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Chapter 1
Introduction to Federal Government Sales
Overview
Are You a Small Business?
In this introductory chapter we begin by examining exactly how the government determines whether you are considered a small business, and how you can find out whether you are eligible to be considered as a small business.
Resources
This is followed by information on the many organizations that can give you advice and assistance on doing business with the federal government, such as the Small Business Administration and the governmentās Procurement Technical Assistance Centers.
How the Federal Government Buys What It Needs
The next section of this chapter gives you a brief overview of exactly how the federal government buys the things it needs, and explains such terms as Invitation for Bid, Request for Proposal, Request for Quote, and Best Value Purchasing. We briefly examine the many government Consolidated Purchase programs that are available, such as Multi-Agency Contracts (MACs), Government-Wide Acquisition Contracts (GWACs) and General Services Administration (GSA) Schedule contracts. In addition, we look at the increasing use of the āreverse auctionā mechanism for bids, as well as the use of government Purchase Cards (credit cards).
Important Codes and Numbers
Then we turn to the important business codes and numbers you will need to obtain in order to begin selling to the federal government. Each code is explained in plain languageāincluding why it is important to know these numbers, where you can find them, and so on. We take you step by step through each number and explain clearly where to go to obtain each one. In addition, we take you step by step through the Central Contractors Registration (CCR) site, and the new Online Representations and Certifications Applications (ORCA) site, where you must register your company in order to do business with the federal government.
Are You a Small Business? Determining Size Standards
If you wish to take advantage of the various programs that are set aside for small businesses, you must first determine if you are eligible.
A small business is one that:
ā¢ Is organized for profit.
ā¢ Has a place of business in the United States.
ā¢ Pays taxes, and uses American products, labor, and materials.
ā¢ Does not exceed the size standard for its industry.
The Small Business Administration uses the North American Industrial Classification System (NAICS) to determine types of industries and their size standards. We discuss NAICS codes later in this chapter. Size standards are usually stated in terms of either the number of employees in a company or the companyās average annual receipts. For a Products company the size standard is determined by the number of employees (including both full- and part-time). For a Service company the size standard is determined by the annual average receipts.
In the chart that follows, a business in one of the following industry groups is considered to be a small business if its size is not greater than the following:
Construction | ā¢ General building and heavy construction contractors: $33.5 million. ā¢ Special trade construction contractors: $14 million. ā¢ Land subdivision: $7 million. ā¢ Dredging: $20 million. |
Manufacturing | ā¢ About 75 percent of the manufacturing industries: 500 employees. ā¢ A small number of industries: 1,500 employees. ā¢ The balance: either 750 or 1,000 employees. |
Retail Trade | ā¢ Most retail trade industries: $7 million. ā¢ A few (such as grocery stores, department stores, motor vehicle dealers, and electrical appliance dealers), have higher size standards, but none above $35.5 million. |
Services | ā¢ Most common: $7 million. ā¢ Computer programming, data processing, and systems design: $25 million. ā¢ Engineering and architectural services and a few other industries have different size standards. ā¢ The highest annual-receipts size standard in any service industry: $35.5 million. ā¢ R&D and environmental remediation service industries state size standards as number of employees. |
Wholesale Trade | ā¢ For small-business federal contracts: 100 employees. ā¢ You must deliver the product of a small domestic manufacturer (unless this is waived by the SBA for a particular class of product). ā¢ For procurements less than $25,000 you may deliver the goods of any domestic manufacturer. |
Other Industries | Divisions include agriculture; transportation, communications, electric, gas, and sanitary services; and finance, insurance, and real estate. Because of wide variation in the structure of industries in these divisions, there is no common pattern of size standards. |
Size standards are updated regularly. The SBAās tables include any changes and modifications made since January 1 of the most recent year.
You may wish to research size standards in more detail on the Small Business Administrationsā Website: www.sba.gov/size. (1)
Resources for Small Businesses
Many places can offer you assistance:
ā¢ Small Business Administration: www.sba.gov (2)
ā¢ Women-Biz: www.womenbiz.gov (3)
ā¢ SBA Office of Women Business Ownership: www.sba.gov (2) At the āSBA Programsā drop-down list on the home page, select āWomenās Business.ā
ā¢ SBA Subcontracting Network: www.sba.gov/subnet (4)
ā¢ Procurement Technical Assistance Centers (PTAC): www.dla.mil/db/procurem.htm. (5) Administered by the Department of Defense, these centers offer local, low-cost assistance to companies wishing to market their products and services to federal, state, and local governments.
ā¢ Agency Procurement Forecasts: www.acqnet.gov/comp/procurement_forecasts/index.html (6)
ā¢ GSA Directories: www.gsa.gov/sbu (7)
Another great source of contact information can be found at the GSA Offices of Small Business Utilization. On the left-hand side of the home page, click on āGSA Publications.ā There are nine Regional Procurement Directories available here, with a great deal of useful contact information. For example, the New England Directory contains lists of all the regional small business offices, technical assistance offices, local Procurement Technical Assistance Centers (PTACS), government procurement offices, chambers of commerce, regional federal buildings, and much more. These directories can be a great marketing source even if you do not yet have a GSA contract award!
How the Federal Government Buys What It Needs
In 1994 the government enacted the Federal Acquisition Streamlining Act, which simplified the way in which government purchases under $100,000 are made. Specifically, all federal purchases more than $3,000 but less than $100,000 may be set aside exclusively for small businesses.
Micro-Purchases
Government purchases of $3,000 or less are classified as āmicro-purchasesā and can be made without obtaining competitive quotes. These purchases can be made using a Government Purchase Card, which is a government-issued credit card (Visa, MasterCard, or American Express). Micro-purchases are no longer reserved exclusively for small businesses.
Invitation For Bid (IFB)āSealed Bid
When a government agency has a clear and complete picture of its needs, it will issue an Invitation For Bid (IFB). The IFB contains an exact description of the product or service; instructions for preparing a bid; the conditions for purchase, packaging, delivery, shipping, and payment; contract clauses to be included; and the deadline for submitting bids. On the stated Bid Opening Date and Time, each sealed bid is opened in public at the purchasing office.
Request For Proposal (RFP)āNegotiated Bid
When the value of the contract exceeds $100,000 and the product or service is considered to be highly technical in nature, the government may issue a Request For Proposal (RFP). In this case the agency will describe the product or service that it needs, and solicit proposals from prospective contractors on how they intend to carry out that request, and at what price. Proposals in response to an RFP can be subject to negotiation after they have been submitted.
Request For Quotation (RFQ)
Sometimes the government is simply looking at...
