#governmentcontractors — Public Fediverse posts

10 Tips to Expand Your Small Business Client Base Mix For Stability In Government Contracting

“SMALLTOFEDS” By Ken Larson

1. A mix of commercial and government business is good. In fact, most small business federal government contractors who move from commercial to government work, remain in  commercial business.  They separate government from commercial work in unique cost centers of the company for pricing and cost control purposes, recognizing the market and competitive differences in the two venues. Cost Center Strategic Planning

2. Your marketing efforts must be sensitized to swings in world events, geopolitics, domestic priorities and technology trends. 

 3. The over 100 federal government agencies all have the same small business contracting requirement under the law. Focus on government contacting applications for your core business by exploring agencies other than those with whom you have been doing business. SAM Contract Opportunities

4. Industry partners are an excellent way to move into new fields. Small Business Teaming

5. Keep an eye on “USA Spends” and a close view of the domestic vs. foreign emphasis in the federal budget.  (War vs. bridge repairs).  USA Spends

6. Remember there is not much agencies of the federal government do not buy and they buy in huge quantities. 

 7. If your high-end navy IT customer requires support, security or related services, it is likely his or her counterpart in the Department of Agriculture or Health and Human services requires the same expertise.   This rule holds true for other services as well.

8. Maintain Your Capability Statement current with evolving trends and your growth. Seek to utilize it as a vital tool in your company marketing program.Your Capability Statement

9. Preserve your credit rating and your finances in top shape to respond effectively when opportunities arise. Government contracting contains certain front-end loaded risks that must be anticipated and managed. Many of these are addressed in the following article. Federal government agencies do not always appreciate the cash cash flow and financing challenges for the small enterprise in the timing of awards and funding.The wise small business manages this risk with a solid credit rating and lines of credit to buffer those types of challenges. Managing Risk. 

10. Remember market research is a continuing and ongoing process. Values Based Market Research

10 Tips SmallToFeds

Explosive ProPublica Report Ties Sen. Susan Collins to Alleged Pay-to-Play Scandal in Maine Senate Race

https://bluepress.blog/2026/09/23/explosive-propublica-report-ties-sen-susan-collins-to-alleged-pay-to-play-scandal-in-maine-senate-race/

Establishing Compliant Small Business Systems For Federal Government Services Contracts

“SMALLTOFEDS” By Ken Larson

“To effectively market a federal government services contract a small business must sell on the basis of having a business system as well as technical performance infrastructure ready to run the job when a contract proposal is submitted. 

Parallel thinking is required to plan for government project technical effort against a template of necessary business process infrastructure, driven by introducing Federal Acquisition Regulations (FAR) into the company.“

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“INTRODUCTION

Key elements of the necessary business system infrastructure are discussed in this article which assumes that your are in the federal government services contracting business, that you plan to price your services at an hourly rate and sell them by labor categories with professional job descriptions to perform the government’s statement of work and bill by the hour. This article also assumes that you are not contracting under FAR Part 12, “Commercial Contracting”.

Labor Categories Each skill set in the company must be specified and defined as chargeable directly to a contract, or indirectly to a cost center overhead, a material handling pool or a general and administrative pool. Each labor category must have a job description and a prospective salary range for proposal purposes.

Cost Center A Cost Center is a single business entity within the company, organized for a group of business lines and clients with close similarities for technical and business management purposes. Cost centers are also driven by geographic location and the requirement to separate commercial from federal government business. Projects performed in government facilities may also require a separate cost center, since many of the associated expenses for such operations are born by the government. Cost centers usually have individual subsidiary ledgers, balance sheets and profit and loss statements and are summarized monthly to a company total. Each cost center must have job cost accounting for the contracts residing there and a cost center unique overhead rate.

Examples:
Commercial Cost Center
Federal Government Cost Center
Government Site Unique Cost Center

Annual Overhead Rate An overhead pool is made up of individual Cost Center indirect expenses projected for a given year divided by the projected Cost Center direct labor dollars for that year to determine a rate. Typical Cost Center Overhead general ledger expenses are those which cannot be effectively charged direct to contracts. These include Cost Center management, building lease, telephone, fringe benefits, electricity, capital equipment, depreciation, and the like.

An example of a 2026 Cost Center Overhead Rate of 110%  is as follows: 

2026 Gen Indirect Expense for Cost Center  $459,800= 110%
2026  Projected Dir. Labor $ for Cost center $418,000

Annual Material Handling Rate (if required) – Corporate wide expenses specifically associated with buying, storing and shipping material for a given year divided by the projected direct material dollars projected company-wide for that year. Not all companies have business that is material intensive enough to warrant a separate pool for material handling. Where extensive buying or subcontracting is conducted out of the corporate headquarters and inventory and shipping labor are high, a material handling pool is permitted by the government when it is not administratively possible to charge these expenses directly to contracts.

The estimated annual Cost Center Overhead Rate is applied to direct labor cost estimates to price labor cost through overhead for the Cost Center. When a contract is awarded, actual overhead expenses are allocated monthly to direct labor by contract on the basis of direct labor dollars incurred. Projected overhead rates are adjusted based on actual total cost center experience as the year progresses.

The estimated annual Corporate Material Handling Rate is applied to direct material cost estimates to price material for all Cost Centers. When a contract is awarded, actual material handling expenses are allocated monthly to direct material by contract on the basis of direct material dollars incurred. The projected material-handling rate is adjusted based on actual total company experience as the year progresses.

Annual General and Administrative Rate (G and A) is corporate indirect expenses projected for a given year divided by the total projected direct cost plus overheads for all cost centers for that year. Typical G and A general ledger expenses include costs which cannot be charged direct to contracts or to cost center overhead expenses such as corporate executive management, headquarters building leases, legal expenses, company wide insurance, corporate advertising, and the like.

MANAGEMENT FACTORS

Success will be determined by managing the numerator in each of the above equations and winning or maintaining the projected direct cost programs in the annual denominator. If expenses increase due to unforeseen events or if the company loses more projects than planned in the annual denominator base, the associated rate will go up for estimating purposes and under cost plus or time and material contracts the rate billed to the government will also increase. Existing fixed price contracts under these circumstances will become less profitable. Pricing for future fixed price contracts must reflect the increased rates being experienced to avoid further losses.

Correspondingly, if expenses decrease due to unforeseen events/good management or if the company wins or grows more projects than planned in the annual denominator base, the associated rate will decrease for estimating purposes and under cost plus or time and material contracts the rate billed to the government will also decrease. Existing fixed price contracts will become more profitable. Pricing for future fixed price contracts must reflect the decreased rates being experienced.

For time and material and cost plus contracts, monthly billing rates utilized are “Provisional Rates” that the contractor is free to change based on experience as long as he informs contracting officers and the local Defense Contract Audit Agency (DCAA) of the changes and reasons for the changes can be demonstrated. Before time and material and cost plus contracts can be closed out, provisional rates must be adjusted to reflect actual rates experienced. The contractor will owe the government if provisional billings have been higher than actual cost history.

Correspondingly, if the actual rates for cost plus or time and materials contracts have been higher than the provisional rates billed by the contractor, the government will owe the contractor at closeout.

Firm, Fixed Price Contracts are generally billed at negotiated fixed prices by line item at contract award and paid upon final delivery and acceptance or through monthly progress payments based on incurred cost with a percent of payment retention by the government until deliveries are complete. 

Fixed rate contracts are billed on a monthly basis through hours incurred. The hourly rates are fixed for the contract term and do not change.

COST ESTIMATING/COST ACCOUNTING EXAMPLE

Consider a historical 12-month project priced in a hypothetical small business utilizing forward pricing “Provisional Rates.” The contract began in July of 2018 and continued to July of 2019. Direct labor rates were escalated between 2018 and 2019 by 3.5% based on the Consumer Price Index. The company decided to keep the indirect rates for Overhead and G&A the same for pricing purposes in 2018 and 2019. The company had no Material Handling Pool and charged purchasing, inventory and shipping costs direct to contracts.

This government contractor maintained Overhead and G&A rate databases in Excel by month by year to forward price projects such as the one in this example. The databases all utilized the same generic chart of expense accounts as a template for the Cost Center Overhead and G and A monthly expense forecasts (equation numerators). The project was priced in cost center 1 at an overhead rate of 110% and a corporate G and A rate of 10%.

Cost Center Direct Labor forecasts in the databases were projected by hours and salary dollars for each existing and anticipated project and then summarized to determine the equation denominator which when divided into the Cost Center Numerator B, above) yields the Cost Center Overhead forecast by month by year. Direct Labor was then burdened by the projected Cost Center Overhead and added to Material and Travel to yield a total Cost Center business summary through Overhead.

The G and A rate data base summarized total direct labor through overhead, material and travel cost for all cost centers (equation denominator) and divided it into the total corporate G and A expense (equation numerator) The equation result yielded the projected G and A rate by month by year. All cost center labor through overhead, material and travel were then summarized and burdened through G and A to forecast a total cost projection by Cost Center at “Provisional Overhead and G and A Rates.

A copy of the annual baseline projected rate database was adjusted with actual expense data each month in the numerator after closing. The denominator for the month was also updated with actual existing and new business developments at the cost center level and G&A monthly actual cost at the corporate level. The resulting actual rate experience is then analyzed for trends as the year proceeds and utilized for making potential adjustments in provisional rates. 

When provisional rate changes are necessary, the government was notified in advance and provided with trend information justifying the rate change. Upon approval by the government, the baseline forecast was adjusted and utilized for billing on T&M and Cost Plus Contracts. The adjusted rates were also utilized to price all future projects. DCAA does not audit management decisions. They simply check the math.

Rate databases are usually fully detailed by month for the current year and 1-2 years into the future. Years 3-5 typically have summarized assumptions through use of escalation factors. Bids for out years 5-10 if required by the government definitely utilize escalation factors. Very few government contractors are willing to bid on a firm, fixed price basis beyond out year 5.

To comply with Cost Accounting Standards 401 and 402, this company set up each new government contract on job cost accounting in the identical manner in which it was proposed; in effect identifying direct labor, direct material and other direct costs to each contract monthly and allocating overhead and G&A utilizing the same numerator and denominator relationships upon which the contract was originally estimated.

The larger the direct cost that was incurred on a contract in this company the greater the share of the cost center overhead and corporate G and A was incurred by that contract. 

The entire content of this company’s business system was subject to audit and verification by the Defense Contract Audit Agency (DCAA) against Cost Accounting Standards 401 and 402. 

DCAA validated company records by requiring “Incurred Cost Submissions” from this contractor. The submissions validated final rates for cost plus and time and material contract closeouts. Fixed price contracts were closed out when final delivery was received and accepted.  Retention on monthly progress payments under fixed price contracts was released at closeout.

SUMMARY:

The software tools discussed at the posting at the “Smalltofeds” blog DCAA Service Contract Audits And Small Business Job Cost Accounting  are designed to assist you in running the above process from a job cost accounting perspective. However, these tools must be set-up to reflect the unique way you are organized and they must reflect your specific business plans as discussed in this article. They will not do that for you.

Illustrations of the the rates, pricing and the long range plan utilized in the above example are available in Chapters 45 and 51 through 53 of my free book, “Small Business Federal Government Contracting” and appendices A and B. You may download the book and related documents from the “Box Net” Cube in the right margin of the below site.”

