Last year, I spent time researching various social media groups to see what many small businesses desired when considering making the U.S. government their customer. There is almost always a universal answer: I want to be a prime.
Last year it was not the first time I had heard the desire to become a prime among small businesses. It was a confirmation of what I had known. The part that catches my attention is that many are people owning a business for the first time in their life and have yet to learn the ropes of what it takes to run a business for the long haul. To be clear, I am not judging anyone’s desires rather coming from a place of knowing what the government contracting landscape is I often question myself: Am I being too pessimistic, or too much of a pragmatist? Why jumping in with both feet in this ocean before learning to swim? What’s the motivation? These and more questions swirl around in my head when I listen to the fervent desires of becoming a prime contractor.
Some of you reading this blog know well the facts of doing business with the federal government. It’s not only about getting a contract here and there. It’s about being in it long term. Success in business with all its ups and downs is about having the fortitude to look ahead to plan. Becoming a government contractor is not a sprint, it’s a marathon, just like a business. And, just as in business one must know its complex language to succeed, so too in government contracting one must know its complex landscape, language, and rules, and plan to succeed.
Becoming a prime contractor requires a lot of preparation, not attitude of “I got this”, it requires not only understanding or being familiar with the regulations, but also understanding one’s responsibilities, understanding how and when to communicate with your customer (the U.S. Government, Department of Defense), understanding and knowing how to write proposals, even if you hired someone to do the job for you, being mature enough to have or can put business systems in place, especially accounting systems, and understand accounting sufficiently to not mess up.
Speaking of systems, the Defense Federal Acquisition Regulation Supplement (“DFARS”) requires from their prime contractors at least six systems to have in place. They are accounting (DFARS 252.242-7006), earned value management system (“EVMS”) (DFARS 252.234-7002), estimating (DFARS 252.215 – 7002), material management and accounting systems (“MMAS”) (DFARS 252.242-7004), property management (DFARS 252.245 – 7003), and purchasing (DFARS 252.244-7001). Of these a small business must have accounting, estimating, property management, and purchasing systems.
Now you may say,” ok, Aida, I know a lot of businesses that have started as primes, and they are doing just fine.” That may be the case for some but not for many. Many small businesses also complain that it is too difficult to do business with the government, yet few implement these systems in place. One of the main complaints agencies have about small businesses is these businesses lack accounting systems.
So given what is required of a business to get started as a prime, if a small business has been a while in the commercial space and now wants to test the waters of the Defense contracting – or it has just been formed to do business with the Department of Defense, the better option, an option that will increase its chances of success is to take first the subcontracting route. By being a subcontractor, a small business gets to learn what its like to work with the government, become familiar with the landscape, gains industry knowledge, by marketing to prime contractors understands first what prime contractors are looking for when working with subcontractors.
Think about working with prime contractors and finding a mentor or a role model that will save you years of growing pains to reach your goals. Now, let’s not be naïve either, you ought to vet the prime contractors, you ought to negotiate your contracts, and make sure they are not flowing down on you all the clauses they shouldn’t be flowing down. Being a subcontractor allows a small business to also refine their capabilities, learn to price competitively, and gain deeper knowledge of how the Defense industry operates and functions.
Taking the path of subcontracting will also pave the way for a small business to transition into a prime contractor to then decide confidently “Do we stay small as prime contractors, or do we choose to become a large business?” That is a good option to have and a good place to be.
I’d like to know your thoughts on this subject and what are best practices you have followed to succeed either as a prime or as a subcontractor. You sharing it means caring to help another small business grow. Also, if you have questions I’m here to answer them, reach out at email@example.com