Are you good at preventing cyber-attacks? Fixing cars? Managing projects? Maintaining IT systems? Repairing tanks? Catering events? Budgeting and accounting? Installing navigational systems? Landscaping? Programming? Laying brick? Typing? Providing engineering services? Or nearly any other skill known to mankind? If so, then you have the potential to achieve your financial dreams by selling your services or products to the Federal Government. Whatever you imagine, there is a 99% chance that the Federal Government is buying it in sufficient quantities to make you a very wealthy person.
So, what is a contractor? A contractor is a person who is simply “on a contract” supporting the Federal Government. The key to true financial success in this industry is to own the contract that provides the services or products at a negotiated price with the Federal Government. Or, more accurately, one must own the company that owns the contract with the government. That’s the thesis of this entrepreneurial example.
Most people don’t realize the U.S. Federal Government, possessing trillion-dollar budgets, is the world’s largest customer. There is no close second. With a goal to earmark a minimum of 23% of its procurements as Small Business Set Aside opportunities, this is one of the easiest markets for those hoping to launch a new company or rapidly grow an existing one. In other words, the government is mandated to award a huge number of good-paying contracts to new and small businesses entering this market.
This is how it works. Each specific government agency and organization sets and monitors their own small business utilization goals. These goals are achieved in a couple of different ways. One way is to direct prime contract awards to small businesses. In this case, only small businesses may respond to a Request for Proposal (RFP). Even if you can’t do all the work listed in the RFP, you can still bid and win. A small business has the option of partnering with other companies, both big and small, if they do not possess all the requisite capabilities to perform the entire requirement. Small business bidders are only required to perform a minimum of 51% of the work.
The other way the government ensures that small businesses get their share of work is through mandatory small business subcontracting plans. A subcontract is an agreement between the prime contractor, who led the proposal effort and was awarded the government contract, and an industry partner. Prime contractors issue subcontracts to industry partners for several reasons. These reasons include: (1) Providing capabilities and qualifications required in the RFP that the prime contractor does not possess, (2) Obtaining “customer insights” to improve the competitiveness of their proposal, and (3) Meeting RFP-required small business subcontracting goals. For this final reason, subcontracting plans are submitted as part of a bidder’s proposal for significant efforts and are evaluated (and scored!) during award determination. To receive a high score in this section of a large bidder’s proposal, typically 25% to 40% of requirements for massive contracts are subcontracted to small businesses.