Government Payment Policies Lead to Struggle for Small Business

The Federal government usually pays its contractors after a certain amount of work is done. For hardware deliveries there are progress payments as certain steps in the completion of the item are made. Companies bill for time and materials at the end of the month and get payed later. This means that once a contract is awarded there is a certain period of time where the contractor is working and must wait for income. The Arizona Daily Sun, via TMCnet.com, writes about a small contractor, Aspen Communications, who while winning a part of a large IT contract with the Federal government faces issues as it needs upfront money to grow to handle the requirements of the larger jobs it is able to now get. The company has advantages in that it is a Hubzone as well as a veteran owned which makes it qualify for more contracts. Unfortunately without some capital it cannot go out an hire the people or invest in the equipment required to do the work immediately. Most government contracts expect the company to be able to start at almost full capability on the first day. These kind of expectations can make it more difficult for smaller, less established companies to be able to compete effectively with the larger, more experienced firms.