Government contracting 101 (Part 1)

This course is designed to help small businesses understand how the government buys goods and services. There are three parts to this training program. This part, part one, provides a small business introduction to government contracting. It describes prime and subcontracting assistance programs, SBA certification programs, and it describes women and veteran owned small business programs.

Learning Objectives

After reviewing this training program you should:

1. Have a general understanding and know about federal contract markets and contract opportunities.

2. Understand prime contracting and subcontracting assistance programs and how they can be used to take advantage of federal contract opportunities.

3. Understand SBA’s certification programs – the 8(a) Business Development and HUBZone programs.

4. And, know about the newly implemented women owned small business program and the veteran owned small business programs.

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Scope of the Federal Buying Market

The U.S. government is the world’s largest buyer of products and services. Purchases by military and civilian installations amount to nearly $350 billion a year, and include everything from complex space vehicles to janitorial services.

In short, the government buys just about every category of commodity and service available.

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Small Firms are the Engine of Growth

Small businesses have always been the engine for economic growth. They provide jobs, innovation and bring competition to the marketplace.

The Government’s procurement policy – which encourages “maximum practicable” prime and subcontracting opportunities for small businesses – is a catalyst for economic growth. With a government contracting market representing more than a half trillion dollars, it makes solid economic sense to help small firms get their fair share of federal contract dollars.

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What is a Small Business?

Certain government programs apply only to small businesses. The question then becomes, what is a small business, or more specifically, how do you determine if you are a small business?

Over the years SBA has established and revised numerical definitions for all for-profit industries, and this numerical definition is called a “size standard.” It is almost always stated either as the number of employees or average annual receipts of a business concern.

In addition to establishing eligibility for SBA programs, all federal agencies must apply SBA’s size standards for contracts to be awarded to small firms.

The referenced hyperlinks can be used to determine small business size eligibility and to learn more about size standards.

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Prime Contract Assistance

Prime contract assistance-no narrative.

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Prime Contract Assistance

Helping small businesses benefit from federal prime contracts is an obligation of all federal agencies and a key responsibility of SBA and its staff.

Multiple programs and initiatives are available to support this effort. They include government-wide contracting goals, small business set-asides, small business size standards and SBA’s Certificate of Competency program. Each of these programs is discussed.

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Government-Wide Contracting Goals

Federal statute defines government-wide prime contracting goals. Such goals represent a primary tool in helping small firms be considered for government contracts. SBA plays a pivotal role in administering the government-wide goals initiative and works with individual agencies.

The current, government-wide procurement goal is that at least 23% of all federal government contracting dollars should be awarded to small businesses.

In addition, targeted sub-goals are established for women-owned small businesses, small disadvantaged businesses, firms located in HUBZones and service disabled veteran-owned small businesses. These targeted goals are 5%, 5%, 3% and 3%, respectively, and are meant to be subsets of the overall small business goal of 23 percent.

These goals are important because federal agencies have an obligation to reach-out and consider different types of small businesses for procurement opportunities.

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Small Business Set-asides

Small business set-asides are a powerful tool for helping small firms win federal prime contracts.

Fundamentally, government buys that have an anticipated dollar value exceeding $3,000, but not over $150,000 are automatically reserved or set-aside for small businesses. This is required unless the contracting officer determines there is not a reasonable expectation of obtaining offers from two or more responsible small businesses.

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Small Business Set-asides

Small business set-asides are influenced by the Rule of Two, the Non-manufacture Rule and Subcontracting Limitations. Further, contracts can be set-aside for small businesses certified in the 8(a) Business Development Program or the HUBZone Program. Or, they can be set-aside for qualified women owned small businesses or service disabled veteran owned small businesses.

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Rule of Two

For acquisitions over $150K – they too are to be set-aside for small business, when there is a reasonable expectation that offers will be obtained from at least two responsible small business concerns, and the award can be made at a fair market price.

It is important to note, consideration is first for a set-aside or sole source award under the 8(a), HUBZone, Service Disabled Veteran Owned Small Business or Woman Owned Small Business programs before a general small business set-aside. However there is no order of precedence among 8(a), HUBZone, SDVOSB or WOSB programs.

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Non-Manufacturer Rule

The non-manufacturer rule is an important provision impacting small business set-asides.

For small business set-asides, other than for construction or service contracts, the prime contractor must utilize a small business manufacturer – if the firm itself, is not doing the manufacturing to complete the work. In industries where the SBA determines there are no or very limited small business manufacturers, it may issue individual or class waivers to the non-manufacture rule.

It is important to note, for small business set-asides for supplies, the prime contractor must either qualify as a manufacturer or supply the product of a domestic small business manufacturer.

For acquisitions that are under $25,000, the rule does not apply. Use the FAR references to learn more about the specifics surrounding the Non-manufacture Rule.

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Limitations on Subcontracting

Limitations on subcontracting apply to solicitations and contracts for supplies, services and construction, if any portion of the requirement is set-aside for small business and the contract amount exceeds $150,000.

This limitation applies to service contracts, such that at least 50% of the contract cost for personnel must be expended for employees of the small business. For supply contracts, the business must perform work for at least 50% of the cost of manufacturing the supplies, not including the cost of materials.

And finally for general construction contracts, the business must perform at least 15% of the cost of the contract, not including the cost of the materials, with its own employees. For construction by special trade contractors, the business must perform at least 25% of the cost of the contract, not including the cost of the materials, with its own employees.

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8(a) Business Development Program

Contracting officers can set-aside purchases for small firms certified in the 8(a) Business Development Program.

8(a) set-asides are a powerful tool for agencies to achieve small business and small disadvantaged business contracting goals. An 8(a) set-aside can be facilitated as a sole source or competitive acquisition.

More details about the 8(a) program are provided in a later section of this training program.

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HUBZone Program

Contracting officers can also set-aside purchases for small businesses located in designated HUBZones.

To participate in this type of set-aside, a small firm’s principal office must be located in a HUBZone and at least 35% of the firm’s employees must reside within a HUBZone, or certify that at least 35% of its employees engaged in a HUBZone contract will reside in a HUBZone or Indian reservation

The HUBZone program is discussed in greater detail later in this training program.

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Women Owned Small Business Program

Changes to the Small Business Act now authorize contract set-asides for women owned small businesses and/or economically disadvantaged women owned small businesses.

