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Five factors manufacturers should consider before pursuing federal contracts
For manufacturers, the decision to pursue government contracts can be significant due to the perception of barriers to entry and not knowing what it will take to succeed as a federal contractor. Before seeking federal contracting opportunities, consider these five key factors.
The level of the barrier to entry depends largely on whether the commercial manufacturing company intends to sell commercial off-the-shelf items to the government or wants to compete to provide custom manufacturing to meet the federal government’s sometimes unique needs. The sale of commercial products does not pose significant barriers to entry, since a commercial price can be determined and the government adds few requirements over and above what the company experiences through its commercial contracting. One commonly used method is to apply to the General Services Administration (GSA) to be listed on the GSA Schedules, or Multiple Award Schedules programs (soon to be consolidated into one large schedule). Companies that do not sell certain items commercially may be required to substantiate that their estimating, accounting, or purchasing systems meet the government’s expectations.
One of the most challenging areas of compliance involves companies’ accounting, estimating, and purchasing systems. Accounting can be problematic in particular. The government expects systems to be capable of complying with Federal Acquisition Regulation and potentially Cost Accounting Standards requirements that commercial manufacturers may not have experience with. This does present a significant barrier to entry, but one that can be overcome by developing policies, procedures, and systems that meet government expectations. Many companies have gone down this path and established approved systems that provide a competitive advantage in winning government work.
After deciding to pursue federal government opportunities, a necessary step is developing a strategy to identify and pursue opportunities. For those seeking GSA schedule opportunities, once listed on the GSA schedule, go to FedBizOps (FBO.gov) to find possibilities. (FBO.gov will move to beta.SAM.gov as of Nov. 8, 2019.) If you are pursuing items that are not commercially available, FedBizOpps also provides information about RFPs or RFQs to which you can respond. One approach is to determine the government’s required specifications for an item your company manufactures. Then, make sure your product meets these specifications, and if it does not, consider changing it to meet them. When the government is ready to buy the product, you will have an advantage, since your product will have a commercial sales history that will facilitate the government’s purchase of the product through the GSA schedule.
Many federal contracting opportunities involve set-asides for veteran-owned, women-owned, and other types of businesses, including small business set-asides. Consider enabling your company to participate in these set-asides. Many businesses that do not consider themselves to be small businesses do qualify. Identify your NAICS code and go to the Small Business Administration’s website to look up your revenue limit to qualify as a small business. If you are under the limit, register the company on the System for Award Management website. Consider other opportunities to participate in set-asides, including expanding ownership to those who will assist the firm in participating in minority, women-owned, veteran-owned, or other set-asides.
Once you have won government work, it is important to successfully perform your contract. This will determine whether you can win future work. The government can be unforgiving if it perceives you did not meet quality or timing requirements. Make sure to communicate frequently with your U.S. government contracting officer and their representatives so that you can be rated highly for the products you have delivered and quickly address any government concerns.
This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
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