Establishing Compliant Small Business Systems For Federal Government Services Contracts

Mastering The Spoken And Unspoken Rules Of Government Contracting

“WASHINGTON TECHNOLOGY” By Alan P. Balutis And Dennis Lucey

“There seems to be a few common “truths,” some “givens,” and a whole lot of conventional wisdom spoken as to how to get into the door of government. A quick overview of eight basic (and true) rules to gain your first foothold with the customer.”

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• “Know what the agency does and what it’s looking for.
• Bring specific ideas, not a panoply of promises.Show specific examples of applications that have worked in similar situations (government examples are best, but private sector ones are helpful too).
• Send a senior executive who can connect with the federal IT professional.
• Network, network and do more networking.
• Partner with other companies.
• Make strategic hires, especially those who know government from the inside.
• Use government contract vehicles and know which one(s) your customer turns to.
• Winning presents its own guidelines to go by in order for that run of success to continue, however.

Here is another set of seven rules for what continues that positive cycle:

• Read the procurement, re-read the procurement.
• Read the contract, re-read the contract.
• Get competent assistance at the beginning.
• EXECUTE — Be prepared to implement what you win.
• Be prepared for change after you win.
• Know who wanted the contract awarded.
• Communicate continually.

But there are also some unwritten/unspoken rules, less often discussed but equal in importance as those noted above.

Let’s start with one expert that could be seen as slightly left-of-field, but surely had GovCon in mind.

“He who does not lay his foundation beforehand may by greater abilities do so afterwards — although with greater trouble to the architect and danger to the building” — Machiavelli, The Prince, 1532.

When a government customer is interested in working with your company, one of the first questions s/he will ask is “How do I reach you?,” meaning what contracting vehicle could our agency use to acquire your products or services.

So know what government-wide contracting vehicle(s), schedule or agency-specific contract is most convenient, available and more often used? Do they give priority to one or more small or disadvantaged business categories (veteran-owned, HUBZone-certified etc.).

Be ETDBW = Easy To Do Business With. Deliver MVA = More Value Add.

Companies usually deliver a product or a service. Think of that as the first rung of a ladder. Now start climbing the ladder, rung by rung.

What do your customers do with your product or service after receiving it? Distinguish between what you are selling and what your customers are buying. What are the broader problems those customers have?

Take a broad view of your customer’s underlying problems that go beyond you and your product or service. What more can your company do to help them solve those problems? See what your customers do with what you give them, and either do it for them or help them with it.

As you answer those questions, you’ll be able to add more value. You’ll be delivering a solution, not just a product or a service. You will be able to price in terms of value rather than cost.”

Mastering The Spoken And Unspoken Rules Of Government Contracting

ABOUT THE AUTHORS

Alan Balutis is the president of APB Ltd and managing partner with the CIO Collective. He’s also a former senior director and distinguished fellow at Cisco Systems Inc. 

Dennis Lucey is a vice president with TKC Global, part of the Akima family of companies. He has over 40 years of business development experience in the federal market.

Pricing Small Business Federal Government Service Contracts

Integrate Long-term Company Strategy With Short Term Proposal Pricing Objectives

‘SMALTOFEDS’ By Ken Larson

“Small businesses entering or growing into federal contacting often struggle with developing a pricing approach. They must design a pricing structure to pass an audit and win competitively. A winning strategy for federal services contracting must involve a view of the horizon as well as the instant bid on the table.“

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“If you are a small enterprise selling off-the-shelf commercial items under FAR Part 12 or marketing commercial products on a GSA schedule, you may be initially challenged by the government contracting venue. With persistence you will establish selling relationships through agencies and prime contractors. Your pricing challenge is minimal. A service contractor faces a far greater challenge in understanding the nature of government contact pricing and winning at it.

Strategic thinking must therefore be applied to structuring a government service contracting cost center in your company. It must involve long term planning and designing a business system as well as establishing rates and factors to bid new work.

LONG TERM COMPANY STRATEGY

Build a Business System With Pricing in Mind:

We have previously discussed the basics of small business government contracting business system design: Job Cost Accounting Basics

The structure or your pricing approach from the cost element level through burdens must use the same template as your job cost accounting and billing. The parallel mapping provides the consistency required to pass audits or get your billings approved on a service contract.

Please read the above article and its related references. Then design your processes recognizing the guidance there and applying it to your company organization, and the way you produce your supplies and services:

Sculpt the DCAA Auditor

As you begin submitting government contracting proposals you will encounter your local DCAA audit office. They learn about your company by auditing your cost proposal rates, job cost processes and systems, billings and contract closeouts.

Keep in mind that you are shaping opinions in these encounters on the part of these government personnel that will influence your future and be passed on in reports to contracting officers. Your unique company business system structure must be carefully explained to them against what they know best; their DCAA Audit manual and FAR Cost Accounting Standards:

DCAA Audits and Job Cost Accounting Systems

Protect Rate Information

Your fully loaded rates will appear on your GSA schedule in the public domain, in subcontracts from prime contractors and in data acquired under the Freedom of Information Act (FOIA) by competitors.

It is generally recognized by all industries participating in federal government contracting that internal overhead and G&A rates and the data that support them are proprietary data. The reason for the proprietary nature of rate data between companies is that in government work firms are teaming with each other exclusively on one project and competing against each other on additional contracts or projects at the same time.

Companies do not disclose the details of their rates to other companies and they do not expect to see another company’s proprietary rate information. So companies view each others rate information on a fully loaded basis, meaning the total of the base cost, any proprietary indirect cost and an agreed upon profit percent.

If a prime contractor requests that subcontractor proprietary rate information be supplied with a proposal the detail should be double wrapped and the package stamped, ‘Government Eyes Only’. The prime will then hand the package off to DCAA without opening it and receive only the fully loaded result of the burdened rate pricing.

For further information on intellectual property protection and protective markings on government contract proposals please see the following article:

Protecting Intellectual Property

Recognize Overhead and G&A Rates Are Critical

Assuming your competition pays a generally similar labor rate to their employees as you do and that fringe costs about the same for everyone, then overhead and G&A are what wins and loses contracts.

Please read the following articles carefully with regard to long range planning and setting your overhead and G&A rates:

FAR and CAS Compliant Systems

Provisional Indirect Rates

Keep in mind that if you are performing work inside a government facility the government will expect to be charged a lower overhead rate than if you were paying the space and occupancy costs and the light bill. This is normally achieved by establishing a separate cost center for “On site” (Internal to government quarters) work with lower overhead expenses applied to project direct labor dollars in that cost center.

Price Set Aside Contracts the Same as Full and Open Competitions

If you are a small business lucky enough to receive a sole source set aside contract under an 8(a) or Hub Zone award, or if you are participating in limited competition under a small business set aside designation, use the same sharp pencil you use on the full and open market. Your goal is to compete for the long haul and inflating estimates on particular jobs due to limited competition has an inflationary effect on your business as a whole.

Your company past performance is being constantly evaluated by the government and prime contractor community. Consistency attains and retains new business. You will eventually grow to the point where set asides and sole sourcing will no longer be available; prepare early.

Know the True Value of Your Proposal

Develop risk thresholds (ceiling and floor) for your bids. The ceiling is the price for which you can bid a job, perform to meet specifications and win. A floor is the lowest possible price for which you can accept a contract and survive.

Do not bid or be negotiated out of these thresholds. “Buying In” does not work and sacrificing the future of your company by “Low Balling” cost proposals and hoping to get well on scope changes later is dangerous.

In government contracting the only worse scenario than losing a contract is winning it, performing poorly (cost, schedule or technical) and getting a black eye on your company past performance record that takes a long time to go away.

Understand a Proposal is the Opening Chapter a Baseline for Your Contract

Your proposal represents an initial offer to a government agency or a prime contractor. Please read the following articles on how this baseline is initially set and controlled through the negotiation process and ultimately through careful contract management.

Project Baseline Managment

Contract Negotiation

SHORT TERM PROPOSAL OBJECTIVES

Make Bid/No Bid Decisions Wisely

Conduct your bid/no bid decisions effectively. Please see the bid/no bid analysis process at the beginning of the following article:

Contract Negotiation

Be Conservative in Rough Order of Magnitude Pricing

A common government planning technique in the early phases of marketing is to ask questions and review and approve a concept paper by a company then informally request for “Planning Purposes”, a rough order of magnitude cost estimate (ROM).

If you provide a ROM be very careful. It tends to get cast in concrete in the customer’s mind, even though it is not the final, formal proposal. Make it conservative in cost content and schedule duration, then plan to beat it with your formal proposal.

Make sure you caveat the ROM if you are asked for it with the statement in your cover letter that it is for planning purposes only and is not a commitment on the part of your company. State that you will be happy to make a full formal proposal/commitment upon receipt of a formal RFP from an authorized contracting officer. Keep in mind that contracting officers are the only people who can commit the government:

Customer Relations

The government usually goes forward with the concept paper and the ROM for approval of the funding necessary for the job. The “Agency Higher Ups” either give the project personnel the approval to do a set aside or they require a competitive procurement.

You may want to read the following article on Statements of Work:

Contract Statement of Work and Technical Specifications

Know the Difference Between Firm, Fixed Price, Time and Materials and Cost Plus Contracting

During the solicitation and proposal process the contract type is specified.

Firm, Fixed Price (FFP) is the riskiest type of contracting and should be undertaken only when you have a definitive grasp of a precise statement of work with known variables and end products. You should have achieved similar work scope in the past or be delivering follow-on products and services that are mature in nature to undertake a firm, fixed price contract.

FFP is particularly risky in software development contracts or high technology program pressing the state of the art. You will receive no more in the form of funding than your bid price on a firm, fixed price contract.

Time and Materials (T&M) contracting places the risk on the government and is suited to long term service contracts of a development nature. T&M may be contracted with fixed labor rates, making the hours and pass through materials and other direct costs the only variables.

Cost Plus (CP) contracting is the least risky of all contract types and you are assured of receiving every dollar of cost incurred under this type of contract.

The lower the risk to the contractor the lower the expected negotiated profit rate you can expect, since the government considers risk the principal factor in profit negotiation.

For further explanation of contract types in more detail, please see the following article:

Government Contract Types

Develop a Price Profile of the Competition

Use a copy of your own forward pricing long range plan (LRP) to model your strongest competitors. Profile your best intelligence regarding their size, location, contract base and estimated overhead and G&A expenses. Then interpolate, from your knowledge of the market, their labor and fringe costs, as well as other direct costs as you prepare your proposal. Incorporate any unique approaches you estimate your competition may offer that impact cost.

Modeling Your Competition

Adjust your competitor cost model to perform “What If Analysis” during your risk assessment and proposal review process. For an example of an LRP cost model please see the Box Net Cube in the left margin of this site: Small Business Federal Government Contracting It is Appendix B to the book, “Small Business Federal Government Contracting” and is available as a free download in Adobe format from the BOX in the right margin of the site.

Understand “Best Value” Source Selection

When the government declares a “Best Value” proposal award process the agency will perform a weighted trade study of cost verses technical and management factors in reviewing proposals. They will announce the weight of each factor in relative terms within the solicitation so contractors can focus on the most important elements.