This change creates opportunities for women entrepreneurs and will help agencies to meet government-wide contracting goals.

Specifics of the WOSB program are discussed later in this training module.

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Service Disabled Veteran Owned Small Business Program

A contracting officer can also set-aside acquisitions for Service Disabled Veteran Owned Small Businesses.

To participate in this type of set-aside, such businesses must be at least 51% owned and controlled by a service disabled veteran and the daily management operations of the concern must be controlled by a service-disabled veteran or caregiver. And, they must be a small business.

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Small Business Size Standards

SBA has established and continually updates numerical definitions for all industries or NAICS codes. This numerical definition is called a small business size standard. It is almost always stated either as the number of employees or the average annual sales of the business concern.

All federal agencies must apply SBA’s size standards for contracts to be awarded to small firms. It is also important to note, only SBA can reconcile size protests.

Use the hyperlink to determine the applicable size standard for a specific NAICS code.

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Certificate of Competency Program

The COC program is helpful to many small firms.

If an apparent successful offeror is determined to be “non-responsible” by the contracting officer, the contracting officer is required to refer the matter to the SBA for a Certificate of Competency or COC review. Based on the review, the SBA may issue a certificate of competency declaring the “referred company” – as sufficiently responsible for the purposes of receiving and performing the specific contract.

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Subcontracting Assistance

Subcontracting assistance-no narrative.

–22 Find Subcontracting Opportunities

An alternative to seeking prime contracts is to explore subcontracting opportunities.

Subcontracting with a prime contractor can be a profitable experience as well as a growth opportunity for a small business. If your small business is not ready or lacks the capabilities to bid competitively for prime contracts, it should consider opportunities available through subcontracting. SBA maintains a database of subcontracting opportunities. This searchable database is called SUB-Net.

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Subcontracting Assistance Programs

Prime contractors receiving contracts greater than the simplified acquisition threshold must agree in the contract that small businesses, specifically veteran-owned small businesses, service disabled veteran owned small businesses, women-owned small businesses, HUBZone small businesses, and small disadvantaged businesses – will have the maximum practical opportunity to participate as subcontractors.

As such, prime contractors are required to establish subcontracting plans describing who and how small businesses will participate as subcontractors.

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Subcontracting Plans

Subcontracting plans are required for contracts over $1.5 million for construction and $6.5 million for all others. There are three types of subcontracting plans: individual, master and commercial subcontracting plans.

These written plans – which become part of the contracting file – are designed to describe specific efforts by a prime contractor to ensure that small businesses have an equitable opportunity to compete and participate as “subs” in specific contracts. The subcontracting plans may include specific goals and will define requirements for reports and documentation to be maintained.

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Subcontracting Goals

Government-wide numerical subcontracting goals are established by statute for small disadvantaged businesses, women-owned small businesses, service disabled veteran owned small businesses and HUBZone certified small businesses.

All other subcontracting goals are negotiated between the respective government agency and the prime contractor.

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SBA Certifications

SBA certifications-no narrative.

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SBA Certifications

SBA administers two certification programs designed to assist specific market groups in the government contracting space. These programs are the 8(a) Business Development Program and the HUBZone Program. Each of these programs represents an excellent vehicle for assisting small firms to win federal contracts. These programs also play a primary role in helping agencies achieve, respective SDB and HUBZone contracting goals.

Informal certification programs – for women and veterans – are also discussed later in this program.

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8(a) Business Development Program

The 8(a) Business Development Program is designed to assist eligible socially and economically disadvantaged small businesses. The program – which is primarily a business development program –
provides qualified firms access to capital and credit, business counseling and training, and contracting opportunities.

Through the award of sole source and set-aside contracts, the 8(a) program provides market access and growth for qualified businesses. The program is an efficient contracting vehicle for achieving small business and SDB goals.

It is important to note – all 8(a) certified firms are also SDBs, but all small disadvantaged businesses are not necessarily 8(a) certified. Qualified firms can participate in the 8(a) program for up to nine years.

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8(a) Business Development Program

There are unique benefits to participants in the 8(a) program.

Certified firms can receive sole-source contracts, up to $4 million for goods and services requirements and up to $6.5 million for manufacturing requirements. Firms are also allowed to form joint ventures and teams to bid on contracts, giving them greater flexibility to compete for larger prime contracts.

8(a) certified firms can also participate in the Mentor-Protégé Program, giving them the opportunity to learn the ropes from other experienced 8(a) businesses.

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8(a) Business Development Program

To be eligible for participation in the 8(a) Business Development Program, the applicant must be a small business and be at least 51% owned and controlled by a socially and economically disadvantage individual or individuals.

Certain individuals are presumed to be socially disadvantaged – they are African-Americans, Hispanic Americans, Asian Pacific Americans, Native Americans and Subcontinent Asian Americans. An individual who is not a member of one of the groups listed can be admitted to the program if he or she shows – through a preponderance of the evidence – that he or she is socially disadvantaged. The evidence can be based on color, ethnic origin, gender, physical handicap or geographic environment.

In addition, successful applicants to the 8(a) program will meet small business size standards and be in business for more than two years. Besides being unconditionally owned and controlled by one or more disadvantaged individuals, the owners must be US citizens, who are in good standing.

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HUBZone Program

The HUBZone Program is designed to stimulate economic development and create jobs in urban and rural communities by providing federal contracting preferences to small businesses. These preferences are available to small firms who qualify because they are located in an area designated by the SBA as a historically underutilized business zone.

Through the award of sole source and set-aside contracts, the HUBZone program provides market access and growth for qualified businesses.

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HUBZone Program

The HUBZone program offers benefits to eligible firms.

A government-wide goal of 3% provides incentives for agencies to award contracts to certified HUBZone firms. In addition, certain contracts can be specifically set-aside for firms located within a HUBZone. And further, in some cases a 10% price evaluation preference may be applicable to a HUBZone certified firm. Review the FAR reference for clarity.

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HUBZone Program

To be eligible for the HUBZone program a firm must be a small business, meeting SBA’s small business size standards. In addition, the business must be owned and controlled by at least 51% of US citizens, or a Community Development Corporation, an agricultural cooperative, or an Indian tribe.

