Large Businesses Want Appliances, Not Sub-Contractors

Securing business with the federal government takes time and persistence, even when you know exactly who your customer is. So it’s very important to use that time wisely. One of the mistakes that is easy to make is to put your time into places where there isn’t, in fact, any money or revenue to be had.

We’ve talked about OSDBUs (Office of Small and Disadvantaged Business Utilization) and how even though it’s a good idea to access their information, support, they’re not the ones who will actually hire you.

Today we’ll talk about who one of your customers actually is. Hint: It’s not the government agency that you’ll be doing work for (but don’t worry, we’ll talk more about them in future blog posts).

When your business is in its early stages, working as a sub-contractor for a larger company can be the easiest way to start. The large company already has relationships with customers, so you don’t have to find them yourself.

However, you can never forget that the large company wants revenue just as much as you do. And they know that to win a contract with the federal government, to comply with federal acquisition regulations they need to show in their proposal that they’ll be setting aside 23% (or more, depending on the job) of the contract to small businesses like yours.

You are extremely valuable to the large business in the proposal phase – as an appliance; you provide the details they can plug into the appropriate sections of the document to ensure they’ve shown their intention to allot a percentage of the contract to a small business.

The fundamental problem is that regardless of how much time you put into putting that proposal together, when it comes to actually awarding the work, that large business may or may not choose you. They may choose another small business, or they may even do the work themselves. Unfortunately, the set aside regulation is not always enforced.

Given all of this, the question becomes how do you ensure that you’re going to get work as a sub-contractor?

1) Have a clear teaming agreement in place (for more information about teaming agreements, see these articles on About.com and eHow.com). Attached to each teaming agreement is an Exhibit A, which details the obligations. If the work share isn’t guaranteed in your agreement, then there’s no guarantee you will get the work. In fact, it’s probably guaranteed that you won’t.

2) Build and maintain positive relationships with the large business’s program manager. THIS is your customer when you want to be a sub-contractor, since this is the person who runs the contracts. You should also get to know the small business/diversity people at the company. Lastly, keep the relationship triangle going between you, the large company and the customer.

3) Know your value proposition to the large company. Maybe you’re already on a program with their customer so you know the customer really well. Maybe you have special skills in using the application/tools that will be used on the project. Or maybe you’ve done a great job with my previous suggestion and you’ve built a really solid relationship with the large company.

If you haven’t built up credibility with the customer or with the large business’s program manager (PM), you’re at risk of losing the relationship once grow too large for the NAICS code size standard in that job. That’s because the large business can no longer claim you as their small business when they are obligated to recertify their contract option (mandatory once a year).

This “graduate-by-jumping-off-the-cliff effect” is one of the issues that organizations like Mid-Tier Advocacy are trying to alleviate.

In your case, be sure to build relationships with your customers, program managers and small business/diversity advocates as soon as possible, so that you’ll be able to keep your business after you grow.


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