01/ 28/ 2005
Just because a government contract is asking for a manufacturer doesn’t mean you’re the right manufacturer for the job.
It’s a lesson we all learned when we were young: It’s better to ask for help than get in over your head. Now that you’re a small-business owner, that same lesson still applies, especially if you’re considering being a government contractor.
Getting in over your head is one of the biggest government contracting mistakes a small-business owner can make, says John DiGiacomo, director of the Procurement Technical Assistance Center at Rock Valley College in Rockford, Ill. “Don’t get in over your head,” said DiGiacomo. “Know what you’re getting involved in and read the contract.”
That’s one of the most important pieces of advice he gives his clients, who are business owners seeking assistance with government contracts.
“Read the entire bid document because there may be something in there that can prohibit you from bidding,” he said. “Make sure to pay special attention to the specifications. If they want something made out of stainless-steel material and your company doesn’t work on stainless steel, then you shouldn’t bid on the contract.”
It’s commonsense, DiGiacomo says, but many small-business owners are so eager to win a contract that they’ll try just about anything, including signing up for a government contract that they’re less than capable of completing.
Even if you can fulfill the specifications and comply with the regulations, there’s always the question of cost.
“A lot of small-business owners do not understand how to price things out,” DiGiacomo said. “They’re used to working in generalized areas where costs are not looked at. They know their labor rate is $35 per hour but they’re not sure how many hours it’s going to take.
“You need to determine what you true costs are,” he said. “If you don’t know what your true costs are, how can you successfully bid?”
When you’re trying to undercut the competition, remember you could be undercutting yourself. By telling yourself – and the government agency – that you can fulfill the contract for $1,000 when you know it will take more will only hurt you and your business. The government will have paid $1,000 for a contract worth $5,000, and your business will be $4,000 in the red.
Outbidding your competitors isn’t the smartest thing to do anyway, as government agencies choose the bid that’s the best value for them, which entails price, delivery schedule and geographical location of the business.
“If you do your homework and you know what your costs are and you know what your overhead rates are, it should be fairly easy to figure out what your bid should be and if you should bid at all,” DiGiacomo said. There are lots of contracts out there – more than 10.5 million in the federal marketplace alone – so make sure it’s a good fit before you commit.