Further, the firm’s principal office must be located within a designated HUBZone, which includes lands considered “Indian Country” and military facilities closed by the “Base Realignment and Closure Act. Importantly, the “principal office” is defined as the location where the greatest number of employees perform the majority of work. Also, at least 35% of the firm’s employees must live in a HUBZone.

Use the HUBZone map to determine if your firm and employees are located in a designated HUBZone area.

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Women and Veterans Programs

Women and veterans programs-no narrative.

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Women and Veterans Programs

Targeted contracting programs exist to help women-owned small businesses and small businesses owned by veterans and service-disabled veterans.

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Woman Owned Small Business Program

Annual government-wide contracting goals have been legislatively established for women-owned small businesses. As such, 5 percent of the total value of all prime contracts and 5 percent of all subcontracts are to be awarded to women-owned small businesses.

However, the Small Business Act has been amended to authorize set-asides for women owned small businesses or economically disadvantaged women owned small businesses. These set-asides apply only to certain NAICS codes. The new program is defined as the Women Owned Small Business Contract Program or simply WOSB.

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New WOSB Program

The new WOSB program opens many doors for women entrepreneurs.

However, as mentioned, not all contract opportunities are eligible and there are limitations. The program is defined by several key tenets: it applies only to contracts in designated industries; only woman-owned small businesses or economically disadvantaged women-owned small businesses are eligible; competition is required for all WOSB contract awards; and, participating women-owned businesses must be certified – through a self certifying process or from an SBA approved certifier.

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Eligibility – New WOSB Program

It goes without saying that only women-owned businesses are eligible for the WOSB program.

A WOSB is defined as a small business that is at least 51% owned and controlled by one or more women who are US citizens. The ownership must be direct and not subject to conditions. A woman or women must manage the day to day operations of the business and be able to provide documents demonstrating that these requirements are satisfied.

An economically disadvantaged woman-owned small business must satisfy all conditions for a WOSB. In addition, a woman will be presumed economically disadvantaged if she has a personal net worth of less than $750,000, her adjusted gross annual income does not exceed $350,000 and the fair market value of all of her assets does not exceed $6 million.

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Certification – New WOSB Program

Women business owners participating in the WOSB program must be certified.

Certification can be accomplished in two ways – through self certification or through a third party certifier.

A woman-owned small business or economically disadvantaged woman-owned small business can self certify — to participate in the WOSB program. This can be done by first registering in the Central Contractor Registration – the CCR – and the Online Representations and Certifications Application – ORCA – as a woman-owned small business.

Other documents will be requested by the contracting officer. These documents will be used to validate that the business is an eligible small business, owned and controlled by one or more women. All certification documents for WOSBs or EDWOSBs will be maintained in the WOSB Program Repository that SBA will manage.

In addition, a WOSB or EDWOSB can be certified by a third party certifier.

A third party certifier is a federal agency, a state government, or a national certifying entity approved by the Small Business Administration to provide certifications of WOSBs or EDWOSBs. SBA will maintain a list of approved third party certifiers on its Website.

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Veterans Programs (VOSB & SDVOSB)

The Veterans Entrepreneurship and Small Business Development Act of 1999 defined veteran owned small businesses and service disabled veteran owned businesses. It also established government-wide contracting and subcontracting goals for service disabled veteran owned small businesses at 3 percent, respectively.

Service disabled veteran owned small businesses are self-certified. However, the Department of Veterans Affairs verifies ownership and control of veteran owned small businesses and service disabled veteran owned small businesses, as part of the Vendor Information Pages or VIP database.

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Service Disabled Veteran Owned Small Business

As mentioned earlier in this training program, a contracting officer can set-aside acquisitions for service disabled veteran owned small businesses.

To participate in this type of set-aside, such businesses must be at least 51% owned and controlled by a service disabled veteran and the daily management operations of the concern must be controlled by a service-disabled veteran or caregiver. And, they must be a small business. Service disabled veteran owned small businesses are required to self-certify.

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Veterans First Contracting Program

The Veterans First Contracting Program applies only to purchases made by the Department of Veterans Affairs and only veteran owned small businesses and service disabled veteran owned small businesses are eligible.

Veteran owned small firms wanting to participate in the program must be certified by the Department of Veterans Affairs and listed in the VA’s Vendor Information Pages or VIP database.

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Resources and Tools

Resources and tools-no narrative.

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Resources and Tools

• Federal Acquisition Regulations

  • https://www.acquisition.gov/far

• Acquisition Central

  • https://www.acquisition.gov/

• FAR Part 19 – Small Business Programs

  • http://www.acquisition.gov/far

• Code of Federal Regulations (13CFR)

• http://www.gpoaccess.gov/cfr/index.html

• Federal Business Opportunities

  • http://www.fbo.gov

• SBA-Government Contracting

  • http://www.sba.gov/aboutsba/sbaprograms/gc/index.html

–45

Resources and Tools

• Online Representations & Certification Application (ORCA)

  • https://orca.bpn.gov

• Learn more about (including application procedures):

  • 8(a) Business Development Program http://www.sba.gov/content/8a-business-development-0

  • WOSB Program http://www.sba.gov/content/contracting-opportunities-women-owned-small-businesses

  • HUB Zone Program http://www.sba.gov/content/hubzone-0

• Find your local:

  • SBA district office http://www.sba.gov/localresources/index.html

  • Procurement Technical Assistance Center (PTAC) http://www.aptac-us.org/new/Govt_Contracting/find.php

  • SCORE chapter http://www.score.org/

  • Small Business Development Center http://www.asbdc-us.org/

  • Women’s Business Center http://www.awbc.biz/locate.asp

–46

Conclusion

Thank you for participating in Part 1, of the GC 101 training program. Much information was covered and we hope it was helpful.

Please review parts 2 and 3, which provide clarity and training around how the government buys and how to sell your goods and services to the federal government. Thank you.

Government contracting 101 (Part 2)

This course is designed to help small businesses understand how the government buys goods and services.  There are three parts to the GC 101 training program. This part, part two, discusses the steps used by the government to purchase what it needs.

Learning Objectives

After reviewing this training program you should:

1. Understand the contracting methods used by government contracting officers to buy goods and services.

2. Know about types of contracts and agreements.

3. Understand key parts of the FAR. And,

4. Know where to find additional contracting resources.

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How the Government Buys

How the Government Buys – no narrative

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How the Government Buys

The government applies standardized procedures to buy products and services it needs from suppliers who meet certain qualifications.