What best value means quite simply is that if you are the low price bidder you may not win. If a competitor proposes a superior technical and management approach, a higher weighted rating in those factors may offset an otherwise non-competitive bid price, resulting in an award. This is a fact you must keep in mind when preparing your own proposal. In short you must perform your own trade study on your own bid.

Past performance has also become a significant weight factor in proposal evaluations in recent years. To address this challenge, please see the following article:

Past Performance Challenge

A balanced proposal, with specific, heavy emphasis on government-designated weight factors and an economical, yet realistic cost/price usually wins. Offsetting weaknesses in any designated government weighted area by proposing excellence in other weighted areas is vital.

Beware of Unallowable Costs

Over the years the federal government has determined that certain costs cannot be allowed in prices, cost reimbursements or settlements under contracts with the US Government. The government is unwilling to pay for these costs as direct charges to federal government contracts or through indirect expense pools applied to federal government contracts.

A company is not prohibited from incurring unallowable costs, but they cannot be recovered either directly or indirectly under federal government contracts. To manage unallowable costs, separate accounts must be established for these type expenses and they must not be priced directly into federal government contracts during the proposal process.

Such costs cannot be made a part of the expense pools which are applied to federal government contracts through an overhead, material handling or G&A cost allocation at accounting period close or during forward pricing rate planning. For more detail on unallowable costs please see the following article:

Unallowable Costs

Integrate Pricing With Technical and Management Approaches

Establish price targets as soon as possible for major tasks, evolve a program plan, or if you are bidding a T&M, IDIQ type program develop a sample work order for a typical representative effort.

As the technical and management proposal move toward completion, use established checkpoints to evaluate the efficiency of your cost estimate, escalation factors, labor, material and other direct costs. Then apply your indirect rates and subject your total proposal to a credibility check with regard to a believable cost estimate considering your solution and its time frame.

Run your competition price model and bring in some outside experts to review the end product proposal “Cold” before it is submitted.

Manage Best and Final Offers (BAFO) Carefullly

Most government solicitations require a format and terms and conditions with submission that permit contract award without further discussion. However, many involve a down-select process, briefings by those selected in the “Competitive Range”, a call for best and final offer (BAFO) or negotiation to achieve a final price.

The best and final offer period is a sensitive time. Most contracting agencies that call for a BAFO will cite weaknesses or concerns in the selected contractor proposals. They wish to hear about solutions to those weaknesses during BAFO briefings and require a re-submitted offer to correct them. The price may be adjusted as well and that is a key consideration. Pay particular attention to the way the BAFO instructions and concerns, specific to your down-selection, are worded. Look for hints that indicate critical opinion about your pricing, and then adjust your costs.

Consider the cost, schedule, technical and past performance implications of the BAFO request letter from the government and revise your proposal by the required submission date. Close the loop on all matters with your suppliers, subcontractors and prime contractors, and then conduct your briefing to the customer when it is scheduled. Present a united front to win. Your price should be your best. You will not be offered a chance to bid another competitively on that program.

On some procurements you may be asked to undertake additional discussions to determine final contract pricing. Please see the negotiation template at the following article for guidance on that process:

Government Contract Negotiation

SUMMARY

This discussion has conveyed how pricing should be a natural outgrowth of the organization structure, market strategy, competitive analysis, business system design and long range planning.

We have further explained how your long and short term pricing factors should be integrated with the management and technical elements of any given proposal. Take the long and the short view of your business by integrating long-term company strategy with short term proposal objectives”

https://www.smalltofeds.com/2010/05/pricing-small-business-federal.html

Marketing to Achieve a Small Business Set-aside Government Contract

“SMALLTOFEDS” By Ken Larson

“Sculpting a government contracting business opportunity to the point where it becomes a small business set aside procurement.”

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“Marketing is one of the greatest challenges for the small business federal government contractor. We have previously discussed the federal government marketing process at the following articles:

Insights to Succeed

Small Business Government Contract Marketing

Customer Relations

Techniques for Product Development

GENERAL CONSIDERATIONS

Small business set-aside procurements are far more frequent than sole source contract awards.  Agencies must prepare special justifications for sole sourcing.

Small business designations are beneficial to firms who hold them by enhancing the probability of an award through agency restrictions on prime contractor bidding to only those who hold the group designation. Others may bid as subcontractors to the prime but the prime small business contractor must be capable of performing at least 51% of the total effort in terms of work scope, hours and dollars.

In either sole source or set-aside marketing, an agency making the buy must be convinced that sufficient capability exists in a single company or in the small business community to set a contract aside. The agency must be convinced early – before a formal procurement announcement is published on  The System For Award Management Contract Opportunities (SAM) 

Federal government procurements are classified under the SBA Small Business Size Standards in terms of North American Industrial Classification System (NAICS) Code, number of personnel and/or annual sales. To determine whether a firm qualifies for a given bid, note the NAICS for a given solicitation and download the SBA Small Business Size Standards the Box Net “References” Cube in the right margin of this site:

Small Business Federal Government Contracting

Part of the sole source or set aside marketing task is to suggest to the agency the NAICS Code (hence the size standard) for a prospective procurement.

Registering to bid government contacts and establish small business designation may be achieved using guidance in the below article:

Registering Your Business For Government Contracting

The small business designation is verified by site surveys and bid vetting for each solicitation prior to contract award.

EARLY REQUIREMENT TARGETING IS THE KEY TO SUCCESS IN SET ASIDE MARKETING
Effective set aside marketing reaches the agency decision makers with technical, budget and schedule authority before a synopsis of the requirement is posted on SAM.

The objective of this form of targeted marketing is to get concurrence from the government to set the program aside for small business to eliminate the prospect of full and open competition involving large business.

• Become known to targeted agency personnel by visiting their program offices and meeting the decision makers.  Bring a capability statement:

Your Capability Statement for Government Contracting

• Present your qualifications openly, objectively and specific to their needs.  You must determine what those needs are through market research, trade magazines, research on what they are buying on SAM, as well as postings on their web site that are future-program oriented.
• Subscribe to periodicals like “Washington Technology” and other trade magazines.  Observe agency trends and analysis that impact your market segment.  There have been set aside programs marketed by small companies through acquainting agency management and technical personnel with capabilities they were not aware existed in the small business community or fulfillment of needs they in fact did not know they had.
• Pay particular attention to SAM “Sources Sought” or “Requests for draft RFP Comment”  on programs that have yet to be formally solicited. Obtain an appointment to present your capabilities to the decision makers (not the gate keepers).  Be courteous to contracting officers but understand they are not the individuals who make source selections. Understand that once the requirement is formally published on SAM the gate closes on informal visits to the customer and the competition begins in the form of proposals by competitors.  It is too late at that point to set the program aside for a sole source or a small business designation if it has not occurred by the publication stage.
• Cultivate teaming relationships with other firms in your industry and look for early opportunities in agencies, not only to prime a program but to bring a team of qualified contractors in lesser roles to fulfill them with you or join a team being led by a more experienced firm:
• Understand the small business start up past performance challenge and work to meet it:

Small Business Government Contract Teaming

Understanding the Past Performance Challenge

• Attend small business outreach events by agencies and prime contractors.  Stay attuned to who is attending and research their needs and requirements.
• Make a point to be present at bidders’ conferences for existing solicitations that you may not choose to bid but which may lend insight into the agency needs and prime contractor relationships in the future.

SUMMARY

As a small business becomes known in the federal government contracting community, successful marketing of sole source or group-designated business becomes easier, but it is always a challenge due to the need for taking early action in windows of opportunity.  Find those windows and communicate capabilities to the decision makers and industry team members who can help you.

If you are eligible for any of the designations discussed in this article, make small business set asides or sole source procurement key elements in your marketing plan.”

Marketing to Achieve a Small Business Set-aside Government Contract

Why Government Contractors Lose Recompetes They Should Win

“WASHINGTON TECHNOLOGY” – By Nick Coppings

“How developing your teams human-IQ can transform customer relationships and secure your revenue pipeline. Organizations with high recompete win rates understand that relationship quality is the best leading indicator of winning.”

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“We lost HOW MUCH?” The chief growth officer’s voice echoed through the boardroom. Another “sure thing” recompete lost. Not due to pricing, performance issues, or even technical shortfalls.

The customer’s feedback was brutally simple: “We felt the winner understood our future needs better.”

This blindspot—investing heavily in technical excellence while neglecting relationship intelligence—costs government contractors hundreds of millions annually. Your team delivers flawlessly on what’s written in the contract, yet competitors who uncover the customer’s unstated needs walk away with your revenue.

TECHNICAL EXCELLENCE: NECESSARY BUT INSUFFICIENT

You’ve built a team of certified program managers who deliver on time and on budget. Your CPARS are stellar, yet you’re still losing recompetes. The reason isn’t your technical capabilities. It’s your limited engagement skills.

While your team focuses on requirements, competitors focus on understanding the customer’s evolving needs.

THE $35M LESSON

A mid-tier defense contractor with five years of flawless delivery lost their $35M DoD recompete to a smaller competitor. Their CPARS ratings? Perfect. Technical solution? Superior. Yet they lost.

The post-award debrief revealed why: while they documented requirements, their competitor embedded with stakeholders, uncovering an unwritten agency priority shift toward integrated digital services—intelligence never hinted at in the solicitation.

“They didn’t just execute our requirements,” the government PM explained pointedly. “They understood where we were going next.”

The aftermath? A $35 million revenue hole that took 12 months to fill, a rushed reorganization, and the need to scale back growth plans for the coming fiscal year.

THE 75% VULNERABILITY: MISALIGNED TRAINING INVESTMENTS

Your PMs have PMI, Agile, and ITIL certification, but can they read a room? While technical training consumes budgets, 75% of contractors never invest in the people skills that determine recompete outcomes.

This critical gap leaves your technically excellent team vulnerable to competitors with superior people skills.

HUMAN INTELLIGENCE QUOTIENT: THE WIN RATE ADVANTAGE

Organizations with high recompete win rates understand that relationship quality is the best leading indicator of winning. So, they invest in improving their teams’ Human Intelligence Quotient (HI-Q). These engagement skills focus on building winning relationships that lead to intelligence that your customers won’t explicitly state.

One government contractor implemented relationship intelligence training after losing three consecutive recompetes. Within 18 months, their win rate had improved by over 20%.

Technical excellence gets you to the table. Relationship quality wins the contract.

BEYOND INTEL: CUSTOMER UNDERSTANDING WINS DEALS

Customer intel (requirements, stakeholders, budgets) is table stakes. Customer understanding goes deeper – what they think, what matters to them, and the bigger picture. This intelligence comes from listening, focusing on them, and providing them confidence to share things they aren’t telling anyone else.

TURN CHECK-INS INTO INTEL GOLD MINES

Transform routine meetings with these types of questions:

• What new challenges is your team facing this month?
• In the last few weeks, have any changes come up in [mention something relevant like who’s on the team, how things are done, short-term goals] or that we need to pay attention to?”

Don’t jump to solve the new problem, just listen. When customers feel heard, they share what they tell no one else. Follow up with:

• Why is this issue becoming more important now?
• How might this affect your mission objectives?
• What’s leadership’s perspective on this?

By asking these simple questions, listening to the answers, and then going deeper with additional questions, while not rushing to provide a solution, your team can turn regular project meetings into opportunities to gather critical customer intel that could potentially win your next recompetes.

