Chelsea Meggitt Govmates member discusses how to acquire government contracts in this podcast.
Govmates, a technology scouting platform, provides amazing new resources and relationship development opportunities. They merge the best practices of technology as well as the human element to promote non-traditional defense contractors within the federal community.
Govmates has assisted with more than 30,000 matches from their system of more than 4,500 government contractors. They are experts in creating valuable relationships within the federal sector.
Chelsea Meggitt Govmates Podcast:
For more information and assistance in acquiring government contract, contact Chelsea Meggitt, Collaborative Compositions
Following article appeared in Bloomberg Government September 8, 2022
Jumping the Line from Sub to Prime Contracting: Chelsea Meggitt
Working with the federal government has a pecking order. Recent changes from Congress have made it slightly easier for small businesses to move up the chain, but there are still several factors that contractors must consider before attempting to make the leap.
Prime contractors, those that work directly with the government, hold the most power. They have privity of communications with the government customer, they receive credit and past performance ratings directly from the government customer, and they hold the contract with the government.
Subcontractors, those that work directly with the prime contractor, hold less power and are generally not afforded those same privileges. Subcontractors are often limited to a specific workshare, restricted from interfacing with the government customer, and they rarely receive credit for their performance on a project from the government customer or the prime.
As one of the most used evaluation factors, past performance is a key resource when submitting a bid to work directly with the government as a prime contractor.
For large prime system integrators that have held government contracts since their inception, providing evidence of past performance doesn’t pose a challenge. These contractors simply direct the government customer to the Contractor Performance Rating System (CPARS), which provides an official record of prime contractor past performance ratings.
CPARS qualitative ratings rank the prime contractor on factors such as quality of product or service, cost control, schedule/timeliness, management/business relations, and small business subcontracting. Those factors are rated on a scale from A=Exceptional to E=Unsatisfactory.
Previous experience as a prime contractor and the availability of CPARS ratings gives primes a substantial competitive bidding advantage.
Subcontractors historically haven’t received CPARS ratings and until recently, due to the legal agreement of the prime contract, didn’t have a right to request them from the government-end customer.
Congress recognized the lack of available, qualifying, relevant past performance ratings as a barrier for small businesses seeking to make the transition from subcontracting to prime contracting. To make it easier for small subcontractors to qualify for prime contracting opportunities, the fiscal 2021 National Defense Authorization Act (Pub. Law 116-283) revised Section 868 to recognize and require past performance ratings for small business first-tier subcontractors and joint ventures.
The Small Business Administration finalized a rule on the change in July. It gives first-tier small businesses the right to recourse if they’re not provided past performance CPARS ratings by a prime contractor on a vehicle with a subcontracting plan.
Will this change result in a flood of new small business prime contractors? Qualifying past performance isn’t the only evaluation factor in competitive procurements. For small businesses seeking to make the jump from sub to prime, there are numerous considerations, and the path isn’t clear cut.
If you’re a small business that now finds it has the qualifying past performance for prime bids, I urge you to consider the following steps.
- Assess your financial runway. Does your company have the cash flow required to support investments in compliance measures, audited financial systems, bid and proposal teams, or contract management?
- Perform a corporate review to determine what types of tools, systems, processes, or other resources you’ll need to support prime work.
- Determine your current corporate security posture. Prime contractors have the responsibility to ensure that the government data they interact with is protected at the appropriate level internally and throughout their supply chains. As the prime, the responsibility is yours.
- Review your current customer landscape. Are the government customers you currently serve on subcontracts likely to contract with you directly?
- Refine your current corporate policies, processes, and procedures to create efficiencies that drive down cost and time spend.
- Poll your current team to ensure any internal capability gaps are filled and your core competencies are supported.
- Secure your current supply chains. Having a robust and diverse supply chain is critical as a prime contractor. No one company does everything, and having a strong network of capable and reliable resources is key to providing a complete solution, especially as a small business.
- Determine the impact your bid will have on your existing prime relationships. While primes are required to provide you with past performance ratings, they aren’t required to support your prime bids. Without taking stock of existing prime relationships, the outcome could damage them.
- Evaluate your current contracts and past performance to identify work done as a first-tier subcontractor, as well as efforts performed as part of a joint venture, before requesting ratings from the prime.
- Forecast your recompete opportunities to develop a capture list to pursue as a prime bidder in the next 12 to 24 months. This gives you time to ghost the competition by highlighting your company’s value and strengths as the competition’s weakness, without mentioning the competition by name.
- Launch marketing efforts aimed at educating prospective government customers and corporate partners on the benefits of contracting with a small business. These advantages include industrial base development, innovation, accessing new technologies and the brightest minds, flexible/agile processes, and often better rates.