Contracting officials use procedures outlined in the Federal Acquisition Regulation, commonly known as the FAR, to guide government purchases.

The primary contracting methods used by the government are: micro-purchases; simplified acquisition procedures; sealed bidding; contract by negotiations; and, consolidated purchasing programs, such as the use of GSA schedules, Government Wide Acquisition Contracts and other multiple award vehicles.

Each of these contracting methods is discussed in the following.

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Credit Card Opportunities

Generally speaking, government purchases of individual items under $3,000.00 are considered micro- purchases.

Such government buys do not require competitive bids or quotes and agencies can simply pay using a Government Purchase Card or credit card, without the involvement of a procurement officer.

It is important to note, about 70 percent of all government procurement transactions are for micro- purchases under$3,000 and are facilitated with a credit card. In fiscal year 2010, this represented over $19 billion dollars.

Credit card opportunities in the government buying space are huge.

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Simplified Acquisition Procedures

The Federal Acquisition Streamlining Act and other statutory amendments removed many competition restrictions on government purchases under $150,000.

Agencies can use simplified procedures for soliciting and evaluating bids up to $150,000. Government agencies, however, are still required to advertise all planned purchases over $25,000 in Federal Business Opportunities or the FBO (www.fedbizopps.gov), the government’s online listing and database of available procurement opportunities.

Simplified acquisition procedures require fewer administrative details, fewer approval levels, and less documentation. The procedures require all federal purchases above $3,000, but under $150,000, to be reserved for small businesses, an important point.

This small business set-aside applies, unless the contracting official cannot obtain offers from two or more small firms who are competitive on price, quality and delivery.

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Sealed Bidding

Sealed bidding is how the government buys competitively when its requirements are very specific, clear and complete.

An IFB or “Invitation For Bid” is the method used for the sealed bid process. Typically, an IFB includes a description of the product or service to be acquired, instructions for preparing a bid, the conditions for purchase, delivery, payment and other requirements associated with the bid, including a deadline for bid submissions.

Each sealed bid is opened in a public setting by a government contracting officer, at the time designated in the invitation. All bids are read aloud and recorded. A contract is then awarded by the agency to the lowest bidder who is determined to be fully responsive to the needs of the government.

Government-wide IFBs are available daily for review in the government’s online listing service, Federal Business Opportunities. This electronic service, which is discussed in detail later, also provides direct links to available IFB invitations.

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Contracting by Negotiations

Contracting by negotiation is used in many federal procurement actions. This is typically a more complicated process for companies wanting to sell to the government. It is also a method that is more time consuming for buying agencies.

This is how it works….. In certain cases, when the value of a government contract exceeds $150,000 and when it necessitates a highly technical product or service, the government may issue a Request for Proposal. In a typical RFP, the government will request a product or service it needs, and solicit proposals from prospective contractors on how they intend to carry out that request, and at what price. Proposals in response to an RFP can be subject to negotiation after they have been submitted.

When the government is merely checking into the possibility of acquiring a product or service, it may issue a Request for Quotation (RFQ). A response to an RFQ by a prospective contractor is not considered an offer, and consequently, cannot be accepted by the government to form a binding contract.

Government-wide RFPs and RFQs are also available daily for review in the FBO.

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Consolidated Purchasing Vehicles

Most government agencies have common purchasing needs.

Sometimes the government can realize economies of scale by centralizing the purchasing of certain types of products or services. This is called consolidated purchasing and multiple award, acquisition vehicles are typically used.

The most common multiple award schedules are GSA Schedules or Government Wide Acquisition Contracts, called G-WACs. These centralized buying vehicles are negotiated by the government with awards to many potential vendors and used by multiple agencies buying goods and services.

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Types of Contracts and Agreements

Types of contracts and agreements – no narrative

–12 Types of Contracts and Agreements

OK – so we have discussed the primary buying methods used by the government.

Let’s now take a look at the types of contracts and agreements that are typically used. Specifically, fixed price, cost-reimbursement, incentive contracts, indefinite delivery contracts, time and materials and labor hour contracts and agreements.

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Fixed Price Contracts

Fixed-price contracts are the most common types of contracts that small businesses are involved with.

They provide for a firm price or, in appropriate cases, an adjustable price.

A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract.

A fixed-price contract with economic price adjustment provides for upward and downward revision of the stated contract price upon the occurrence of specified contingencies.

And finally, a fixed-price incentive contract is a contract that provides for adjusting profit and establishing the final contract price by a formula based on the relationship of final negotiated total cost to total target cost.

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Cost-Reimbursement Contracts

Cost-reimbursement contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract. These contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed without the approval of the contracting officer.

This type of contract is used when — circumstances do not allow the agency to define its requirements sufficiently to allow for a fixed-price type contract, or uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed-price contract.

A cost contract is a contract in which the contractor receives no fee. A cost-sharing contract is a contract in which the contractor receives no fee and is reimbursed only for an agreed-upon portion of its allowable costs.

A cost-plus-fixed-fee contract is a contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract.

A cost-plus-incentive-fee contract is a contract that provides for an initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs.

A cost-plus-award-fee contract is a contract that provides for a fee consisting of a base amount, fixed at inception of the contract and an award amount, based upon a judgmental evaluation by the Government.

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Incentive Contracts

Incentive contracts are appropriate when a firm-fixed-price contract is not appropriate and the required supplies or services can be acquired at lower costs and, in certain instances, with improved delivery or technical performance, by relating the amount of profit or fee payable under the contract to the contractor’s performance.

Incentive contracts are designed to obtain specific acquisition objectives by establishing reasonable and attainable targets that are clearly communicated to the contractor, and

by including appropriate incentive arrangements designed to motivate contractor efforts and discourage contractor inefficiency.

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Indefinite Delivery Contracts

There are three types of indefinite-delivery contracts: definite-quantity contracts, requirements contracts, and indefinite-quantity contracts. The appropriate type of indefinite-delivery contract may be used to acquire supplies or services when the exact times or exact quantities of future deliveries are not known at the time of contract award.

Indefinite-quantity contracts are also known as delivery-order contracts or task-order contracts.

A definite-quantity contract provides for delivery of a definite quantity of specific supplies or services for a fixed period, with deliveries or performance at designated locations.

