How to Land a Big Government Contract
By Kathryn Hawkins
The federal government spends more than $425 billion on goods and services each year, and there's a lot of money in there for small businesses: Twenty-three percent of agencies' annual expenditures must come from contracts with small U.S.-based businesses.
Landing a government contract can involve a lot of red tape, delays, and upfront expenses. But if you wade through all of that successfully, you could end up like Cabot Hosiery Mills: The Northfield, Vt.-based company's contract with the U.S. military now accounts for close to a quarter of their $15 million in annual revenue.
Here's what CEO Ric Cabot has to share about securing and delivering on a federal contract:
Get your business certified
The federal government sets aside funds for contracts with certain types of business owners. If you're a woman, a minority, or a veteran, for example, get certified as such before bidding. Register as a vendor in the Central Contractor Registration (CCR). That will add you to the list of bidders for federal procurement opportunities, but you may need to register separately for local government agency bidding opportunities.
And if your company sells a product rather than a service, it's a plus if your manufacturing takes place within the U.S. There's no certification process for "made in America" products, but there are strict guidelines. The plus: Goods valued at more than $100,000 must come from contracts with U.S. companies. That rule made Cabot's Vermont-based hosiery mill an attractive candidate.
Make contact with procurement officers
Government procurement officers often go to trade shows for products they're interested in, so strike up a conversation when the chance arises. That's how Cabot made his connection with the military. "They were interested in Darn Tough, our line of high-performance wool socks," says Cabot. "After learning more about their needs, we tweaked the product to fit their color and style requirements, then sent them hundreds of samples to try out in the field." After that, the requests to bid started rolling in.
Prepare the bid
Prepare yourself for an intensive bidding process with plenty of paperwork. They're going to want to know who you are, how long you've been in business, how many employees you have, and how your profit and loss statements look, says Cabot.
The military asked Cabot Hosiery Mills to run a number of stress and environmental tests on their socks, and to share the results. The company also needed to send a proposed price and delivery schedule for a one-year contract. "The contract alone can take up to a month to prepare," Cabot adds.
Iron out the final details
If you win the contract, that's great news -- but you're not done yet. If the contract is longer than a year, you may be required to commit to a price for the full contract term.
When Cabot Hosiery Mills won a four-year contract to supply the military with Darn Tough Socks, "we had to create a price quote that factored in the projected cost increases of our labor and machinery, as well as the inflated costs of our raw materials providers," says Cabot. "We also needed to get a commitment from all of our suppliers. It's a matter of saying, 'I need 100,000 pounds of wool this year and next year -- can you give us a firm commitment?'"
Ramp up production
The bidding process can be slow -- it often takes the government up to two years to award a big contract -- but you'll need to be ready to fulfill the terms right away. "We had just a couple of months to ramp up our output," says Cabot. "If you tell the military you can produce 30,000 pairs of socks a week, you'd better be able to do it, or you'll never get another shot."
Cabot Hosiery Mills got up and running by purchasing new machinery with the help of a loan. They haven't finished paying back the loan yet, but the new equipment has led to dramatic growth in the company's other areas. "Our output has increased sevenfold since we began working with the military in 2007," says Cabot.
Be prepared for your next bid
Even as you're working to fulfill production requests for your current contract, stay on the lookout for other contracting opportunities. It's also worth finding ways to customize your product to particular agencies' needs.
"We're constantly looking for ways to lighten the soldier's load, so we've put money into researching how to make the product lighter and improve the fit," says Cabot. "When it comes time to bid on another contract, we won't necessarily have the cheapest bid, but it's not always about that -- it's about creating a product that works for the end user."
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