THE THREE LEVELS THAT LEAD TO WINS

Winning a recompete requires:

1. Deliver what was Contracted
2. Connecting to Their Goals: Show you care about them achieving their mission.
3. Human Intelligence Quotient: Creating real connections that help you understand what they need but haven’t written down.

Most firms are okay at the first, sometimes get to the second, but not many nail the third. But it’s that third level – real human connection – where you discover what it takes to keep those contracts.

5-MINUTE FIX: PROTECT YOUR PIPELINE

Does your team have the HI-Q skills to fully understand your customers?  

75% of contractors don’t, and they miss those unspoken customer needs that decide million-dollar awards.

The stark difference between 62% and 84% win rates isn’t technical—it’s relational. Our free HI-Q Assessment reveals whether your team consistently uses the 25 critical engagement practices that prevent being blindsided by competitors who understand the customer better. Take the 5-minute assessment now.

A little HI-Q training can go a long way to ensuring you win your recompetes, identify opportunities for on-contract growth, and improve your program execution.

As Senior Partner at Hi-Q Group, Nic Coppings brings over 20 years of experience in the Government market, helping organizations secure billions in contract wins. 

10 Common Traits Among Successful Small Business Government Contractors

“SMALLTOFEDS” By Ken Larson

“As a volunteer counselor over the last 17 years, I have noted common traits among the most successful small business federal government contractors.  The following are 10 of the most prominent traits and tips on how successful small companies developed them.“

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“Commercial success before entering government contracting.  From maintaining buildings to keeping the lights on, from grounds maintenance to flight maintenance, look for niches that can be pursued based on successful past performance, transitioning via industry teaming via subcontracts, partner roles with larger companies or in small business set aside orders for minor items and simpler services provided directly to the government.  Your Entry Points

Willingness to concede there were things they did not know and seeking advice early.   You may download the book, SmallBusiness Federal Government Contracting and its supplement from the “Box” in the right margin of this site.  You may also benefit from the free “Reference Materials”. Contract agreements, incorporation instructions for all the US states, guidance on marketing and business planning are also included.   Free Books and Supplements

Recognition of the value in industry teaming. Synergism is paramount in teaming with any size company, whether in a lead or subcontracting role. There should be technical, management and market segment similarities between you and any company with whom you are considering teaming. Your prospective team member ideally will not be a direct competitor; rather a business in a related field with whom you share a mutual need for each other’s contributions in pursuing large-scale projects. Small Business Teaming in Government Contracting 

Strong capability statement (CAPE) development, networked prudently among government agencies and large government contractors. Your CAPE targets contracting officers and prime contractor buyers who are seeking to fulfill their small business buying goals. It is a way to get you in the door and speak to, or correspond with, the management and technical personnel who are the decision makers in sourcing small business buys.  A good quality CAPE is the spearhead of your marketing campaign and your visual image;  focused and direct, it must be informative, concise and a snapshot of the very best you can offer. Your Capability Statement

Maximizing set-aside qualifications in seeking both prime and subcontract opportunities. Small business group-designated procurements are far more frequent than sole source contract awards.  Agencies must prepare special justifications for sole sourcing and those most frequently approved are for Hub Zone and Small, Disadvantaged [8(a)] firms.  Small business group designations are beneficial to firms who hold them by enhancing the probability of an award through agency restrictions on prime contractor bidding to only those who hold the group designation. Others may bid as subcontractors to the prime but the prime small business contractor must be capable of performing at least 51% of the total effort in terms of work scope, hours and dollars. Marketing to Achieve a Small Business Set-aside Contract

Prudent bid/no bid decisions. Government contract proposal preparation is time consuming and can be costly. Meeting agency Request for Proposal (RFP) requirements with a responsive proposal can be well worth the effort if a winning strategy can be formulated.  When considering a proposal to a given government solicitation, conduct a bid/no bid exercise. By going through that process you will begin formulating your win strategy or you will discover that you should not bid the job for lack of such a strategy. Making an Astute Bid/No Bid Decision

Ethical business conduct and avoidance of conflicts of interest. A small business ethics image is different than a product or service “Brand Identity”. The latter focuses on that which the customer receives from you in the way of products and/or services. A company ethics image is how the organization is viewed in general from a public perception as positive or negative.  That view is held by customers, your industry partners or prospective partners, regulators and the average citizen. If carefully sculpted your public ethics image can be a vital element in business success; if neglected it can pose a high risk to your enterprise.  Maintaining an Ethical Company Image

Excellence in risk analysis. The challenges and difficulties for the small business in government contracting are not so much in the areas of barriers as  they are in lack of knowledge (which I concede is a form of barrier but one that can be dealt with) Large business and government agencies take advantage of the small enterprise lack of knowledge or make poor assumptions regarding what a small business knows about the Federal Acquisition Regulation (FAR) and associated Cost Accounting Standards (CAS). This leads directly to abusive practices. Managing Small Business Risk

 Solid long range planning and plan maintenance. The time to consider separating government from commercial work and/or establishing new cost centers for bidding, accounting and billing purposes is when the enterprise is generating a long range marketing plan to determine rates for bidding new long term contracts. The location of the work (both geographic location and whether performance is in or out of a government facility, its duration, skill set requirements, government-mandated fringe benefits for workers and the competition are all factors to consider).Strategic Planning for Small Business

Excelling in meeting the past performance challenge, building a performance record with solid customer service and sensitivity.  How can a new organization or one that is new to government contracting muster a response to the past performance challenge? The answer lies in historical projects that may be similar in the commercial arena and a high quality proposal that clearly demonstrates an understanding of the requirement at hand, a unique and cost effective project plan and high performing personnel and/or products tailored to the statement of work to offset an interim, light past performance record. Meeting the Past Performance Challenge“

10 Common Traits Among Successful Small Business Government Contractors

Small Business Set-Asides – What The Data Signals For What Comes Next

“GOVCONWIRE” By Kevin Plexico Deltek Senior Vice President Of Information Solutions

“Set-asides remain central to federal procurement, although qualification, certification and competition look very different from even 12 months ago. Firms that balance compliance rigor with proactive market engagement and a diversified growth strategy will be best positioned for sustained success.”

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“The federal small business market is in a state of flux. With sweeping SBA recertification rules, increased scrutiny on the 8(a) program and shifting agency priorities, the landscape has been fundamentally reshaped, tightening the compliance requirements small businesses must meet to remain competitive as the number of prime contract positions continues to shrink. These shifts are already visible in current acquisition trends and are influencing corporate decisions and investments.

Across agencies and programs, these developments point to a clear pattern in the evolution of the federal market. In this article, I’ll outline the regulatory, market and procurement changes driving this evolution, and show how small firms must adapt their growth, compliance and go-to-market strategies to stay competitive.

How Agency Buying Behavior is Evolving in FY 2026

The pattern defining the federal market becomes clearer when looking at how agencies are buying in FY 2026. Overall, contracting dollars grew in FY 2025, which may come as a surprise to some. Last year ended as a record year for the Defense sector, which grew by 8.9%. Civilian agency obligations, on the other hand, decreased by 2.3%.  

However, despite the overall increase in FY 2025 contract spending, small business awards decreased $2.6 billion, or 1.5%. Multiple factors contributed to this decline, including contract terminations, agency reorganization and potentially increased scrutiny of certain socioeconomic programs. Also, there is a bit of bad math. In 2025, growth was largely driven by increased spending in aerospace and defense programs and in health care, while spending in professional services, IT, and architecture, engineering and construction remained flat or declined.

The areas that grew are dominated by large companies, while the areas that declined or went flat are hot spots for small-business contracting.

At the same time, as we’ve seen for several years, the volume of actual prime contract positions continues to shrink despite an increase in overall contracting dollars. With that, the number of primes has also dropped (the number of small businesses participating in the federal market is down 49% since FY 2010).

Opportunity Trends Within a Changing Environment

So, where is this spending actually happening? Deltek’s expert federal analysts have found that some small-business industry segments have seen a stronger boost than others, such as cloud products and services. Identifiable cloud spending with small business partners jumped to $4.4B in FY 2025, a total that rose $200M from FY 2024.

Our analysts have noticed an increase in requests for information, or RFIs, issued for recompetes of formerly sole-source contracts as the Administration pushes for more competition. Additionally, some RFIs may open the door for different competition types compared to the acquisition strategy used for the predecessor contract.

For small businesses, this shift elevates the importance of early engagement. Firms that actively participate in market research are better positioned to influence requirements development, competition structure and teaming strategies before solicitations are finalized.

Changes to SBA And Other Small Business Regulations

These acquisition trends are unfolding alongside a more constrained and increasingly complex regulatory environment.

While federal small business spending is up in some areas, spending cuts are on the horizon in others. Our initial findings on the recently released President’s Fiscal Year (FY) 2027 Budget Request showed a total of $329M in discretionary budget authority for the SBA, a 67% decrease from the FY 2026 enacted level. This includes a $309M drop in Entrepreneurial Development Programs, with several programs eliminated.

This is one wrinkle for GovCons working with the SBA or relying on the SBA for assistance. Another is the raft of recent eligibility and program changes, including:

• Mandatory recertification within 30 days of mergers, acquisitions, or ownership changes, with immediate loss of eligibility on multiple-award set-aside vehicles if the company can no longer certify as small
• Disqualifying recertification now uniformly affects all SBA programs (8(a), WOSB, SDVOSB, HUBZone)
• FAR / SBA rules now make size determination task-order specific on MACs, shifting what counts as “small” when bidding
• 8(a) recompetes no longer have to remain in the 8(a) program allowing them to be moved to other socioeconomic programs

Together, these developments signal that maintaining small business status increasingly depends on transaction timing, compliance discipline and internal coordination rather than initial certification alone.

How Increased Scrutiny Is Reshaping the 8(a) Program

These dynamics are most pronounced within the SBA’s 8(a) program. Joining other agencies in the review of the program, the Pentagon’s review stems from what it has alleged are fraud schemes. Its initial focus was on the last 15 years of high-dollar, limited-competition contracts. Coupled with stronger audit enforcement, policy changes and a raft of executive orders, the 8(a) program has reversed its year-over-year growth, with a 44% decline in program participants since FY 2023.

Policy changes occurred regularly in 2025 and have extended into 2026. In January of this year, the SBA issued policy guidance eliminating presumptive social disadvantage status based solely on race, requiring documented evidence of social disadvantage. The next week, the agency suspended more than 1,000 firms for noncompliance and terminated additional firms in February and March.

For companies remaining in—or seeking entry into—the program, success increasingly depends on maintaining audit readiness, responding quickly to data requests and sustaining close coordination with contracting officers and program managers. 

5 Takeaways for Small Business Contractors

So, we’ve seen that overall contracting dollars are up, but the environment for many small businesses is full of changes and challenges. Contractors planning for the remainder of FY 2026 should consider the following implications:

1. Increased oversight and compliance pressure are influencing how agencies use small business programs, underscoring the need for more deliberate, risk-aware contracting decisions.
2. While 8(a) set-aside and sole-source procurements may shift to other competition types, such as WOSB, HUBZone, SDVOSB and potentially VOSB, this creates opportunities for firms certified in those socioeconomic categories. Responding to RFIs and market research can influence the resulting competition.
3. Greater reliance on contract vehicles is shaping award activity, making it essential for firms to be positioned on the right GWACs and IDIQs. These vehicles also raise the bar on compliance capabilities, effectively pruning the competitive field to the most prepared firms.
4. Rising competition and a continued decline in prime opportunities are putting greater pressure on incumbents to differentiate through past performance and strategic teaming.
5. Data-driven business development is becoming a competitive advantage, as leading firms use market intelligence to identify opportunities earlier and target the most active agencies.