A requirements contract provides for filling actual purchase requirements for supplies or services during a specified contract period – from one contractor.

An indefinite-quantity contract provides for an indefinite quantity of supplies or services during a fixed period. Quantity limits may be stated as number of units or as dollar values.

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Indefinite Delivery – Indefinite Quantity Contracts

The most common type of indefinite delivery contracts are know as IDIQs or Indefinite delivery / indefinite quantity contracts.

IDIQ contracts are most often used for service contracts and Architect-Engineering services. Awards are usually for base years as well as option years. Agencies place delivery orders – for supplies – or task orders – for services – against a basic contract for individual requirements. An IDIQ contract is typically used when a buying facility cannot predetermine the precise quantities of supplies or services that will be required during the contract period.

IDIQ contracts are often multi-agency contracts issued as Government-Wide Acquisition Contracts or GWACs. Or, they may be government agency-specific contracts. GSA and DOD use IDIQ contracts frequently.

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Time and Materials – Labor Hour Contracts

A time-and-materials contract is designed for acquiring supplies or services on the basis of direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit; and actual cost for materials.

A time-and-materials contract is typically only used when it is not possible — at the time of placing the contract – to estimate accurately the extent or duration of the work, or to anticipate costs with any reasonable degree of confidence.

A labor-hour contract is a variation of the time-and-materials contract, differing only in that materials are not supplied by the contractor.

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Agreements

A basic agreement is a written instrument of understanding, negotiated between an agency or contracting activity and a contractor that contains contract clauses applying to future contracts.

It anticipates separate future contracts that will incorporate – by reference or attachment — the required and applicable clauses agreed upon in the basic agreement.

A basic agreement is not a contract.

Let’s take a look at Basic Order Agreements and Blanket Purchase Agreements.

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Basic Order Agreement

A basic order agreement is a written instrument of understanding, negotiated between an agency or contracting office and a contractor, that contains: (1) terms and clauses applying to future contracts, (2) a description of supplies or services to be provided, and (3) methods for pricing, issuing, and delivering future orders under the basic order agreement. Again, the a basic order agreement is not a contract.

A basic order agreement may be used to expedite contracting for uncertain requirements for supplies or services when specific items, quantities, and prices are not known at the time the agreement is executed, but a substantial number of requirements — for the type of supplies or services covered by the agreement — are anticipated to be purchased from the contractor.

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Blanket Purchase Agreement

A blanket purchase agreement is a simplified method of filling anticipated repetitive needs for supplies or services by establishing “charge accounts” with qualified sources of supply. BPAs are typically established for use by an organization or agency responsible for providing supplies for its own operations or for other offices, installations, or functions.

The following are circumstances under which BPAs are established:

There is a wide variety of items in a broad class of supplies or services that are generally purchased, but the exact items, quantities, and delivery requirements are not known in advance and may vary considerably. Or, the use of this procedure would avoid the writing of numerous purchase orders. And, there is no existing contract vehicle for the same supply or service that the contracting activity is required to use.

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The Rules

The rules-no narrative.

–25

The Rules

Understanding the government’s procurement rules is critical to the success of a small business wanting to participate as a government contractor. The FAR is the roadmap for doing business with the government. It outlines all of the rules.

It is a comprehensive guide indexed by topic. It is an excellent resource tool. The most common FAR sections used by small business are:

• Subpart 8.4 – Federal Supply Schedules

• Part 13 – Simplified Acquisitions

• Part 14 – Sealed Bidding

• Part 15 – Contracting by Negotiation

• Part 16 – Types of Contracts

• Part 19 – Small Business Programs

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Resources and Tools

Resources and tools – no narrative.

–27 Resources and Tools

• Federal Acquisition Regulations

  • https://www.acquisition.gov/far

• Acquisition Central

  • https://www.acquisition.gov/

• FAR Part 19 – Small Business Programs

  • http://www.acquisition.gov/far

• Code of Federal Regulations (13CFR)

  • http://www.gpoaccess.gov/cfr/index.html

• Federal Business Opportunities

  • http://www.fbo.gov

• SBA-Government Contracting

  • http://www.sba.gov/aboutsba/sbaprograms/gc/index.html

Information is power. Numerous resources are available to help you better understand government contracting programs.

–28

Resources and Tools

• Find your local:

  • SBA district office http://www.sba.gov/localresources/index.html

  • Procurement Technical Assistance Center (PTAC) http://www.aptac-us.org/new/Govt_Contracting/find.php

  • SCORE chapter http://www.score.org/

  • Small Business Development Center http://www.asbdc-us.org/

  • Women’s Business Center s http://www.awbc.biz/locate.asp

Narrative

Learn from these resources and use them as tools.

–29

Conclusion

Thank you for participating in Part 2, of the Government Contracting 101 training program. Much information was covered and we hope it is helpful in understanding how the government buys goods and services.

Please also review parts 1 and 3, which provide clarity and training around government contracting and certification programs and, how to sell to the government.

Government contracting 101 (Part 3)

This course is designed to help small businesses understand how the government buys goods and services.  There are three parts to the GC 101 training series. This part, part three, specifically discusses how to sell goods and services to the government.

Learning Objectives

After reviewing this training program you should:

1. Have a better understanding about government contracting programs.

2. Know how to sell goods and services to the government.

3. Know where to find additional contracting resources.

–4

How to sell to the government

How to sell to the government

–5

Selling to the Federal Government

A small business wanting to participate in federal government contract opportunities should engage in several foundational steps.

These steps include: define products and services; register in the CCR; develop a winning CCR profile; prepare a quality capability statement; market directly to agencies; find contract opportunities; subscribe to bid matching services; use procurement vehicles; and, engage a mentor or partner.

Each of these foundational steps is discussed in the following slides.

–6

Define Products and Services

Government agencies use the North American Industry Classification System, more commonly referred to as a NAICS code, to identify products and services by industry type. A NAICS code, or codes, identifies the products and services a company supplies. The NAICS code is a six digit number that describes a particular product or service a company supplies. A firm can have multiple NAICS codes.

NAICS codes do not uniquely identify the business. The Federal government uses D-U-N-S numbers, provided by Dun & Bradstreet, to identify prospective vendors.