- When opportunities are released, be prepared to craft compelling and compliant proposals utilizing the past performance ratings as evidence of ability to perform.
Entering the government contracting industry looks slightly different for every business. While it has just become easier with the changes to the law, businesses of all sizes need to take an adequate amount of time to assess the risk before making the leap from subcontractor to prime. The process sounds straightforward, but it’s a long-term strategy with no guarantees of success.
Chelsea Meggitt , CEO of Collaborative Compositions, has an MBA from the University of Washington and is a business strategist and government contracting consultant with more than a decade in the industry. She works with small and mid-size businesses to launch and expand their government contracting business and has a knack for identifying the path of least resistance to achieving government contracting success.
Federal contracting officers are no different. They too enjoy having a variety of choices. That’s getting tougher for them.
With the consolidation of prime weapons contractors from 51 in the 1990s to five in 2022, the number of options available to government customers has steadily dropped over the past 30 years. To stand out in today’s competitive landscape, primes need to be asking themselves how they can provide their government customers with more options through their already held contract vehicles.
One approach—build out a robust and varied small business pipeline to offer your government customers accessible options.
The benefits to large primes of sustaining small supplier and teaming partner networks are five-fold:
Lower perceived risk: If the pandemic taught us anything, it’s that a single point of failure, like a sole supplier of a critical component, is a significant risk that can cause a catastrophic system failure.
In federal contracting terms, vendors with single points of failure in their supply chains run higher risks of delays and cost overruns than those with diversified supply chains of healthy small businesses. If the goal is to maintain a high rate of availability and reliability, having a robust supply chain helps ensure that and lowers perceived risk in the customer’s eyes.
Best targeted solution: Small businesses have a unique advantage of being able to pivot quickly and provide agile and responsive development processes that truly adapt to evolving edge requirements. They often provide a niche or specialized product that isn’t yet offered by large system integrators.
Offering a small/large business pairing can deliver more value and allow the prime and their customer to access bleeding-edge tech as a faster alternative to developing it in-house.
Access new markets: The first contract is the hardest to win. This is no different for large primes. When contemplating new market entry, large primes can look to their small business counterparts with existing contracts or other footholds in agencies of interest.
Supporting small businesses for set-aside bids limits the competition further and allows the prime, as a subcontractor, to get a piece of a pie that would otherwise be limited. Ultimately, the customer gets additional capabilities from the small prime.
New technology integration: Large primes with varied supply chains of agile small businesses are substantially more likely to be conscious of emerging tech and keep interoperability in mind while developing and maintaining their large platforms. Small businesses can integrate technology rapidly.
Congressional satisfaction: Congressional interest in small business mentor-protégé programs has increased in recent years for a variety of reasons, but primarily because they help small businesses become competitive as federal contractors. That, in turn, creates and retains jobs.
Mentor firms have incentives to maintain more resilient supply chains and meet subcontracting goals. They can receive reimbursement of certain expenses for participation.
Maintaining a robust and varied portfolio of small business partners gives your government customer more options and raises your odds of winning across the board.
When a small business decides to participate in the SBA 8(a) program matters…..
Upon entering the government contracting market, the runway for receiving the first award is in the range of 12-24 months. This is just the first award and it usually won’t be a prime contracting opportunity, meaning you don’t have direct access to the government customer. With such a long runway, many companies initially try to seek any advantages they can. There are many programs that are advertised as being propitious but beware of the nuanced considerations involved in the decision to pursue any of them.
Programs Of Interest
Programs like the SBA 7(j) Management and Technical Assistance Program, small/disadvantaged business certifications, the SBA 8(a) program, and GSA schedules, are often promoted in a way that appeals to small businesses. The programs are all different, they offer different benefits for different businesses at various stages of growth. Missing from the descriptions of these programs are details that interested prospective contractors should consider before participating. To reap the advertised rewards, contractors need to consider not only which program they join but also when they decide to enter.
When considering participating in one of these programs it’s important for small businesses to consider that the 8(a) program has an expiration date, GSA schedules have minimum orders, and small business certifications must be renewed on a regular basis. While it is generally true that having a small business certification can be helpful, it’s equally well known that capabilities matter more than certifications. GSA schedules are not a guarantee of money. Obtaining a GSA schedule without a strategy for identifying and pursuing government customers can easily end up as a negative return on investment. On the surface, while the program itself might not have an entrance fee, each of the maintenance activities requires an overhead labor expense and often other additional unforeseen costs.
