The Real Scoop on Government Contracting

Executive Summary

Procurement in government, as well as in industry, is going through a tremendous change as a result of globalization, technological breakthroughs, and the surge in outsourcing services to outside vendors (Giallourakis, 2008, p. xiii, Preface).  The contracting world is growing by leaps and bounds, with no signs of letting up in the near future.  To accentuate this fact, the Defense Department is beginning the process of increasing its contracting workforce by adding 20,000 new employees by 2015, including converting approximately 10,000 contractor support positions to full-time government slots.  The government is using computerized systems to record purchasing transactions across its agencies, leading to more centralized purchasing (government-wide acquisition contracts, or GWACs), especially of commercial items, and cost cutting.  Hence, the urgent need for procurement managers to manage a worldwide network of reliable supplier relationships and be thoroughly knowledgeable not only of what is to be purchased but also of the processes necessary to manufacture a satisfactory product (Giallourakis, 2008, pp. xiii-xiv).

Introduction to Federal Contracting: How It Works

The federal government initiates more than 450,000 contracts yearly of which two-thirds are granted to contractors outside the Washington, D.C., area.  The best way on getting in on these deals is on who you know, but, most importantly, on finding out and understanding how the federal government does business.  The government is by far and wide the biggest consumer in the world.  No other nation or corporation can match its purchasing power and along with this power comes the authority to tell other businesses what to buy, where to buy & from whom it will conduct purchases (Stanberry, 2009, p. 4).

The government operates under what is known as a monopsonistic”—one who operates with only one buyer and many sellers.  As a result of this sovereignty, the government possesses certain unusual powers and immunities that differ significantly from your typical buyers.  Congressional mandates, rather than state laws, control federal policy.  These differences, for example, government contracting vs. commercial/private contracting include:  1) Federal policy sets the standard for formal competition criteria for procurement or purchases vs. a company determining competition rules and regulations; 2) Congress grants all appropriate funding vs. funding from many sources for companies; 3) Laws, directives, policies and procedural regulations are combined to make up procurement actions vs. a company defines the procurement actions within legal barriers (Stanberry, 2009, p. 6).

Contracting can be a great boon for business once you get your foot in the door, but, it can be very cumbersome.  Unlike dealing with your typical business, doing business with the government requires the patience of a saint; one must patiently go through the government procurement process which makes for a very slow and complex sale.  But, if you are willing to learn the system and be patient and assertive, dealing with the federal government can be a great and steady source of income for both new and established businesses (Stanberry, 2009, p.7). 

According to Ellen McCarthy, Washington area firms earned an estimated $52.6 billion from federal contracts in 2004 alone—a figure that has prompted the formation of countless small start-ups and lured many private companies to try and win federal contracts.  But, as I stated before, selling/doing business with the government is not an easy task, and even veteran companies can be surprised by a market that operates with its own language and rules, where business is conducted more by committee than by a handshake-type deal (The Washington Post—February, 2006).  “It’s not a market for the faint of heart.  If they’re looking for a quick hit, it’s not going to happen,” said David M. Nadler, a government contracting lawyer with Dickstein Shapiro Morin & Oshinsky LLP.  The government “moves slowly, is risk adverse, it’s financially restrained, and there are watchdog groups watching the watchdogs.” (Stanberry, 2009, p. 8).

During FY 2005, the federal government purchased over $390 billion worth of supplies and services.  The following table shows the major movers and shakers in federal procurement (Stanberry, 2009, pp.10-11):

The federal government is a huge place, with many agencies across the nation.  You hear it all the time on the news:  The government is too big and bureaucratic.  Both Republicans and Democratics have over the years been vying for a smaller bureaucracy, with all but the most essential work functions being outsourced to the private industry.  During Clinton’s administration, there was talk of making the government smaller; recently, there is more and more talk of doing away with government positions.  Current projections estimate that the number of nonpostal governmental positions will shrink from 1.8 million to 500,000 within the next dozen years.  But these jobs are being done away with; they are just outsourcing them out to the private sector.  There is a strong belief that the competitive forces of the commercial industry will produce better products and services at a cheaper price.  Having worked for the federal government as both an employer and a contractor, I have to say it is a prime time to look for contracting opportunities with the federal government; there is always work to be had if you are persistent and watchful.