The small business landscape is in a state of rapid change, and there are opportunities out there for proactive businesses, but the rules and structures governing it are shifting rapidly. Set-asides remain central to federal procurement, although qualification, certification and competition look very different from even 12 months ago. Firms that balance compliance rigor with proactive market engagement and a diversified growth strategy will be best positioned for sustained success.”

ABOUT THE AUTHOR:

Kevin Plexico is senior vice president of Information Solutions for Deltek, is responsible for overseeing research, analysis and specification creation for customers in the Government Contracting and Architecture, Engineering & Construction (AEC) industries. He provides thought leadership and expert opinion to industry executives and is a recognized expert on the public sector market.

Every Capability Statement Needs A Mission Story

“WASHINGTON TECHNOLOGY” By Katie Helwig 

“Organizations that consistently earn customer trust don’t just describe their capabilities. They demonstrate ‘Proof Point Marketing’ – the difference between product-focused marketing and mission-focused marketing.”

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“A worldwide communications upgrade was postponed during its final stages because of a communications cable.

Not the software.

Not the installation.

Not the people.

A communications cable.

The cable had been manufactured to an older specification and wasn’t compatible with the upgraded equipment. The dry run did exactly what it was designed to do—it identified a critical issue before implementation. The upgrade was postponed until the problem could be corrected.

To most people, it was just a cable.

To the leaders responsible for mission success, it represented operational risk.

I remember those conversations well.

As the spouse of an Air Force officer for more than two decades, I had a front-row seat to the conversations that followed him home after long days—and sometimes long nights. More than a decade after his retirement, those conversations still shape how I think about leadership, mission, and marketing.

Around our on-base neighborhoods, conversations rarely centered on organizational charts, budgets, or management structures. They were about airplanes. Missile launches. Satellites. Communications. Mission success.

Over time, I noticed something.

The higher the rank, the closer the conversation got to the mission.

Senior leaders weren’t preoccupied with individual components. They focused on outcomes. They understood that every component mattered—but only because of the role it played in accomplishing the mission.

That lesson stayed with me long after military life and into my work helping government contractors grow.

Too often, we market the communications cable. We lead with our certifications, contract vehicles, technical capabilities, years in business, differentiators, and corporate achievements. Those are important. They demonstrate capability and credibility.

But they answer only one question:

What do you do?

Government buyers are asking a different question.

How will what you do help us accomplish the mission?

That distinction changes everything.

Federal agencies don’t buy products and services in isolation. They buy confidence that those products and services will enable successful mission outcomes. Whether the requirement is cybersecurity, engineering, recruiting, logistics, program management, or a communications cable, the evaluation ultimately comes down to reducing risk and increasing confidence that the mission will succeed.

That’s why I’ve come to believe that marketing occupies a much more strategic role than we often give it credit for.

Over the past decade I’ve watched business development, capture, operations, HR, finance, security, proposal, and leadership each contribute something essential to winning work. Every one of those functions creates evidence that an organization can be trusted.

Marketing’s role isn’t simply to communicate that evidence. Marketing’s role is to connect it to the customer’s mission. That realization became the foundation for a framework I call Proof Point Marketing.

At its core, Proof Point Marketing is about building trust through mission-focused marketing. Every organization possesses proof.

Past performance.

Operational maturity.

Experienced people.

Successful delivery.

Customer relationships.

Technical capability.

Innovation.

Financial strength.

Security and compliance.

The challenge isn’t collecting those proof points. The challenge is helping customers understand why they matter. Every capability has a mission story. A recruiting firm doesn’t simply fill positions. It strengthens mission readiness.

A cybersecurity company doesn’t simply implement controls. It protects mission continuity.

A program management contractor doesn’t simply manage schedules. It enables mission execution.

The communications cable wasn’t important because it was a cable. It was important because, without it, the mission could not move forward.

That’s the lesson I believe many of us overlook in government contracting. We spend tremendous energy explaining what we do. We spend far less time explaining why what we do matters.

Organizations that consistently earn customer trust don’t just describe their capabilities. They demonstrate how those capabilities contribute to mission success. That’s the difference between product-focused marketing and mission-focused marketing. It’s also the difference between creating awareness and earning trust.

As government contractors compete in an increasingly crowded market, differentiation will come from more than capabilities, certifications, or contract vehicles. It will come from demonstrating a clear understanding of the customer’s mission—and communicating how your organization contributes to its success.

So, before your next website refresh…Before your next capability statement…Before your next customer meeting…Before your next proposal…Ask a different question.

Not:

What are we selling?

Ask:

What mission are we helping our customer accomplish?

Because government buyers don’t simply buy products or services.

They buy confidence.

They buy trust.

They buy mission success.

Every capability has a mission story. The organizations that tell it well begin earning trust long before they earn the contract.

That’s the essence of Proof Point Marketing.”

Every capability needs a mission story

ABOUT THE AUTHOR:

Katie Helwig is president of Mild Red LLC. Her career spans 20+ years in sales, marketing, and business growth, including the last decade in GovCon. She helps government contractors turn acquisition strategy into practical growth through OASIS+, GSA MAS, GWACs, capture strategy, market intelligence, and go-to-market planning. As a military spouse, she gained an early appreciation for the people behind the mission—an experience that continues to shape her perspective today.

How Large Defense Industry Prime Contractors Price Gouge the Pentagon

“THE NATIONAL INTEREST” By Julia Gledhill

“The distillation of the defense industry as the number of prime military contractors shrank from over fifty to just five, bodes poorly for both the military and taxpayer because it produces waste, not to mention a strong profit incentive for war”

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“As a matter of practice, military contractors have overcharged the Pentagon for years—at the expense of both taxpayers and the military.

However, several members of Congress are working to end the practice. Senators Warren (D-MA), Braun (R-IN), and Grassley (R-IA) teamed up with Reps. Garamendi (D-CA) and Deluzio (D-PA) to introduce legislation that will address the legal loopholes that enable military price gouging.

Acquisition experts understand these loopholes well, but unfortunately, most lawmakers are still unaware of how common it is for contractors to overcharge the military. Without a better understanding of the true scale of military price gouging, Congress is unlikely to pass legislation to prevent it.

Due to unchallenged market power, sole-source contractors are well positioned to profiteer. Doggett’s provision would establish a panel to review sole-source military contracts and “determine whether the Department of Defense paid fair and reasonable prices.” By focusing on sole-source contracts, the panel would shine much-needed light on the issue of military price gouging writ large, the scale of which is near impossible to discern because so much of it is legal.

Over the course of decades, military contractors have consolidated and harnessed market power to slowly obscure military price gouging. Industry consolidation began when the Cold War ended, and the Clinton administration slashed defense spending. However, as Richard Loeb—former Executive Secretary and Counsel of the Cost Accounting Standards Board in the Office of Management and Budget—has pointed out, the administration simultaneously catalyzed an era of “acquisition reform” to protect contractor profits even as defense spending plummeted and the number of prime military contractors shrank from over fifty to just five. Merger mania has continued, further concentrating market power among the few. Military contractors wield that power on Capitol Hill, lobbying Congress to gradually chip away at acquisition laws designed to protect the government from unfair pricing schemes on military contracts. In so doing, lawmakers have left the Pentagon in the dark about contract negotiations with the defense industry.

Acquisition reform and industry consolidation have helped contractors overbill the military in pursuit of excess profits. As a result, military contractors have overcharged the Pentagon to the tune of hundreds of millions of dollars on a single program, generating nearly 40 percent in excess profits. Indeed, a CBS investigation last year revealed that the Pentagon saved $550 million on the Patriot PAC-3 missile after conducting a 2015 cost review of Lockheed Martin and Boeing’s previous work on the program. Both contractors are repeat offenders, and they have long been among the top five prime contractors dominating the defense industry. The Pentagon’s internal watchdog exposed Boeing for inflating prices on spare parts in 2013 and 2011. In one case, the company charged over 177,000 percent above the fair and reasonable price for a helicopter spare part—$71.01 for a tiny metal pin worth 4 cents at the time. The trend continues. Just last month, two Lockheed subsidiaries agreed to a $70 million settlement with the Navy for doing the same thing—inflating prices on spare parts.

The Pentagon can’t negotiate reasonable prices with military contractors because it doesn’t have sufficient bargaining power. Contractors are often exempt from providing the Pentagon with “certified cost or pricing data.” Without this information, the Pentagon has little idea what companies’ costs are and, thus, what their profit margins might look like. Contracts may be valued below the mandatory disclosure threshold. Contractors may also produce a product that’s considered commercial—and theoretically, price competitive. However, the statutory definition of “commercial” is overly broad, encompassing products that aren’t sold to the public and sometimes never have been. Lawmakers expanded the commercial definition and raised the mandatory disclosure threshold for certified data at the behest of industry and under the guise of cutting red tape.

Without legal requirements for certified data, the Pentagon may ask contractors for historic or uncertified cost and pricing data. Yet, the Pentagon has few tools to ensure that this data meets requisite standards; among them, that they include “the minimum information necessary to permit a determination that the proposed price is fair and reasonable.” According to the Pentagon, current statutory and regulatory requirements discourage officials from requesting uncertified data. Instead, contracting officers often rely on historical cost and pricing data. Still, according to the Pentagon Inspector General, the department cannot evaluate price reasonableness “based solely on historical price comparison.” This is particularly concerning given the watchdog’s extensive analysis of contract pricing in recent years, which shows that price analysis methods like historical cost comparison enable “sole source contractors to earn excess profits without detection by contracting officers.” Effectively, military contractors can provide the Pentagon with any cost figures without consequence—even if they give zero indication of how reasonable current prices are. In other words, contractors can price gouge the military legally, likely under the government’s radar.

Still, the defense industry appears to resist almost any attempt by the Pentagon to evaluate contract price reasonableness. “Sweeping” is a process through which contractors overwhelm the Pentagon with cost and pricing data that was “reasonably available at the time of price agreement” but submitted after the fact. According to Senator Warren, contractors often sweep the Pentagon after price agreements and before contract awards to absolve themselves of the liabilities associated with breaking acquisition law and potentially “to hide data that might give the [Pentagon] a better price.” In other cases, contractors outright refuse to provide the Pentagon cost and pricing data, claim they can’t share it, or delay the provision of such data to the extent that the Pentagon may blindly agree to a contract price due to time sensitivity. So, the Pentagon doesn’t just struggle to obtain certified cost and pricing data. It’s a challenge to get any cost and pricing data—even from sole-source contractors, which are relatively uninhibited by the forces driving price competition.

