An issue that small business owners encounter is how to successfully bid on government contracts – and, in particular, how to price bids competitively. There’s a common belief that the government will always go with the lowest-priced bid. In reality, it’s the bid that presents the best value that wins – and value is based on a combination of competitive pricing, capacity to get the job done and responsiveness.
Government agencies are responsible to taxpayers for every dollar spent, so the bidding process is rigorous, especially for small businesses, but the agencies are also transparent about who is awarded bids and how the money is spent, so there are resources available as you go through the bidding process.
This article by Pursuit outlines steps you can take to better position and price your bid, with tips to help you be more competitive.
Step 1: Register your business with applicable government entities
Before you can submit an application, all government entities require that you register your business as a vendor (see an example, here). Take care of registrations right away – this step ensures that you’re eligible to submit bids and get paid for the work you perform, and that your business can be found by agencies that may want to solicit your business.
In addition, once it’s registered, your business becomes part of a searchable database that potential customers or contractors can use to find your company when searching for their own needs. Registration is typically a simple process – you’ll answer about 10-15 questions online or through hard-copy paperwork.
Step 2: Certify your business
If you’ve been in business at least one year (for New York City or New York State programs, or two years for federal programs) and at least 51 percent of your business is owned and controlled by women or people of color, your business may be eligible for minority- and women-owned business enterprise (M/WBE) certification at the city, state and federal levels (these are separate certifications).
While it isn’t required to bid on contracts and doesn’t guarantee that you’ll get them, this certification can put your business in a special pool of eligible bidders that, all other things being equal, can improve your chances of selection. This is because government agencies have specific goals for developing business opportunities for M/WBE-certified businesses.
If you’re already working with Pursuit, we can help with this process. There are numerous other resources available to the public, such as New York City’s Department of Small Business Services (SBS).
Step 3: Carefully consider your capacity
Keep in mind that your business will have to cover all expenses related to fulfilling the contract, so it’s imperative that you have sufficient cash flow to cover your costs, even if it means taking on loans for needed materials, equipment, staff, and other necessities. You also have to ensure that your enterprise is big enough to handle the job that you say you’ll do.
Consider starting slowly: New York State and several municipalities and agencies offer discretionary contracts, in which there is no formal bidding process (this is when relationships and reputation really count), which can be great for small businesses.
Step 4: Take advantage of resources to develop a competitive bid
When you’ve found a request for proposal, or RFP, that aligns with your business, take advantage of resources that can help you competitively price and position your bid. Procurement Technical Assistance Centers (PTACs) are federally funded agencies specifically developed to help businesses bid on contracts, and you can find a listing of them throughout New York State here. Working with a PTAC be very advantageous, especially for your first few bids.
You can also do your own competitive research. Municipalities and state agencies keep records of past contracts with summary information that includes who won the award and the amount. When bidding on contracts in New York City, for example, you’ll find invaluable information in the City Record Online (CROL) searchable database – click on ‘Procurement’ to see how others won contracts. (Here’s an example for a past award for computer equipment.) Elsewhere in New York State, information can be found here, and federal information is here and here.
Step 5: Ensure that your bid adequately covers your costs
Often, unanticipated expenses will throw a business’s budget off (sometimes, way off), so be sure to account for everything, within reason (if your expenses are way out of whack or there are items that aren’t permissible per the RFP, you risk rejection). Be sure to account for additional expenses if you have to scale up your staff, space, equipment, or anything else. Also, consider ancillary expenses like additional legal fees or insurance coverages.
Step 6: Include an appropriate profit margin
Include a reasonable profit margin. RFPs will state the amount of available funding, so after you’ve considered all of your costs, it’s up to you to determine whether or not the opportunity is worthwhile.
Step 7: Connect
When government entities release RFPs, they also include information about pre-bid solicitation hearings, when the agencies issuing the contracts discuss the scope of work and their needs.
Attending these is essential for small businesses that are new to the process. These meetings are great opportunities to ask questions, hear what others are considering, and meet other people bidding on contracts. Also, while these are typically held by the agencies, if the contract has already been awarded, the agency may facilitate a meeting for the primary contractor to help find subcontractors to meet their small business utilization goals.
By connecting with these people, you position your business as a potential subcontractor – a great way to get a foot in the door, gain experience and meet key industry connections. Another good person to know is the Agency Chief Contracting Officer (ACCO) for the agencies that your business is best suited to do business with and build a relationship.
When it comes to government contracts, the most successful small businesses are the ones that take a long-term approach to relationships and bidding, prepare in advance, are responsive to requests for information, and are responsible with obligations. Remember: The work you do becomes part of your vendor history for the entire life of your business.