You can find the NAICS codes for your products and services by clicking on the referenced hyperlink. It is also important to note that you can use your NAICS code or codes to conduct online searches at the Websites of numerous federal agencies to learn what they are buying.

To participate in contract opportunities within the Department of Defense (DOD), a firm will also need to know its Federal Supply Group or Class code.

The hyperlinks provided can be used by a firm to identify appropriate NAICS codes, obtain a D-U-N-S number, and identify its appropriate Federal Supply Group. It is important that a firm properly define its products and services.

–7

Register in SAM

The System for Award Management, more commonly known as SAM, is the primary source for agencies to learn about prospective vendors.

SAM is a government-maintained free database of companies wanting to do business with the government. This database is a marketing tool for businesses and a searchable list of prospective vendors for the government.

A firm must register in the SAM system to participate as a seller in the federal space. Further, a firm’s profile in SAM must be updated at least once every 12 months – for the profile to stay active.

Completing an accurate and appealing small business profile in the government’s SAM system is an important, foundational step in marketing your goods and services to the federal government.

–8

Develop a Winning SAM Profile

Registering in the SAM system is an important marketing tool for your 8(a) firm.

As such, you should learn as much as possible about the SAM system. That includes accessing the SAM site and performing multiple searches, as if you were looking to hire a firm similar to your own business. Review profiles of businesses in similar areas of expertise and use them as a guides when developing your own business profile.

Also, treat your SAM and Dynamic Small Business Profile as your business resume. And, as with any resume, it should be regularly reviewed, updated and strengthened.

Finally, get feedback. This is critical. When you talk with contracting officers, mentors and other procurement professionals ask them for a candid appraisal of your SAM profile. This information should be used to make necessary adjustments.

–9

Prepare a Quality Capability Statement

A business should prepare and maintain a comprehensive Capability Statement that clearly outlines its management, technical and business strengths. This is important. Such a statement should include specific capabilities and skills, past performance history, awards and commendations, and resumes of key management personnel.

As with your SAM profile, you should seek regular feedback on your capability statement and refine and update it accordingly. This is important

–10

Market Directly to Agencies

A firm should understand that there are differences between selling to the government and selling to the private sector.

However, good marketing is key. You should learn what agencies or prime contractors have a need for and then clearly demonstrate – to appropriate agencies or prime contractors — how your business can fill specific needs and add value.

In addition, you should participate in procurement related conferences, activities and matchmaking events. These activities will help you become known to contract “players” and to be a participant in the procurement arena.

Finally, visit your local SBA district office Website. At that site, by clicking on events – you can learn about training and networking opportunities.

–11

Use Procurement Vehicles

In Part 2 of the Government Contracting 101 series, we learned about consolidated purchasing programs. Under such programs, the Federal government tries to benefit from economies of scale and make it easier for vendors to sell to the government by establishing Multiple Award Schedules.

These schedules are often referred to as procurement vehicles. Two examples of this type of contracting include General Services Administration (GSA) Schedules and Government Wide Acquisition Contracts or (GWACs). Under the GSA Schedule, GSA negotiates prices and terms with prospective vendors and enters into an agreement with those vendors. Under the agreement, participating government agencies can purchase products and services from a schedule of prospective vendors, according to prices and terms already agreed to by the vendors.

Procurement vehicles can be valuable tools for small businesses to gain access to contract opportunities.

–12

Find Contract Opportunities

It is impossible for a small business to sell its products or services to the government, if it doesn’t know which agencies are buying, what their needs are and when they need it.

To market or advertise contract opportunities to the public, the federal government operates a robust, online service called Federal Business Opportunities, but more commonly known as FBO or FedBizOpps. This single entry, government-wide Website profiles available business opportunities and is one of the most powerful tools available to help you become successful in government contracting. The online tool identifies contract opportunities over $25,000.00.

Firms can also view past awarded contracts in the FBO – which may help you with preparing future proposals or bids.

The FBO is a very powerful tool. It is important that your business understands how to fully use all aspects of this tool. The referenced hyperlinks are very helpful.

–13

Find Subcontract Opportunities

An alternative to seeking prime contracts is to explore subcontracting opportunities.

Subcontracting with a prime contractor can be a profitable experience as well as a growth opportunity for a business. If, after assessing the capabilities and capacity of your business, you concludes that you are not ready to bid competitively for prime contracts, you should consider opportunities available through subcontracting.

To help small businesses find opportunities, SBA maintains, SUB-Net, a searchable database of available subcontract opportunities.

–14

Subscribe to Bid-Matching Services

To help find contract opportunities, some companies subscribe to bid-matching services. Such services provide leads on prospective contract opportunities that match a business’s qualifications. Such services do much of the work associated with finding contract opportunities, but the business still has to prepare the bid and win the contract.

A small business can subscribe to a free bid-matching service through its local Procurement Technical Assistance Center. Other bid-matching services are also available.

–15

Network – Learn from the Wisdom of Others

If there is one message that is consistent throughout this presentation, it is knowledge is everything. You don’t know what you don’t know. A business can waste a lot of time and expend unnecessary resources if it doesn’t understand how to play in the federal contracting arena.

Learn from the wisdom of others. Others, who have seasoned knowledge and experience in federal contracting. Network, ask questions and cultivate relationships.

Engage knowledgeable people who can help guide you through the challenging aspects of trying to win federal contracts.

–16

Proposal Preparation

Proposal preparation.

–17

Types of Solicitations

As we have noted in this and other training modules, government contracting is big business with thousands of contracts — in hundreds of billions of dollars — being executed by the federal government each year.

The bid packages used by the government usually contain a set of documents to which a bidder develops a responsive proposal. Such solicitations typically come in three primary formats or types: Request for Quote (RFQ); Request for Proposal (RFP); and Invitation for Bid (IFB). Each of these solicitation types, as well as some of the key forms required by the government are discussed in the following slides.

As a helpful activity, go to the government’s FBO website and download a sampling of RFQs, RFPs and IFBs — to familiarize yourself with their overall organization and format.

–18

Solicitation Numbers

To better understand the types of solicitations, let’s first look at the government’s numbering system.

Each solicitation issued by the government is assigned a number. The number tells much about the solicitation. The first six digits identify the buying facility. The second two digits indicate the fiscal year the contract will be executed in. The alpha character defines the type of solicitation – which is both revealing and important. The R character – shown here — indicates a request for proposal. The last four digits represent the order number.