The 8(a) program in particular requires participating at the most opportune time to maximize the potential for profit. The 8(a) program has a nine-year life span which is divided into two phases: an initial four-year developmental stage and a final five-year transition stage. The application process is extensive and requires financial, business organization, banking, and personal information to address the eligibility requirements such as proof of ownership and control of the business, social and economic disadvantage statements, business acumen, experience in the government market, and business revenues and number of employees. Generally, companies interested in the 8(a) program should already have worked with the federal government directly or as a subcontractor to a prime. The following discussion addresses the necessity for careful consideration by individually owned businesses of when to participate in the SBA 8(a) program.
The 8(a) program provides business development assistance to businesses owned and controlled by person or persons that are socially and economically disadvantaged, have good character, and demonstrate a potential for success. The program was established for disadvantaged individuals but now includes small businesses owned by Alaska Native Corporations (ANCs), Community Development Corporations (CDCs), Indian tribes, and Native American Organizations (NHOs). The three-part test used to determine economic disadvantage sufficient for participation in the 8(a) program is as follows:
- Net worth of less than $750,000 (excluding ownership interest in the applicant’s business, equity in their primary personal residence, and funds invested in an official retirement account.)
- Generally, no more than $350,000 in average adjusted gross income over the preceding three years
- No more than $6 Million in assets (excluding funds invested in an official retirement account)
Risk vs. Reward
Many companies will join the 8(a) program with hopes of receiving a sole source award. For an 8(a) sole-source contract including any options the maximum award for individually owned businesses is $4.5 Million. The threshold for awards to CDCs, ANCs, and NHOs is higher. That’s an attractive number, however, simply participating in the 8(a) program comes with no guarantee of business. The company still has several other hurdles to jump over before being considered for a sole-source contract award.
There is no requirement for companies entering the 8(a) program to have demonstrated past performance with the government. When bidding on contract work companies must demonstrate to the government that they can accomplish the work in the contract and perform successfully. Typically, Contractor Performance Assessment Ratings (CPARs) are the only way for companies to provide evidence of related past performance with the federal government.
These ratings are filled out by government contracting officers at every contract performance milestone and stored in a federal database for other contracting officers to access. Typically CPARS are reserved for prime contractors. If CPARs are unavailable for a company, there are certain circumstances in which the evaluation factors for a contract might allow for another type of past performance but there is no consistency with this consideration. Ultimately being awarded the first contract is the hardest as many opportunities require companies to prove their abilities.
In addition, if the company previously hasn’t received a contract award from the government valued at over $1 Million, they are perceived as being a higher risk bidder by the government. Providing evidence that the company has performed the same type of work that is required by the government is helpful. However, if the work was at a smaller scale the government construes the company’s capacity to handle larger amounts of government work and funding as lower and the risk higher.
The path to a $4.5 Million Sole-Source contract under the 8(a) program is not short nor is it without competition. Without adequate planning and relationship development ahead of time, the beginning of the program can be spent learning and catching up instead of getting the crucial first wins that are necessary to build upon. When assessing the probability of success it’s helpful to identify meaningful statistics. For instance, the DOD awarded 105 sole-source 8(a) contracts on or after March 17, 2020—the date that the increased threshold was implemented —which reflected an increase over prior years. These contracts were all over $22 million Half (50 percent) of the 105 sole-source 8(a) contracts were awarded to firms owned by Alaska Native Corporations; 32 percent were awarded to firms owned by Indian Tribes; and 18 percent to firms owned by Native Hawaiian Organizations.
With a longer than average runway for contract award and half of the sole-source contracts awarded by the DoD ultimately going to other than individually owned businesses, the landscape is still quite competitive and not for the faint of heart. Pursuing the 8(a) program can be helpful for companies with a clear understanding of government contracting processes and an aggressive plan for maximizing the program’s potential for growth. On the other hand, companies that are in the earlier stages of their government contracting journey are unlikely to find the 8(a) program to be an easy button. Early-stage government contractors would be wise to consider getting some experience in the market under their belts before pursuing programs like the SBA 8(a).
Merit is a market invention agency. More than a traditional brand development agency, Merit maintains a focus on achieving category leadership for its clients regardless of their current size. Business strategy drives everything at Merit. These are the folks who put strategic intent above all else and in doing so help shape the future. As defined by Merit: Market invention is a paradigm shift that rejects industry standards in favor of a bold, new vision. Merit is driving that shift to shape a bold new future with its clients.
DIB Tech Talk Episode:
Have you ever wondered what the future of defense contracting holds? What about how you can help shape the future of the defense industry?
This video features Market Invention expert Adam Vasquez talking about shaping the future of defense contracting. Adam is an expert at redefining markets to shape the future.This conversation focuses on the trends shaping the future of the defense industry.
About Collaborative Compositions:
We provide business development consulting services for the federal sector.
