as the Delegation of Authority and not a procurement officer” (Beesley, 2012). Not only do small businesses benefit from micro-purchasing from the contracting stand-point, but additional small businesses whose products are purchased using the charge card provided to contractors by the government can also benefit; thereby reiterating the federal government supports America’s small business owners. With each of these contracting, bidding, and purchasing methods seemingly preferred by the federal government, small business owners branching into contracting with the federal government stand to have a larger success rate, overall. Small business owners must ensure that the procurement of a government contract is profitable, yet flexible enough for both parties to be prosperous in their efforts. Not only does the government have its preferred buying methods, but it has its own methods in which to successfully negotiate all aspects of contract procurement. The benefits offered through the varying degrees of contract negotiations, especially with hybrid contracts; negotiations within the sealed bidding process; or utilizing the micro-purchasing method, each play an important role for the small business owner and the government, both. As the deal comes to a close, it is remembering these vital points which will ensure that maximum profit potential is reached. Works Cited Beesley, C. (2012, December 6). Government Contracting-Learn How the Federal Government Buys from Small Businesses. Retrieved February 1, 2013, from SBA.gov: http://www.sba.gov/community/blogs/government-contracting-%E2%80%93-learn-how-federal-government-buys-small-businesses Carter, D. A. (2010, September 14). Better Buying Power: Guidance for Obtaining Greater Efficiency and Productivity in Defense Spending. Retrieved February 1, 2013, from Acquisition,Technology, and Logistics; Office of the Under Secretary of Defense: http://www.acq.osd.mil/docs/USD_ATL_Guidance_Memo_September_14_2010_FINAL.PDF Darst, B. A., & Roberts, M. K. (2010, December). Government Types of Contracts. Retrieved February 1, 2012, from Contract Management: http://www.ncmahq.org/files/Articles/CM1210%20-%2016-31.pdf Defense Acquisition University. (2008, June 6). Micro-Purchases. Retrieved February 1, 2013, from Acquisition Community Connection: https://acc.dau.mil/CommunityBrowser.aspx'id=24925 Federal Acquisition Regulation. (2013, January 29). Subpart 14.1-Use of Sealed Bidding. Retrieved February 1, 2013, from Federal Acquisition Regulation : https://www.acquisition.gov/far/current/html/Subpart%2014_1.html#wp1091050 Small Business Administration.gov. (2008, June 18). Subpart 19.13-Historically Underutilized Business Zone (HUBZone) Program. Retrieved January 27, 2013, from Small Business Act: https://www.acquisition.gov/far/html/Subpart%2019_13.html U.S. General Services Administration. (2012, November). About GSA SmartPay. Retrieved January 27, 2013, from GSA SmartPay: https://smartpay.gsa.gov/about-gsa-smartpay/how-it-works WebFinance Inc. (2013). Sealed Bid. Retrieved February 1, 2013, from BusinessDictionary.com: http://www.businessdictionary.com/disclaimer.php