BusinessTN

To carry out its daily operations, the government must rely on the goods and services provided by other companies—just like any other business. With a massive shopping list of supplies, equipment, and services covering everything from sprockets and submarine parts to data entry and film processing services, the government is always in need of the very things that Tennessee’s small businesses provide.

“If you think about the sheer number of federal, state and local agencies, and consider that each of these have substantial contracting needs, from building maintenance to specialized computer equipment, the enormity of the government contracting market becomes quite clear,” says Katie Stenberg, a government contracts attorney with Waller Lansden Dortch & Davis.

Even so, many small businesses avoid doing business with the government because they’re either unfamiliar with government contracts and procurement matters, or they’ve misconceived the level of difficulty involved. Luckily, government contracting for commercial goods and services—those customarily used by the general public as well—has become significantly less complex over the past decade, Stenberg says. These simpler steps coupled with the varying range of government operations mean that the entire spectrum of small businesses stands to benefit from government contracts.

One of the biggest advantages to working with the government is that there are rules that require the government to make payments within a certain period of time. “Pay statutes offer a great deal of certainty as to the time period in which a government contractor can expect to get paid and remedies available in instances where the statue is violated,” Stenberg says.

“The government usually pays on time,” agrees Paul Krivacka, an attorney with Stokes Bartholomew Evans & Petree. “It’s a creditworthy entity, and there is little risk of default or bankruptcy.” All reassuring news to a small business.

Another advantage to working with the government is its reputation of being a long-term customer. A small business owner that successfully manages an initial government contract can generally count on return business, Stenberg admits. Also, the government is always in business, regardless of the status of the economy. Though some commercial companies may drastically decrease purchasing during low economic periods, the government’s fluctuation of spending is often less severe. The ability to attain such a level of relative stability and security has made government contracting attractive to large corporations for years. But now with many federal initiatives in place to attract small businesses to the playing field, it’s even easier for small businesses to enter the market.

“There are entire acquisitions set aside for socially and economically disadvantaged businesses under the Small Business Administration 8(a) Program,” Stenberg says.

And just last December, Gov. Phil Bredesen signed an executive order that created the Governor’s Office of Diversity Business Enterprise. The Office works with the five major procurement companies of state government with aims of increasing state procurement opportunities for small businesses and minority- and women-owned businesses.

Though steps have been made to attract and accommodate them, small businesses still face some disadvantages. The regulations and policies that govern state procurement are more extensive than those that regulate everyday business-to-business transactions. Often state procurement policies require businesses to provide letters of credit or performance bonds that help the government verify the credit-worthiness and responsibility level of the bidding company, Krivacka says.

“These processes can be a huge encumbrance for small businesses, and often they don’t have either the means or knowledge to successfully provide them.”

The government, though, is now working on ways to curb some of the excessive paperwork requirements.

Small businesses are also at a disadvantage when it comes to pricing. Success in government contracting is dependent upon the price, which is why it’s important to study the market. Gauging the market prices and submitting a comparable price could mean the difference between hundreds of thousands of dollars in profit or bankruptcy. Unfortunately, most small businesses usually lack the time and resources required to monitor and analyze the market so closely, according to Krivacka.

“I’ve seen people underbid, and I’ve seen people overbid,” he says. Krivacka says both instances can be disastrous for a small company with little margin for error.

Since government contracts have the potential to make or break a company, it’s wise for the inexperienced government contractor to consult legal counsel. “Government entities have become increasingly more effective at making the necessary information available to the public,” Stenberg says. “But we still have not reached total success. Information that may take a layperson several hours to locate often can be found in minutes by an experienced government contract lawyer.”

“However,” Stenberg says, “with the increased level of information available over the Web, business owners can identify and secure government contracts without even picking up the phone.”

There are also Procurement Technical Assistance Centers, like the one at the University of Tennessee’s Institute for Public Service, throughout the state that provide information and assistance to interested businesses.

Getting on the radar is the first thing you have to do, Krivacka says. Once you register as an available contractor with the various local and state governments, you’ll begin to receive notices of invitations to bid (ITB), via the government Web sites, e-mail, or regular mail. Becoming familiar with the different Web sites and figuring out the process takes time, but a motivated small business can find that the increased opportunity for revenue makes all the effort worth it. The potential for steady, long-term business and the near guarantee of timely payment are added perks. Krivacka notes, “In this ever-changing economy, the government remains a good, stable business partner.”