The Ins & Outs of Government Contracting
When the U.S. economy soured in 2008 and business shriveled up, the staff at Trademasters Service Corp., in Lorton, VA, looked at each other and asked, “What do we do now?” They decided to make a bigger push into government contracting, an area in which the firm had always worked, but not as the prime contractor.
Today, Trademasters has a government division, in addition to its commercial and residential divisions, and about 80 more employees. Its business has grown approximately 20 percent annually, year after year, with the addition of clients such as the U.S. Naval Observatory, Andrews Air Force Base, and Arlington National Cemetery.
Granted, Trademasters is located near the nation’s capital and its alphabet soup of federal agencies, offices, and departments. But plenty of government contracting opportunities exist even outside the Washington area, contends Dave Kyle, general manager of Trademasters. For starters, you’ll find federal buildings in every state and most large cities.
“Many of those buildings are large, old, and not particularly efficient. There are government mandates to improve federal buildings, with net-zero requirements by 2030 and 2050, so it’s a good market to play in right now,” says Kyle, whose company does not work in new construction. Plus, he notes, federal law requires 23 percent of all government spending to go to small businesses—defined, in the case of HVAC contractors, as companies earning an average of $15 million or less over the last three years.
“The government is really looking for small businesses that meet its requirements and self-perform—that actually do the work themselves—and our industry is almost all small businesses,” adds Kyle. “The government has a lot of work that needs to get done, so even the crumbs you pick up can be huge.” Trademasters, for example, has government service contracts that range from hundreds of dollars to tens of thousands of dollars in billings per month.
Some Extra Effort
To be sure, working with a federal, state, or local government entity requires some extra effort. According to Kathy Townsend, Trademasters’ director of government procurement, “The government likes very thorough estimates and, even for emergencies, wants lots of details, not just a bottom-line number. And once they’ve awarded the work, they don’t like surprises that up the cost of a job.” Some agencies, she adds, require contractors to use a particular software program for estimating, while others favor a particular.
“Is government contracting difficult? Yes, it is,” Kyle confirms. On the other hand, the government typically pays its bills in 30 days and offers many interesting work opportunities. “A lot of our work involves more complex systems, which requires a higher level of expertise—and that usually means better compensation for our staff,” says Kyle.
He and Townsend offer these suggestions for growing your government contracting business:
START SMALL. Initially Trademasters gained experience as a prime contractor through work for local and state governments, such as replacing equipment at K-12 schools and public universities. “Every county and city usually has its own online bid site, where you register and upload your license and insurance information,” Townsend explains. “Sometimes they invite certain businesses to bid, so make yourself known to them and get vetted in advance.”
Although it’s not a builder, Trademasters also obtained licensing as a general contractor. That designation enables it to bid on jobs that are primarily mechanical and then subcontract for any needed masonry or tile work.
GET SCHOOLED ON THE SYSTEM. If you’ve ever filled out an income tax return, you know governments have certain procedures to follow and forms to use. Fortunately, free or low-cost assistance is available to help you understand how everything works.
Townsend suggests accessing the System for Award Management (sam.gov), where you register to do business with the federal government, and Federal Business Opportunities (fbo.gov), where you can view videos and search for opportunities by state and type of job. The Small Business Administration (sba.gov) offers self-paced audio courses on topics such as Government Contracting 101 and How to Prepare Proposals, plus a list of nearly 100 Procurement Technical Assistance Centers, where staff advise small businesses how to compete in the government marketplace.
“There are also small business utilization officers in every agency, in every state, who are looking for good contractors to recommend,” says Townsend, who recommends participating in vendor days hosted by the officers.
“Retired federal employees who worked in the contracting arena are another helpful resource,” she continues. “They often work as consultants, and you can hire them to help you write proposals and understand the procurement process.”
READ THE FINE PRINT. Bidding on a large project may mean wading through 400 pages of specifications before crafting a proposal that not only fulfills every requirement, but also accounts for every nickel and dime.
“There’s no shortcut—you actually have to read the requirements, which can be difficult and sometimes pretty boring,” says Kyle. After analyzing a job’s requirements, Trademasters typically compiles a list of questions for the government to answer, such as confirming the project’s scope and determining whether certain tests are mandatory.
Make sure you understand all the reporting requirements in advance, because a contract isn’t considered complete until all the paperwork is done,” adds Townsend, noting you may need to track all subcontractor hours or submit receipts for all materials purchased.
As another example, says Kyle, “some of our co-workers are legal to work in the United States, but are not citizens. That means they can’t work on military bases and most federal sites, which require U.S. citizenship.”
ADAPT YOUR OPERATIONS. An integrated software system that handles everything from payroll to job costing to dispatching is essential to managing large government projects, Townsend emphasizes. “We cost everybody’s hours to the job, so they’re used to providing a detailed list of what they’ve done and where they’ve been,” she says. “Having one system to track all costs gives us the number we use to compute our overhead and helps with estimating future bids.”
Some federal jobs may require additional coaching of employees—such as reminders not to smoke, curse, or use a cell phone on site. “There are different standards of deportment for any sort of public site, where you need to be extra vigilant and careful,” observes Townsend.
It’s standard procedure for Trademasters to conduct background checks on employees, but those working on federal contracts—and subcontractors—require additional scrutiny. You’ll have to exercise patience while waiting for security clearances and badges for employees, which can take months. Once those badges are issued, however, your firm moves onto a short list of vendors with the credentials to respond to emergencies as well as handle routine maintenance and repairs.
“Working for the government is no different than any other client—it’s all about the trust and relationships you build,” says Townsend. “Once an office or agency knows you and knows you do good work, they’ll call when something comes up.”
For Trademasters, another benefit of government work has been its steady nature. “We never have a shoulder season. We never seem to slow down and are able to keep our staff busy year-round,” says Kyle, describing the exact opposite of the situation Trademasters found itself in just eight years ago.
BECOME AN ACCA MEMBER