The Pentagon has admitted that data denials “may be more prevalent [than reported], particularly with respect to sole source commercial items.” This is especially nefarious in a market that looks like a monopsony but operates like a monopoly, where sole-source contractors reign as kings. They have a documented history of refusing to provide even uncertified cost and pricing information. Since 1998, the Pentagon’s Inspector General has published several reports detailing data denials by sole-source contractors. TransDigm, Inc. is the most recent example and perhaps the most notorious. According to the Pentagon, the company “accounted for all Defense Logistics Agency cost and pricing data denials” in FY 2022. The company failed to respond to 401 requests for cost and pricing data from the agency, and that was after the Pentagon Inspector General exposed TransDigm for twice price gouging the Pentagon. The contractor generated a total of nearly $40 million in excess profits.

Ultimately, withholding cost and pricing data bolsters a contractor’s ability to increase profits by charging the Pentagon unfair and unreasonable prices. However, the defense industry already significantly outperforms other industries financially, and this is not just because the United States spends over a trillion dollars annually on national security. In many cases, the Pentagon reimburses contractors for research and development costs. It will even cover some capital costs, including those associated with the depreciation of assets like machinery and equipment. As a result, military contractors enjoy returns on assets and invested capital that are difficult to achieve in other industries where companies make those investments themselves. Still, military contractors leverage special treatment from the government to increase executive compensation and cash paid to shareholders, even at the expense of capital investment and internal research and development.

If the defense industry continues to consolidate, it will only get harder for the Pentagon to negotiate fair prices with military contractors. The department will have to rely on more and more sole-source contractors, which not only increases the risk of overcharging but also presents national security risks, like supply chain vulnerability and reduced availability of certain resources. The entire nuclear triad is already dependent on one company, Northrop Grumman. As far as U.S. contractors go, General Dynamics manufactures a significant portion of tracked combat vehicles. Boeing, Lockheed Martin, and Northrop Grumman produce the military’s fixed-wing aircraft. The distillation of the defense industry to a handful of companies bodes poorly for both the military and taxpayer because it produces waste, not to mention a strong profit incentive for war.

As the defense industry’s primary customer and a steward of taxpayer dollars, the Pentagon needs to be a stronger buyer. However, never-ending acquisition reform continues to prevent that. Current laws are insufficient even to document price gouging by military contractors, much less prevent or remedy it. If retained in the final defense policy bill, Rep. Doggett’s provision would help the Pentagon better understand the scope of overcharging by sole source contractors—and ultimately, give lawmakers the information they need to hold industry accountable for overcharging the government at the expense of the taxpayer.

Congress does not yet have the tools to investigate and root out the full scale of defense contractor fleecing of the DOD.”

“National Interest” How Defense Industry Price Gouges Pentagon

ABOUT THE AUTHOR:

Julia Gledhill is a Research Associate for the National Security Reform Program at The Stimson Center. She focuses her research and writing on Pentagon spending, military contracting, and acquisition. In previous roles at the Project On Government Oversight and the Friends Committee on National Legislation, Julia worked on various national security issues related to Pentagon accountability, war powers, civilian protection, drone policy, the torture program, and U.S. lethal strikes.

GAO Reports Pentagon’s Top New Weapons Programs Are 12 Years Behind Schedule

DEFENSE NEWS By Michael Peck

“Schedule delays across Major Defense Acquisition Programs (MDAP) signal overly optimistic time frames,” according to the GAO report, after examining 104 of the Pentagon’s most expensive weapons programs. “The overall average time frame to deliver a capability increased this year to over 12 years.“

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“The news was almost predictable. For yet another year, auditors have found that America’s new weapons aren’t being delivered on time.

“DOD plans to invest over $2.4 trillion to develop and acquire its costliest weapon programs,” according to the Government Accountability Office’s 2026 annual report on major defense acquisition programs, or MDAP.

“Schedule delays persisted across MDAPs, signaling overly optimistic time frames,” according to the GAO report, which examined 104 of the Pentagon’s most expensive weapons programs. “The overall average time frame to deliver a capability increased this year to over 12 years. Further, several MDAPs have not set new delivery dates or are delaying critical interim milestones.

“By keeping delivery dates static, these programs raise questions about how realistic their estimates are. This means the 12-year average will likely increase in the future.”

If that sounds familiar, the 2025 annual report found that the DOD “continues to struggle with delivering innovative technologies quickly and within budget.”

However, the 2025 study seemed particularly concerned by rising costs of weapons due to inflation in the U.S. economy. In that regard, the 2026 analysis revealed a mixed price picture, with 46 of 72 programs reporting increases totaling $122 billion, and 16 reporting decreases totaling $47 billion.

GAO’s 2026 report seems more focused on program delays, especially in middle tier of acquisition, or MTA, projects that are intended to quickly jumpstart fielding of weapons within five years. The Pentagon is investing more than $49 billion across 23 of the most expensive MTA projects.

But GAO found that many systems are being slotted into the MTA despite the technology being too immature to be fast-tracked.

“For example, between 2018 and 2025, 18 out of 40 programs have entered the MTA pathway with immature technologies,” the report stated.

Many were lower than Technology Readiness Level 6 (prototype stage), and some were less than TRL 3 (proof of concept stage). Of eight current MTA projects, GAO deemed seven to be technologically immature, including the Hypersonic Attack Cruise Missile and the Next Generation Persistent Overhead Infrared sensor.

Thus, “programs are increasingly using the MTA pathway to mature technologies, when the intention of the pathway is to prototype and or field a residual capability within two to five years,” Shelby Oakley, GAO’s director for contracting and national security acquisitions, told Defense News.

“This is why we are not seeing capabilities fielded any faster,” Oakley said.

Among specific program issues, the Navy’s MQ-25 Stingray carrier-based unmanned aircraft has a 2.5-year delay to “initial operational capability and a 26-month delay to the end of initial operational testing,” GAO found. Changes to the design based on testing could push deployment out even longer.

For the DDG(X) destroyer, the Navy has yet to offer an acquisition strategy that details the assumptions behind the project.

“As such, the Navy’s business case for the DDG(X) program is not apparent,” GAO said. The DDG(X) is also likely to be affected by shipyard delays in building the Arleigh Burke-class Flight III series, which are up to 55 months behind schedule.

The Air Force’s B-52 radar modernization program, meanwhile, is beset by “cost increases and schedule delays.” The Air Force is opting to enter production with “very little development flight testing completed.”

The Army’s Mid-Range Capability program, which uses mounts Navy missiles and vertical launch tubes in Army vehicles, has “identified three additional critical technologies, all of which are immature.”

There are questions on “whether the return on investment is worthwhile for the four batteries planned for production by the Army,” the GAO stated.”

Pentagon’s top new weapons programs are 12 years behind schedule: Watchdog

ABOUT THE AUTHOR:

Michael Peck is a correspondent for Defense News and a columnist for the Center for European Policy Analysis. He holds an M.A. in political science from Rutgers University. Find him at theuncommondefense.com. His email is [email protected].

Small Business Federal Government Contract Proposal Preparation

“SMALLTOFEDS” By Ken Larson

“Conducting a Bid/No Bid Decision, developing a competitive strategy and preparing a winning proposal for a small business federal government contract.”

______________________________________________________________________________________________________

“The solicitation by the government may be a result of your self-marketing efforts or you may have located it at the System for Award Management (SAM), the gateway for all federal government business in excess of $25K. 

The fact that the government has now converted a project requirement into a formal solicitation means that the funding is available for a contract and the authorities within the government agency have authorized a source selection process.

BID/NO BID DECISION

Government contract proposal preparation is time consuming and can be costly. Meeting the agency Request for Proposal (RFP) requirements with a responsive proposal can be well worth the effort if a winning strategy can be formulated.

When considering submitting a proposal to a given government solicitation, conduct a bid/no bid exercise. By going through that process you will begin formulating your win strategy or you will discover that you should not bid this job for lack of such a strategy.

The elements of the process are discussed below in the form of questions to ask yourself against topics for key consideration. Affirmative or non-affirmative answers to the topical questions and ability to fill in the blanks below will drive your decision to bid or not bid a solicitation.

A. Customer:

Do you know this customer? Yes __ No ___

Does this customer know you? Yes___No ___

Do you have any idea of the available funding for which the customer has obtained authorization?

Yes___No ____

Specify the marketing contacts which have been made with the customer thus far:

Date:

Contact:

B. Supplies and Services:

Specify the supplies and services to be delivered in the prospective contract:

Line Item (s):

Description:

Are the supplies and services in the RFP Statement of work a good match for what the company sells?

Yes ___No ___

Is the RFP Statement of Work specific enough to identify risks? Yes____No ____

Is the RFP schedule specific enough to determine the delivery requirements?

Yes____No____

Can the delivery schedule in the RFP be met?

Yes ___No _____

Specify the delivery schedule for the prospective contract:

Line Item(s):

Delivery Date:

C. Contract Type/Value/Start/End Date:

Does the proposed contract type (FFP, CP, T&M, etc) suit the nature of the work?

Yes___ No ___

Specify the contract type for this program: _______________.

Are there any unusual terms and conditions specified in the government RFP?

Yes ____No___

Specify any unusual terms and conditions: ___________________________________________

What is the Rough Order of Magnitude (ROM) value of the prospective contract? $___________.

What is the anticipated start date of the contract? ________.

What is the anticipated end date of the contract? ________.

D. Company Strengths:

Is this prospective contract for effort in which the company has strong skills?

Yes____No ____

Specify the strengths the company will utilize in meeting the product specification or statement of work:

E. Company Weaknesses:

Are there any company weaknesses in meeting the product specification or statement of work?

Yes ___No ___

Specify any weaknesses for which the company must compensate and manage associated risks:

F. Teaming Arrangements (If any):

Does your company plan to team with other companies in the performance of the prospective contract?

Yes ___No ___

Identify the other team member companies:

Will your company be a prime or a subcontractor? Prime___Subcontractor ____

Have NDA’s and Teaming Agreements been executed? Yes____No ______

G. Competition:

Is this a sole source set-aside procurement to your company?

Yes____No____

If this is a competitive procurement, identify the prospective competition and their associated strengths/weaknesses:

H. Win Strategy:

Identify the proposal features and themes which will be utilized in the proposal as descriminators to win this program:
Management:

Technical:

Cost:

I. Proposal Budget:

Estimate the man hours and dollars for proposal labor, any travel expenses, shipping, packaging, samples and other expenses associated with preparing the proposal. The government does not reimburse the contractor for proposal preparation under the subsequent contract.

Proposal expenses must be included in the cost center overhead or G&A and accounted for as marketing expense allocated across the cost center or the company.

Labor Hours __

Labor Dollars $______

Material _______

Travel _______

Samples (if any) _______

TOTAL $_______

J. Bid/No Bid Decision:

If you can answer “YES” to at least 5 of the questions under paragraphs A through D above, it is likely you should bid this procurement.

If the answers to 7 of the 10 “YES” or “NO” questions under paragraphs A through D above are “NO” it is unlikely you should bid this procurement unless the answer to G is “YES”.Even then, examine your answers and carefully review whether this business is suitable for your company.

If the answer to E is “YES”, it is unlikely you will bid this procurement successfully unless the answer to G is “YES”. Even then, determine how you will overcome the weaknesses you have identified in your company associated with doing this work before you decide to bid it.

Carefully compare the competitive analysis under Item G to the win strategy under H before you make your final decision.

K. Decision:

BID _____

NO Bid _______

YOUR PROPOSAL

You have decided to bid a prospective project. You have downloaded the RFP from the government agency and the clock has started on the proposal due date.

