Small businesses that have been federal contractors for more than 10 years, or that have won more than $1 million in government contracts, tend to invest more time and money in seeking work, and submit more bids than their less active counterparts, a new survey shows.
The American Express OPEN survey found, on average, these so-called “procurement leaders” leaders spent $233,457 in preparing their bids for federal contracts in 2010, both in terms of staff time and direct expenditures. “Casual” contractors — those that have been contracting for less than three years and have won less than $1 million in federal contracts — only spent $31, 278 over the same period.
Procurement leaders also bid more, submitting an average of 18.9 prime bids and 5.6 subcontracting bids over the past three years, which is 83 percent and 37 percent more than all active contractors.
Though they bid more, procurement leaders appear to bid “smarter,” said survey research research advisor Julie Weeks.
“The bidding activity did not go up as fast as the success rate did, so that shows you’re not getting more success by throwing more proposals,” Weeks said. Instead, procurement leaders often only bid when they believe they will be likely to succeed.
Though only a minority of businesses surveyed hired outside consultants to research and apply for contracts, those that did found it very helpful, Weeks said.
Procurement leaders were more likely than the average contractor to be in the goods-producing, professional/scientific/technical services or information industries, and slightly more likely to be located in the D.C., Maryland or Virginia areas. But it was the manner in which they pursued contracts that tended to be the bigger predictor of contracting success rate than industry or location, Weeks said.
When asked what tips they had for less experienced firms, procurement leaders often suggested getting on a General Services Administration schedule, which is a kind of preapproved bidders’ list.
But there are other paths to success as well. Amber Peebles, president of Dumfries, Va.-based Athena Construction Group started pursuing federal construction contracts in 2008, but did not pursue the GSA schedule because she didn’t feel the schedule would be helpful for her industry, construction.
The former Marine sought contracts through government set-asides for women-owned businesses and businesses owned by the service-disabled veterans. Today, 90 percent of Athena’s revenue comes from federal contracts — instead of bidding through the GSA, Peebles has instead developed contacts in individual government agencies.
Prior to 2008, Athena was focused on residential construction. Peebles was anxious to move from commercial to federal construction because she found the residential sector to be sexist, and it was “difficult for women to succeed” in residential construction. Though the procurement process can sometimes be stressful, she said she “felt like there was a more level playing field in the government.”
Peebles emphasized that procuring prime contracts — instead of only subcontracts — helps small businesses gain credibility, though initially subcontracting helped her company “get our foot through the door.”
But for Peebles, the most important factor in procuring a federal contract is persistence. “Keep calling, and keep trying,” she advised.
The AmEx study was based on 740 small businesses between August and November of 2011.