The alpha code is further explained in the next slide.

–19

About the Alpha Character

The alpha character or code used in the numbering system is important to understand. Different letters mean different things.

For instance, R is for request for proposal, M is purchase order, C is contract of all types, I is for sealed bid, J is reserved, T is for a request for quote under $25K, and Q is for a request for quote under $150k.

–20

Request for Quotation (RFQ)

A Request for Quotation or RFQ is the type of solicitation used by the government to obtain information and quotations, but the responses are not considered offers. This solicitation type is typically used when the estimated value of the government’s need is expected to be under $150,000 and simplified acquisition procedures will apply. An RFQ, however may also be used in some circumstances where the estimate value of the government’s need exceeds the simplified acquisition threshold.

An RFQ bid package typically includes Standard Form 18.

–21

Request for Proposal (RFP)

Request for Proposals or RFPs are used in negotiated acquisitions to communicate government requirements to prospective contractors and to solicit proposals.

RFPs for competitive acquisitions will, at a minimum, describe the government’s requirements, anticipated terms and conditions that will apply, information required to be in the offeror’s proposal, and factors that will be used to evaluate the proposal. An RFP will result in a negotiated contract.

An RFP bid package typically includes Standard Form 33 or Standard Form 1447. It is important to note that some procurement systems, such as GSA’s eBuy – offer a fully electronic RFQ/RFP system.

If you are unsure of any provision within an RFP — ask the contracting officer for an explanation.

–22

Invitation for Bid (IFB)

An Invitation for Bid or IFB is often referred to as a sealed bid solicitation. There are typically no discussions or negotiations with the government buying office and the bid package – when issued — is considered complete for bidding purposes. Among qualified bidders, price is considered the key consideration by the government in awarding the contract.

Responsiveness to the solicitation’s terms and conditions are key to a successful bid. Be sure to complete your bid package in accordance with the instructions. Non-responsive bids will be eliminated from consideration.

An IFB bid package typically includes Standard Form 33 or Standard Form 1447.

–23

Uniform Contract Format

For most RFPs and IFBs, where simplified acquisition procedures are NOT applied, the government requires the use of a uniform contract format. This format is described in the noted Far references and contains four parts and multiple sections.

Part I contains section A which includes the use of Standard Form 33, Standard Form 26 or Standard Form 1447. In some circumstances it may also include SF 18 – which is a Request for Quotations. Sections B – H include a list of supplies and services to be acquired, the statement of work, packaging requirements, inspection and acceptance specifics, delivery and performance requirements, and any special provisions.

Some of the provisions may only be incorporated by reference. However, you should go to the FAR to read those provisions to avoid any unpleasant surprises later on. Be sure you understand what you will be expected to do if you receive the contract award.

–24

Uniform Contract Format (cont)

Part II, section I, contains the clauses required by law or the FAR that govern the specific contract.

Part III, section J, contains a list of all attachments applicable to the contract. And, Part IV, sections K–M include information about representations and certifications – such as 8(a) certifications – required of offerors, instructions, conditions and notices to offerors, and importantly, section M outlines the evaluation factors that will be used to evaluate the award.

It is important to note —– contract solicitations for bids estimated to be below the simplified acquisition threshold or $150,000 will use a streamlined contract format and may or may not use some of the parts and sections outlined in the uniform contract format.

–25

A Closer Look at Key Standard Forms

Let’s take a closer look at the specific government standard forms and when they are used.

–26

Standard Form 33

Standard Form 33, Solicitation, Offer and Award is the solicitation/contract form used by the federal government, not only to solicit orders, but also to award a contract.

It is a bilateral document, such that the bidder signs the document and submits it to the government. Then, upon acceptance of the bid, the government signs the same document and a binding contract is established.

This form is used for either sealed bids or negotiated contracts valued at $150,000 or more.

–27 Standard Form 1449

Except in circumstances where an electronic solicitation is used, Standard Form 1449, Solicitation/Contract/Order for Commercial Items is the form used by the government to buy commercial items that are estimated to have a value of less than $150,000 and simplified acquisition procedures will be applied.

–28

Standard Form 1447

Standard Form 1447, Solicitation/Contract is used in connection with negotiated acquisitions when simplified acquisition procedures will apply. It may also be used in lieu of Standard Form 26 or Standard Form 33.

–29

Standard Form 18

Standard Form 18, Request for Quotation is the form used by the government – when quotations are not solicited electronically — to obtain information and quotations, but the responses are not considered offers. An RFQ package is typically used when the estimated contract value is less than $150,000 and simplified acquisition procedures will be applied. Importantly, an RFQ may also be used for quotation requests that have an estimated value above $150,000.

Standard Form 26 is sometimes used to award a contract resulting from the use of Standard Form 18.

–30

Standard Form 26

Standard Form 26, Award/Contract is the form used by the federal government to award a contract, usually as a result of a Request for Quotation.

In general, this form is similar to Standard Form 33, although it requires additional certification information.

–31

How to Write the Proposal

Just thinking about responding to a government RFP or solicitation can be stressful. Writing the proposal, well that can make you even more anxious.

It doesn’t have to be that way. Preparing a response to a government procurement request or invitation is an important task, not necessarily a daunting one. It should be approached with diligence and professionalism.

Writing a successful proposal is about doing your homework, preparing and responding clearly and appropriately, aligning your proposal with the government’s needs and articulating what makes you the best solution provider. These elements are critical to successful proposal writing.

–32

Review the Solicitation and Rules

Preparation is key…

If you are going to respond to a government RFP or other type of procurement request, you must be prepared, or you will likely just be wasting your time.

Carefully read the solicitation, including all applicable schedules, clauses and attachments. This is important. The solicitation is designed to provide prospective bidders with all of the information needed to write a successful proposal. The agency that prepared the solicitation expects you to read and follow it carefully.

Also, make sure you review and understand the regulations (FAR Parts) governing the specific type of solicitation you plan to respond to. Some of the regulatory references relevant to the solicitation and proposal process are highlighted in this slide. If possible, assemble a team to review and prepare the proposal.

Keep in mind, these are only some references. Other regulatory or policy guidance may be applicable to the specific procurement you are considering. Talk with your BOS, PTAC or a contracting officer for more assistance. Some PTACs and SBDCs offer training on how to prepare and submit proposals. Consider taking such training.