Visit the federal government on line certifications and representations web site and complete the standard information there, which can be utilized for all federal agency proposals. Certifications and representations are required for virtually every proposal submission. That web site is at:

System for Award Managment (SAM)

The following information addresses the proposal process. It is from an independent consultant named Deborah L. Kluge, who is a specialist in proposal writing and consulting. The below is an extract from Deborah’s Web site.
If you are preparing a FAR Part 12 Commercial Proposal, certain elements of this material may not apply, but you are encouraged to utilize the information and the checklist to insure you have covered all the bases.

“THE RFP

Read it once, then read it again. And again. Experienced bidders know that several readings of an RFP are necessary for a complete understanding of what is required.Learn what the lettered sections of an RFP are (e.g., Section B refers to your pricing, Section C is the scope-of-work, Section K contains Representations and Certifications, Section L provides instructions to the bidders, Section M specifies the bid evaluation criteria, etc.). The titles of the lettered sections are generally the same in every RFP.

Be aware that information critical to your bid may be scattered among many different sections of an RFP.Put the RFP in a 3-ring binder for easy use as a reference document. You might also want to insert dividers in front of each important section for quick reference.Use small “Post-It”™ notes at the edge of a page to mark important pages or paragraphs. That way, you can find them quickly.

If you don’t understand some of the information in the RFP, you can submit written questions to the Contracting Officer.Some RFPs specify a date by which questions are due. Make sure you send in your questions before the due date or they may not be considered.Be aware that the Government’s response to all submitted questions are distributed to all bidders, usually through a written amendment to the RFP.

Although you and your firm will not be identified as the “asker” of specific questions, the way in which you word your questions could provide important information to your competitors. Word your questions carefully to ensure that you don’t give away information on your strategy or pricing.If you call the Contracting Officer to obtain or clarify information in an RFP, be aware that verbal information given to you by the Government is not binding.

THE PROPOSAL OUTLINE

If you have downloaded an RFP from the Internet, you can use that file to begin constructing your proposal outline.If you do not have the RFP on disk, use a scanner to scan in important sections for use in preparing your outline.

Some people prepare an annotated outline as well as a basic outline. An annotated outline can contain important points from the RFP, as well as your own information on what you are planning to say in each section.If you prepare an annotated outline, copy your file, save it under a different name, and delete the annotations. The result will be a basic outline which you can use for easier viewing and tracking of proposal sections and subsections.

For each section and/or subsection of your outline, indicate the estimated number of pages that will be written, the person responsible for doing the writing, and the evaluation points.Put important instructions on the first page or at the top of your outline, so you don’t have to rummage through the RFP to find them. These instructions might include: proposal due date and time, number of copies, page limits, font size, page margins, packaging and delivery instructions.

THE PROPOSAL SCHEDULE

Make one and stick to it!Work backwards from the proposal due date.You might want to make a separate schedule for preparation of the cost/business proposal.Make sure you leave plenty of time for copying, binding, and delivering the proposal.

Remember, the copier knows that an important document is being copied, so it will break, jam or smudge. Have a back-up plan that includes having extra paper and toner on hand and sending the proposal out to be copied.Distribute the schedule to all members of your proposal team.

PROPOSAL PREPARATION

Make sure you are familiar with the instructions in Section L of the RFP.Study the proposal evaluation criteria and the points allocated to each section/subsection of the technical proposal, as well as the points that are allocated to cost. This information will tell you what to emphasize and where to put your efforts with regard to proposal preparation.Hold an intial and regular follow-up meetings with your proposal team to discuss strategies, progress and problems.

To the extent possible, your Technical Approach and strategy should provide answers to the following questions: who, what, when, where, how, and why.Depending upon the instructions in the RFP, your Management Section might contain a discussion on how you will manage the overall project, a discussion on how you will manage and oversee the work of your staff and subcontractors (if any), an organization chart of the project, and position descriptions of project staff.

In your Personnel Section, you may be required to include narrative information on the experience and skills of the staff members you are proposing for the project and/or their resumes.In your Related Experience or Capabilities Section, you may need to demonstrate that you have performed similar or related work for this or other clients.

Your proposal may have other sections such as an Executive Summary, a discussion of your Understanding of the Problem, Appendices, or other required information as specified in the RFP.

Don’t assume that the Government knows your organization’s capabilities, staff or the projects you have carried out. The Government is supposed to evaluate only the specific information contained in your proposal. That means it must be written down in accordance with RFP instructions.Use tables, charts and graphics to summarize information (“a picture says a thousand words”) or to break up your narrative.

Check the entire proposal for the following: technical consistency; spelling; page numbering; section/subsection numbering or letting; consistency of appearance of headings, subheadings, font types and font sizes.Make sure you have filled in and signed all the forms in the RFP that you must return with your bid.Before and after copying your technical and cost proposals, check to see that each copy contains all pages and that they are in the proper order.

COSTING/PRICING 

You have a technical strategy — you should also have a costing and pricing strategy!Don’t wait until the last minute to begin gathering cost information that you will need to prepare your cost estimate.Be aware of and understand the type of contract you are bidding: fixed-fee, cost-plus, cost-reimbursement, time and materials, etc. This will likely affect the way you price your proposal.

Prepare a spreadsheet template or checklist of items to include in your cost estimate.Make sure your cost estimate is consistent with what you are proposing to do or provide.You may need to develop some specific assumptions for pricing purposes. If appropriate, you can include these assumptions in your cost/business proposal on a separate page or as footnotes to your estimate. In any event, always document your assumptions so that you can refer to them later and make changes if needed.

Check and re-check your numbers and formulas. Review the hard copy of your estimate to help in spotting errors.Make sure that your cost estimate can be easily read. Don’t use a font that is too small. For guidance on cost and pricing data, please see the following articles:

Cost and Pricing with Credibility

Certified Cost and Pricing Data

PROPOSAL PITFALLS – Don’t Let These Happen to You!

Failure to follow the RFP instructions regarding organization of the proposal, inclusion of required information, page limits, volumes, etc.Failure to take evaluation criteria and allocated points into consideration when preparing your response.

Failure to understand and to demonstrate an understanding of the problem (i.e., the reason why the agency is issuing the RFP).Failure to submit your proposal on the required date and time.

Failure to include all of the information requested by the Agency.

Failure to tailor your response to the specific RFP.Costs/Prices are unreasonable (too high or too low) or incomplete.Costs/prices do not provide any detail or breakdown information (if required) for line and sub-line items.

Failure to include specifics of your proposed approach to the project.Proposal is unprofessional in appearance (e.g., typos, blank pages, unnumbered pages, smudges, no whitespace, sloppy-looking, etc.). This reflects poorly upon your company.

Proposal is poorly written (e.g., information is not presented/organized in a logical manner, proposal is difficult to follow, poor grammar, etc.).Proposal merely repeats or paraphrases the RFP.

Proposal does not explain how or by whom the project will be managed.Proposal does not contain RELEVANT information about your firm, its capabilities, and/or its management and staff.Proposal does not demonstrate that your firm/organization and personnel have the experience and capability to carry out the project.

PROPOSAL CHECKLIST:

1. RFP/DOCUMENTS

Obtain complete copy of RFPDistribute RFP to appropriate staff.Review RFP for missing pages/sections.Prepare questions for submission to Contracting Officer.Receive and review responses to questions.Collect, distribute and review pertinent background documents.

2. PARTNERS

Identify partners to participate in bid.Determine type of partnership arrangement.Prepare teaming or other type of appropriate agreements.Receive signed agreements from partners.Determine each partner’s level of effort for project.Number and type of long-term staff.Number and type of consultants.

3. TECHNICAL STRATEGY

Hold strategy meetings.Identify the partnership’s strengths and weaknesses.Identify competition and their strengths and weakness.Identify ways to differentiate partnership from competition.Develop strategic themes.Develop strategy for each component and overall.

4. TECHNICAL PROPOSAL

Prepare draft outline/revise as needed.Identify & select writers for each section.Determine page numbers for each section.Determine document format (font, major/minor headings, etc.).Provide writers with written formatting guidelines/instructions.Prepare/distribute list of nomenclature, abbreviations, acronyms.Identify and provide writers with relevant sections from past proposals.Prepare schedule/identify due dates for draft sections.Determine review, feedback and editing process for written sections.Ensure compatibility of software packages and versions.Ensure compatibility of document transmission via e-mail.Ensure sufficient quantities of appendix materials are available.

5. PERSONNEL

Prepare packet of materials for long-term candidates.Prepare personnel checklists/tracking list for candidate documents.Prepare commitment letter(s) for signature by candidates.Recruit long-term staff and consultants.Collect ResumesSort Resumes by category/areas of expertise.Review ResumesIdentify best candidates and alternates.Confirm candidates’ interest/availability.Obtain additional info from candidates for Resumes, if necessary.Obtain signed letters of commitment from candidates.Review personnel checklists for missing items.Determine format for re-written Resumes.Re-write Resumes.Prepare skills matrices.

6. PAST PERFORMANCE REFERENCES

Use RFP format if required.Update and/or prepare past performance information as needed.Review for accuracy and completeness.”

SUMMARY:

This article has offered guidance as a template to apply to your marketing operations for accommodating federal government contract proposal preparation. Proposals are special, sometimes exhausting projects, but a necessary part of doing business with government agencies. Like many other aspects of business, the more proposals you prepare, the more you learn and the more can borrow from past practice for the next one.

As a final note please read the following carefully. Your proposal data may contain rate information, proprietary data or strategic technical solutions which you would not want to fall into the hands of a competitor. The government does not sign Proprietary Data Agreements (PDA’s). The government’s obligation to protect your information is covered in the following FAR clause and requires protective markings by you on the title page of your proposal and on each subsequent page.

FAR 15.509 Limited use of data.

(a) A proposal may include data that the offeror does not want disclosed for any purpose other than evaluation. If the offeror wishes to restrict the proposal, the title page must be marked with the following legend:

“The data in this proposal shall not be disclosed outside the Government and shall not be duplicated, used, or disclosed in whole or in part for any purpose other than to evaluate the proposal; provided, that if a contract is awarded to this offeror as a result of or in connection with the submission of these data, the Government shall have the right to duplicate, use, or disclose the data to the extent provided in the contract. This restriction does not limit the Government’s right to use information contained in the data if it is obtainable from another source without restriction.”
(b) The offeror shall also mark each restricted sheet with the following legend: “Use or disclosure of proposal data is subject to the restriction on the title page of this Proposal.”

(c) The coordinating office shall return to the offeror any unsolicited proposal marked with a legend different from that provided in 15.509(a). The return letter will state that the proposal cannot be considered because it is impracticable for the Government to comply with the legend and that the agency will consider the proposal if it is resubmitted with the proper legend.

IF YOU WIN Celebrate!Uh oh — you now have to actually manage and implement your project.

IF YOU LOSE

You can call the Contracting Officer to arrange an in-person or telephone debriefing to find out the reasons for your loss. Try not to get too discouraged — no one can win all the time.Learn from your experience and apply that learning to your next bid.

https://www.smalltofeds.com/2007/02/federal-government-contract-proposal.html

Marketing A Small Business In The Federal Government Contracting Environment

“SMALLTOFEDS” By Ken Larson

“Now is the time to think through your marketing strategy and the various venues for contracting with the federal government. This article discusses primary venues and the opportunities they offer your small business.”