Govmates has assisted with more than 30,000 matches from their system of more than 4,500 government contractors. They are experts in creating valuable relationships within the federal sector.
Govmates is a technology scouting platform. They merge the best practices of technology as well as the human element to promote non-traditional defense contractors within the federal community. Govmates is providing amazing new resources and relationship development opportunities via their partnership with OT Consortia Management firm ATI.
DIB Tech Talk Episode:
Have you ever wanted an unlimited Rolodex of resources? What about hand-picked matches to help grow your government contracting business?
We discuss the way they’re providing assistance to large and small federal contractors as well as providing a matchmaking platform. This enables government agencies to connect one-on-one with small and non-traditional defense contractors. Federal Contractors use this support for small business outreach, market research, sources sought, and supplier diversity initiatives.
We work closely with world class partners like Govmates and we deliver valuable resources and helpful information. Our goal is to help drive enterprise as well as defense innovation throughout the country.
More about the Strides Agency:
The Strides Agency is a digital marketing and communications agency and you can find out more about the Strides Agency at Strides.Agency
Stay tuned for more interesting DIB Tech Talk episodes coming soon!
A growing buzz term in Government Contracting over the past several years has been Other Transaction Authority (OTA) or Other Transaction (OT). Chances are if you work in the government contracting industry you have heard the term. Since the 2015 and 2016 NDAAs Congress has made several adjustments to clarify and expand the use of OTA. For example, in FY 2018, Congress enacted a law requiring the DoD to prefer the use of OTs for science and technology and prototype programs.
Most of the OTs the public will see are run with a consortium-based model, in which an intermediary third-party firm (consortium manager) forms a consortium usually focused on a specific technology focus area and acts as the facilitator for the government-industry interactions. These consortia are marketed as a more efficient and lower barrier to entry way to work with the Department of Defense and Civilian Government agencies.
A comprehensive list of all the OTA consortia is hard to come by, but this list by MITRE’s AiDA (Acquisition in the Digital Age) is typically up to date. Benefits for small businesses participating in these consortia can include increased visibility with government and prime customers, faster funding, more teaming opportunities, and cost share requirements that incentivize large prime contractors to work with non-traditional small companies.
The increase in spend on OTs is not surprising considering an OT approach allows government to get money out the door faster than traditional FAR contracting and gives the government substantially more flexibility when forming business arrangements with industry members. Jon Harper summarized the explosion of growth in the use of OTAs in a 2019 article in National Defense Magazine
“The 2016 National Defense Authorization Act expanded their application. OTAs are now available for basic, applied and advanced research projects and for prototype projects and follow-on production, noted the Govini report titled, “Evaluating the Innovative Potential of Other Transaction Authority Investments.”
“To ensure U.S. military advantage, it is imperative for DoD to partner with businesses and academia to incorporate innovative technological advancements into military capability,” the study said. “DoD is increasingly using OTAs to leverage commercial technology for research and prototyping.”
Following the change in the NDAA, obligation totals grew by 122 percent, eventually reaching a total of $3.4 billion in fiscal year 2018, according to the report.”
Rolling into Calendar Year 2022 the trend towards OT use hasn’t changed. In fact, the government’s use of OTAs has skyrocketed going from $3.4 Billion in 2018 to over $7 Billion in 2019 and the global pandemic served to accelerate the trend. Early predictions for OTA spending in 2021 top $12.5 Billion on COVID related expenses alone according to an article in NextGov.
“Congress allocated trillions of dollars to federal agencies to combat the COVID-19 pandemic and, in an effort to get that money out the door quickly, the top three spenders awarded more than $12.5 billion using an opaque acquisition method known as other transaction authorities, or OTAs, according to a government analysis.”
With an increased focused on supply chain surety and technological advancements via R&D it’s likely the trend towards OTA spending will increase.
For industry looking to capitalize on the OTA BOOM they’ll have a maze to navigate of various OTA consortia with different managing entities that have different philosophies on what an OT really should be. Most, if not all require annual membership dues of $250 or more and what industry members will find behind the closed access doors of the members only portal varies with the management firm.
To ensure small businesses capture the value available via OTs it’s important they keep their eye on the prize when adding OTs to their contracting portfolios. Here are some tips for picking consortia to join:
- Do your research on the Management Entity
- What is their philosophy/what role do they take?
- What benefits does membership receive?
- Make sure the technology focus areas, sponsors (DoD, Civilian, other), and previously awarded technology profiles align with the business’s strategic direction
- Check if cross consortia membership is available and supported by the management entity. You want to get visibility with multiple sponsors and ensure cross-domain solutions are realized where appropriate.