–33

Prepare and Respond Appropriately

Responding appropriately to a solicitation follows from reading and understanding the government’s request. Solicitations are usually very specific and follow a uniform contract format. It is important that you respond, as you are asked – answering all questions, providing all information and following all schedules in the order, time-frame and structure requested. Eliminate any guesswork by ensuring that each response is appropriately identified so the reviewer can readily recognize the section of the RFP which is being addressed.

This may sound like common sense and it is. But, you would be surprised to learn how many proposals submitted to the government that are received after the due-date and that do not respond to what was asked for, or requested. Responding appropriately is important!

–34

Align Proposal with the Government’s Needs

A good proposal will clearly articulate how the bidder can solve the problem or fill the need outlined in the government’s solicitation. This again, follows from understanding the nature of the procurement request.

Understanding the government’s need is important. Even more important, however is how your firm plans to execute or deliver an appropriate solution. It is, after all about convincing a government review panel that your proposal solves a specific problem or need and is the best fit.

A proposal may look good and read well, but if it is not clearly aligned with fulfilling the government’s needs, it will likely fall behind other more substantive, solution focused proposals.

Don’t get caught up in telling a great story about your company, focusing too much on “we can do the work.” What really matters is substantiating how you can do the specific work that is needed.

–35

Articulate What Makes You the Best Solution

A typical government solicitation requires the bidder to provide a great deal of information. The key is pulling it all together in a proposal package that clearly describes why your company offers the best solution and is the best fit to perform the work. Think capture management……. There is no magic bullet. It comes down to doing a lot of things right.

It’s about: understanding the solicitation and responding appropriately; clearly demonstrating how your firm can best fulfill the government’s need; offering pricing that is fair and competitive; making sure your proposal is well-written and error free; showing evidence of success through past performance; and finally, interweaving an amazing story throughout all parts of the proposal, including the executive summary – that makes a compelling case for your firm as the best solution.

–36

What to Avoid

Sometimes learning from others provides the best lessons.

With regards to solid proposal preparation, some key things to avoid include: not fully understanding the solicitation and governing regulations; submitting an incomplete or late submission; not providing specificity or focus; highlighting too much fluff and not enough substance, not understanding best value considerations; unrealistic pricing; failure to address evaluation factors; and errors in the submission.

If you aren’t selected for a contract, consider asking for a debriefing to learn where you may have gone wrong and what you can do to improve your future proposals. Done in a professional manner, this can be a way to show contracting staff of your willingness to improve and to be more responsive to the government’s needs.

–37

Cost and Pricing

Cost and pricing.

–38

Introduction to Contract Pricing

Contract pricing is an important aspect of procurement and a particularly important component in developing a strategy to win federal contracts. There are two sides to this issue.

First, the government’s perspective. Federal contracting officers are responsible for ensuring that government agencies purchase supplies and services from responsible sources at fair and reasonable prices. As such and to accomplish this, most contracting officers and agency buyers conduct considerable market research to better understand markets and pricing.

A contractor will likely have a related, but different perspective. An 8(a) firm, or any company for that matter wanting to do business with the government is responsible for developing a contract pricing strategy that is reasonable, competitive, but profitable. The typical contract
bidder wants to make as much as possible in profit, but at the same time be competitive and win the bid. As such, with contracting officers doing considerable market research and a high number of firms competing for federal contracts, pricing is an important variable. A variable that can make or break your success in federal contract markets.

–39

Negotiated Contracts vs. Sealed Bid Contracts

As discussed earlier, there are two fundamental contract categories: negotiated contracts and sealed bid contracts. The distinction between the two is important.

The FAR states that any contract awarded using other than sealed bidding procedures is considered a negotiated contract. Procedures for contracting by sealed bidding require the government to evaluate bids without discussions and award to the responsible bidder whose bid, conforming to the invitation for bids, will be most advantageous to the government considering only price and price related factors. Negotiations are not permitted prior to the contract award.

Procedures for contracting by negotiation permit negotiations prior to contract award. However, a solicitation under procedures for contracting by negotiation may or may not actually include negotiations. For example, the instructions to offerors may include the provision, the “Government intends to evaluate proposals and award without discussions.” When that provision is used, actual negotiations are not permitted unless the contracting officer determines in writing that they are necessary.

The pricing you propose in response to a government solicitation will be influenced by your ability to negotiate or not negotiate.

–40

Regulatory Guidance

How you analyze your costs and price your proposal is primarily up to you, as long as you follow applicable government rules and guidelines.

Federal rules for negotiated and sealed bid contracts and contracts that follow simplified acquisition procedures are outlined in FAR parts, 15, 14 and 13, respectively. Also, highlighted in the –are FAR subparts that are pricing related.

It is important to note, in addition to FAR guidance, other agency pricing guidelines or policies may also apply for specific contracts.

–41

Pricing Approach

The pricing approach used by bidders for products and services being procured, besides following specific contract rules, is pretty typical, but unique to the business doing the pricing. That is, individual business costs and other considerations are factored into pricing formulas that are typical or generally used.

For instance, with regards to product pricing, a firm would typically consider and add material costs, plus labor costs, plus estimated overhead expenses, plus a profit margin to arrive at a price it would propose or charge for the product being delivered.

Regarding the pricing of a service, a firm would typically consider and add estimated hourly overhead expenses, plus hourly wages, plus a profit margin to arrive at a price it would propose or charge.

It is important to point out, that some government solicitations and contracts are very unique regarding costs and pricing and specific cost and pricing requirements may apply. Carefully review all government requirements.

–42

Important Pricing Considerations

Contract pricing is a critical component in developing a strategy to win federal contracts. A successful pricing strategy will: learn from past contracts; consider all costs — even special requirements; factor best value considerations; include bidding costs; and, importantly allow for sufficient overhead expenses and profit.

If a solicitation is using a ‘best value’ approach, the contracting officer may not make an award to the offeror providing the lowest price, rather an award will be made to that offeror who is providing the government with an approach that best meets the government’s needs. While price is always a consideration, in a best value scenario it doesn’t have to be the primary consideration.

–43

Resources and Tools

Resources and tools.

–44

Resources and Tools

Information is power. Numerous resources are available to help you better understand government contracting programs.