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On Small Business
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Posted at 08:30 AM ET, 08/08/2012

Contracting games only making matters worse for small businesses

Unemployment remains above 8 percent, job growth is slow and gas prices are on the rise. Family net equity is down 35 percent from last year, investors are holding onto their cash because they are uncertain about this market, and on top of all that, there is a presidential election in less than 90 days and voters are confused and uncertain.


Small businesses are bidding pennies on the dollar to win contracts, sometimes taking a loss just to keep working. (James M. Thresher - FOR THE WASHINGTON POST)
These economic pressures are all playing out in my small technology business in Alaska, where firms are so desperate for work that they are increasingly doing it at a loss.

For example, 50 small companies recently submitted bids for a federal construction project to upgrade a fresh water/waste facility — 25 more than normal for this area of the country. The government estimate to execute this project was $1.25 million. 

The winning bid was $600,000. There is no way the winning contractor can do this project correctly by bidding it for just the cost of materials. 

 The more distressing part was that the contracting officer evidently awarded the contract simply because it was the lowest bid.  I believe the only outcome for this project is failure, and taxpayers will likely get stuck with the bill to have this job done correctly the second time. 

There are many companies bidding jobs at or below their cost in the hope of riding out these tough economic times

 So what can the government do to help small businesses and boost the economy?  Some people say that access to capital is the key; I would agree that this is one component but not the main ingredient to get things rolling.  I believe that access to opportunities and to real contracts is the key.  All 50 states have small business programs and goals that they are required to achieve or at least try to achieve. 

Unfortunately, most small business goals at the local and federal levels are not met, and worse, there seems to be little concern that these goals are not met on a consistent basis. State and federal governments can help by complying with existing small business goals. There should be repercussions or fines for not meeting the goals.

We all know that the fastest way to jump start this economy is to get people back to work and we all know that small businesses can do it faster and more cost effectively. So why not help those small businesses get more work? 

It is a very simple plan with very real results. 

Ron Perry is president and CEO of Teya Technologies LLC, an 8(a) certified Alaskan native corporation in Anchorage.

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How is your small business responding to the recent slowdown in the economic recovery? Please share your thoughts or your advice for other business owners in the comments below.

By Ron Perry  |  08:30 AM ET, 08/08/2012

Tags:  small business, advice

 
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