Contract process full of pitfalls for small firms

Valerie Lilley’s Navy coat contract was part of a government set-aside program aimed at growing small businesses. Since 1997, Congress has had a goal of awarding 23 percent of government contracts to small businesses.

But a study by a business credit card unit of American Express found that on average it takes a small business nearly two years of trying before it wins its first contract.

“There are systemic problems with the procurement process. The government has not made the kind of progress it really needs to in moving away from very detailed specifications for very common items,” said Robert Burton, a partner at Venable LLP, who formerly served as the top career federal procurement official at the Office of Federal Procurement Policy.

In his former role, Burton said, he saw 15-page documents listing specifications for making everything from toothbrushes to toilet paper.

Of Toluca Tailoring’s failure, which was partly related to not meeting precise stitching requirements, Burton said, “It’s a coat. It’s a coat. It’s not a weapons system. It’s a coat.”

Just as whales can eat smaller fish simply by sucking in the water around them, the mismatch between big government and a small business can make them “just disappear,” said Michelle Randall, principal of Enriching Leadership International, a global executive coaching and consulting firm.

“The amount of paperwork is substantial,” Randall said. “It could overwhelm a small business.” 

Pamela J. Beavers, the Small Business Administration’s director of government contracting for Area IV, said small businesses should have other contracts and orders in the pipeline, along with about 10 months’ worth of financing, before trying for a government contract.

Successful contractors spend an average of $86,000 a year in staff time pursuing contract opportunities, the American Express study found.

In this sputtering economy, the situation Toluca Tailoring found itself in wasn’t uncommon. Small businesses are more likely to count on winning a single big order after they run out of options, said Scott Testa, a professor of business administration at Cabrini College in Radnor, Pa. That’s why, he said, small businesses should carefully read a contract to account for any potential payment lags.

“Some of these decisions that may be important from the small business owner’s perspective may not be a priority for these huge government agencies,” Testa said.

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 — Oct 13, 2010 – Chicago Tribune-McClatchy-Tribune News Service  Visit the Chicago Tribune on the Internet at http://www.chicagotribune.com.  Distributed by McClatchy-Tribune Information Services