CEO Confidential: Shotgun Weddings: Partnering on Government Contracts
Government entities have strict rules about what percentage of their contracts go to minority- and women-owned businesses, which cause large companies to scramble for subcontractors. For smaller companies, that can be both an opportunity and a problem.
At first it sounds great when a large company asks you to participate on a bid: "Hey, little business, want to partner with us?" But beware, for there are pitfalls.
Large companies typically call at the last minute, which means you have to work like crazy to put together your piece of the proposal. And the larger company will invite you to bid without knowing much about your business — except that you’re a woman- or minority-owned company. It’s like a shotgun wedding.
Know whom you’re getting betrothed to. The partnership works better when the larger company understands and appreciates what you bring to the table as a subcontractor. Yet larger companies usually don’t take the time to get to know you, so you’ll have to build a relationship for both sides.
When it comes to winning the contract, you’re only as good as the large company. This became clear to me when we participated in an oral presentation. Our team was great, but about 85% of the larger company’s presentation was lackluster. We felt like little show dogs trotted out to impress the client. But no matter how good you look, you’re not going to get hired unless the larger company does.
Take a harsh look at the time commitment. You can invest hours on a proposal — and never get any business out of it. We’ve participated on 10 different bids and only have been on the winning team once. Even then we were dumped later: Our service didn’t come into play until the second year of the project, and by then the large company was making its minority numbers elsewhere and decided they didn’t need us anymore.
Nail down payment issues. Understand not just how much you’ll be paid, but also when and how payment is structured. Government agencies may have caps on hourly fees that are a far cry from your normal rate. What’s more, agencies may require you to break down fees and disclose your overhead and profit margins.
Ask yourself: What sliver of this business am I really going to get? Do I want to go after it?
For us, it’s not a way to build the business.
Writers: TJ Becker and anonymous contributor