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How Small Businesses Can Rescue the Federal Government

February 21, 2012 |

Many small businesses out there in Real America have excellent, proven commercial products and services, but they are scared off by the amount of obscure paperwork and distance from agency headquarters in DC to give federal contracting a try. Others are daunted by the debt ceiling crisis in DC, along with the budget battles and cuts in agency spending.

As an active member of the US Chamber of Commerce Small Business Council, I would like to address the question of why small businesses should be applying for government contracts. In fact, small businesses can offer a significant benefit to the Federal government in terms of cost savings. In the face of current budget cuts, they can potentially rescue the Federal Government.

The Government Needs Small Businesses

The Federal Government requires 23% of its contracts be set aside for Small Business, but agencies have consistently missed this set-aside and most other set-aside goals. In 2009, this shortfall represented nearly $5 billion of missed revenue opportunities for small businesses. I believe this happened for two reasons:

1. Small businesses aren’t registered in the federal contracting databases and therefore aren’t easily visible, or “on the pre-approved list”.

2. Contracting offices are only required to do minimal “market research”.  They don’t know what they don’t know.  Thus, regular contact with agencies at several levels is paramount.

The Advantages Small Businesses Can Offer the US Government

Small businesses are inherently more competitive and innovative. Where a large defense contractor would prefer to be awarded more battleships worth several billions of margin, small businesses are working to develop alternate-fuel-powered Unmanned Aerial Vehicles (UAV’s), which can deliver payloads across the Atlantic at an infinitesimal fraction of the cost of fuel, parts, maintenance, and human life versus a battle ship. The difficulty will be changing the operating system – and the mindset – of the Department of Defense that bigger is not necessarily better.

Small businesses are inherently lean and used to existing on thin margins and small budgets. Just a few weeks ago, a 10% cut across all federal agency budgets was handed down by the administration, but those cuts have yet to be implemented.  As an example, The Veterans Administration might consider preventive programs to help vets maintain their wellness, thus avoiding expensive heart surgeries and other procedures to fix preventable problems. The VA should put more emphasis on innovative technologies that come out of Small Business Innovative Research (SBIR) grants, Army Medical Command’s Small Business office, etc. because, consistent with Moore’s Law, big expensive medical equipment is getting smaller, faster and less expensive every development cycle.

Small Businesses Need to Recognize Their Power

Small businesses are currently unaware of the power they can yield in Washington. Congress gave up earmarks as a “thank you” to successful businesses in their districts. Bureaucrats in agencies now decide what budget goes where; however Members of Congress (primarily lawyers) must be taught how to provide business development services to the small businesses in their district. Lockheed Martin will survive just fine without earmarks. However, Small Biz, LLC would benefit greatly if their Congressman who chairs the Transportation Committee calls DOT Secretary LaHood and notes that a great Florida small business needs an introduction to the right point of contact at the Department of Defense. Members of Congress must be taught how to be small business advocates.

Small business for the most part has no desire to remain small. Thus the tenacity of a successful small business owner, the dedication to detail, the knowledge that hiring one wrong person may make the whole company go under, the recognition that they must be more than competitive on margins, the incentives to be rewarded for success -  all these compel the small business owner to go forth, grow and create jobs. Jobs you said? Yes, and those folks pay taxes, buy houses, earn advanced degrees, etc. – all of which are sustained sources of income for the federal government (versus the “stimulus” measures which only provide for expensive non-reoccurring revenues).

Small business must be allowed to prosper.  We can do this together, with expanded efforts on our part to educate our legislators, be vigilant in our efforts to lead contracting officers to water and help them drink.

Elvis Oxley
Oxley Consulting