___________________________________________________________________________________________________________

“You have positioned your existing or start-up company for doing business with the federal government. You have registered your enterprise at the System for Award Management to include determination of your North American Industrial Classification (NAICS) Codes, applied for Small Business Set Aside Designations , if applicable, researched your HUB Zone status HUB Zone Information and developed a Capability Statement for marketing purposes.

You are embarking on the utilization of SAM Contract Opportunities, the gateway for federal government agencies advertising prospective contracts on the Web. 

WHAT TYPE OF SMALL BUSINESS ARE YOU?

A. Commercial Contracting Under FAR Part 12

Are you planning to market an existing commercial product which has been on the market, such as software, hardware, a commodity, a report, a conference, a survey or a study, sell it to meet a government specification or statement of work and bill for the end product when delivered? 

If the answer to this question is “Yes”, you may be able to do business under Federal Acquisition Regulation (FAR) Part 12, “Commercial Contracting”, which is a simplified and fast form of selling to the federal government. 

The vast majority of purchases by the federal government in this category are Firm Fixed Price (FFP) with a product warranty of some type. You may be able to sell under FAR Part 12 if your product meets the definition of commercial items specified by the government.

B. Non-Commercial Contracting

Are you planning to market your services at an hourly rate, sell them by labor categories with professional job descriptions to perform the government statement of work and bill by the hour for labor and at cost for material and travel? 

Or is your product or service a development effort or not readily available to customers in the commercial marketplace. If you fall into this category for either reason it is unlikely you will be contracting under FAR Part 12 and you will be pursuing long term government contracts. 

If the above apply, much of the remainder of the Federal Acquisition Regulation (FAR) will apply to you, together with the various contract types other than FFP which are used for efforts where the contractor and the government may share the business risk in development, implementation or production of a new product, system or service.

C. Commercial and Non-Commercial Contracting

You may decide to market under both (A) and (B) above. Some small businesses sell their product commercially, but contract for product implementation and support on a service contract basis.

If you are selling under (A) and (B) or just (B) above you should examine this web site further to obtain sufficient detail to develop your business system in estimating, proposing, accounting and billing the government for contracts not qualifying under FAR Part 12.

YOUR CUSTOMER

Although all requirements in the federal government market emanate from the US Agencies there are several ways for meeting these requirements with a business arrangement that suits your small business.

A. U.S. Government Agency As a Customer

There are many agencies or “Departments” in the Federal Government. Each of these agencies has a statutory obligation to contract from small business for 23% of everything it buys. Contracting officers must file reports annually demonstrating they have fulfilled this requirement. Not fulfilling the requirement can put the agency annual funding in jeopardy. You have a motivated customer in federal government contracting officers and buyers.

As a prime contractor to one of these agencies your small business proposes, negotiates and contracts directly with a federal government contracting officer. You may or may not have subcontractors or suppliers. 

A subcontractor is a teaming partner who agrees to accept a portion of the effort under your prime contract and abide by the prime contract terms and conditions flowed down to him from you. On competitive procurements the business arrangement is usually mutually exclusive on the part of the subcontractor and your company. 

A supplier is a purchased finished vendor or off the shelf retailer who sells you items or components necessary to produce your product but does not accept the flow-down provisions of your prime contract other than the most general terms and conditions such as US Public Law , EEO, Tax Provisions, Warranty and the like. Supplier relationships are not usually mutually exclusive arrangements.

You may be able to fulfill the entire prime contract scope of work or meet the product specification from within your company. However, major government procurements are increasingly geared to teaming arrangements involving a prime and several subcontractors. As the prime on such a procurement you normally have the lead share of the work scope, you have a product critical to the program, you know the customer the best or a combination of these factors. Your subcontractor team members are usually not your direct competitors but are involved in lines of work that complement your business and enable the team to fulfill a scope that is larger than any single member could undertake alone Your direct competition is most likely forming similar teaming arrangements in an attempt to win the larger jobs which can span a number of years in duration and mean good, solid cash flow for all participants.

A General Services Administration (GSA) Schedule is a pre-qualifying way to obtain business directly from all federal government agencies. The GSA performs the service of negotiating with you for multi-year pricing of labor, products and equipment, together with pre-established terms and conditions. Your schedule and terms are posted to the GSA Web Site and all federal agency buyers can expeditiously buy from your schedule. A GSA Schedule is normally set up for 5 years. Achieving and Utilizing a GSA Schedule

The GSA also sponsors and manages major Indefinate Delivery/Indefinate Quantity (IDIQ) procurements such as “Alliant” and “Alliant Small Business” for Information Technology. These contract vehicles pre-position large and small contractors and teams of contractors to accept competitive delivery orders under established terms and conditions and standardized solutions for technological areas in high demand across the federal government. An IDIQ procurement can span a period as long as 10 years.

B. A Government Prime Contractor As A Customer

Government Prime contractors who are large businesses (roughly defined by the SBA and the banking community as having over 500 employees and annual sales in excess of $20M) and who hold federal government contracts have the same requirement as government agencies to buy at least 23% of the supplies and services in support of those contracts from small business.

Large business, under federal procurement law, must prepare and submit annual “Small Business Contracting Plans” for approval by the local Defense Contract Management Area Office (DCMAO) nearest their headquarters. These plans must include auditable statistics regarding the previous 12 month period in terms of contracting to small businesses and the goals forecast for the next year. The federal government can legally terminate a contract in a large business for not meeting small business contracting goals. Approved small business plans must accompany large business contract proposals submitted to federal government agencies. You have a motivated customer in large business subcontract managers, administrators and buyers. A small business who becomes a prime contractor does not have to meet the annual small business contracting plan requirement until it becomes a large business.

In selling to a prime contractor you propose, negotiate and subcontract with a company who holds a contract with a US government agency and in turn flows down its provisions to you. Or you sell under purchase orders on a commercial basis (FAR Part 12) to another company who holds a federal government contract.

C. Selling Via a Joint Venture

There are occasions when two companies wish to combine their respective products or resources and form a separate entity to undertake a contract, usually a prime contract with the federal government. The marketing considerations for such a venture involve impressing the client with the resources being dedicated to the program or addressing government concerns about broadening the technology and assuring redundant capability in the industrial community. A joint venture consists of human and other resources from the participating companies. However, it stands alone as a legal entity. Joint venture agreements are difficult to craft. Protecting proprietary information, together with intellectual property is especially demanding. Dividing the contractual effort and ultimately integrating it into a final product or service is also a challenge. Complicating the scenario is the fact that the US Government reserves the right to approve joint venture agreements before a contract can be issued to the entity. One company usually assumes the lead role in the joint venture. Some joint ventures hire a joint venture administrator who is the only legal entity authorized to sign a binding document on behalf of the two companies once it has been approved by each firm through a joint venture board, with equal representation by both organizations. Administration, accounting and billing at the joint venture level is a third tier of administrative cost which must be born by both companies.

Your customer in the federal market is either the government itself or a prime contractor. You will sell as a prime contractor, as a commercial supplier or as a subcontractor and on occasion you may have the need to establish a joint venture with another firm.

MARKETING AVENUES

A. Small Business Certifications

Your small business designation at your SAM registration places you in the small business set-aside market for 23% of the total goods and services the federal government buys. Within small business, there are additional self-certifications and SBA certifications to which you can apply if you qualify. small business designations 

Self-certification occurs when you respond to government requests for proposals, cite you registration number and state in your proposal certifications and representations that you are a Small Business and whether or not you have set-aside designations.

Procurement contracting officers and prime contractors are responsible for verifying self-certifications. Owners claiming designations must have a major equity share in the business and must be involved in running the business operations.

The SBA certifies Small, Disadvantaged Businesses under their “8(a) Program”. The application for this certification is available at the SBA Web Site for businesses who qualify by virtue of minority ownership and minority involvement in running the business operations. The SBA reviews, approves and grants 8(a) Certifications to small minority-owned businesses. Please see the following link:

SBA 8(A) Certification Program

Federal agencies and prime contractors are required to set goals and contract to achieve annual objectives for each of the above certifications within the overall 23% small business contracting mandate required by statute. Procurements are regularly “set-aside” for these designations to achieve government and prime contractor annual objectives. Procurements are also set-aside for small business in general, which includes companies who may not qualify for the additional small business certifications discussed above.

B. Capability Statement

With your small business SAM registration and additional certifications, you are ready to develop your capability statement. This document will be a promotional brochure which on paper and through the electronic media advertises who you are, what your do and why the government or prime contractors should buy from you. Major elements of your capability statement in addition to your small business designation and certifications are as follows:

(1) Company overview

(2) Supplies and services description couched utilizing your marketing ideas and strategy.

(3) Past performance of your enterprise or your personal background and qualifications (experience, education, etc.)

(4) Facilities or capabilities overview (How you perform your service couched in a manner that will appeal to your target market)

(5) Explanation of the positive results the client should expect.

(6) Points of contact and ways to contact you for meetings, placing an order and contracting your services.

Your Capability Statement

Your capability statement can be distributed on paper to your target market as a brochure, emailed as an attachment and linked into related industry web sites or partner web sites to get the word out about your product or service. The capability statement targets contracting officers and prime contractor buyers who are seeking to fulfill their small business buying goals. It is a way to get you in the door and speak to or correspond with the management and technical personnel who are the decision makers in sourcing small business buys.

C. Self-Marketing for SBA 8(a) Small Disadvantaged Business (SDB)’s and Historically Under-Utilized Business (HUB) Zone Contractors

If you qualify for a SDB Certification or can attest that you are located in a HUB Zone, these items can be valuable marketing tools. Presenting your capability statement to a prospective federal customer and meeting the management, technical and procurement decision makers puts you in a position to self market projects. All federal agencies and large business contracting to the federal government have to meet SDB and HUB Zone annual buying objectives. They have processes for competitive procurements. The processes are generally lengthy to comply with regulations governing solicitation on the open market, request for proposals, source selection, negotiation and award.

Under the 8(a) SDB Program and the HUB Zone Program if you can assist a federal agency or large business in identifying a product or service they need and that you are a qualified source to fill that need then the your customer can buy it directly from you and bypass the competitive process entirely. The key to achieving this type of targeted marketing is to contact and/or visit your customer regularly and get in front of the solicitation process. Once a project has gone to the “Sources Sought” or “Solicitation” stage you can still convince the customer to set it aside for 8(a) or HUB Zone firms, but you will be competing with other SDB’s or HUB Zone contractors in your NAIC’s Code for the business. The “Early Bird Gets the Worm”, adage is useful for SDB and HUB Zone organizations. Some buying agencies even permit an 8(a) SDB or HUB Zone Contractor to assist in writing the product or performance specification for a project to expedite the process. Federal agencies and large businesses are motivated to use the non-compete, set-aside features of the 8(a) SDB and HUB Zone Programs. Doing so permits them to meet their small business procurement goals and enables a swift buying action of a product or service for which they may have a critical need. 

D. GSA Schedules and Indefinite Delivery/Indefinite Quantity (IDIQ) Contracts

The General Services Administration (GSA) pre-qualifies contractors with a terms and conditions package and negotiated rates for products or services. Your GSA schedule is then posted to the web at:

This site is searchable by all government agencies who want to buy products and services. A GSA schedule allows you to offer a pre-existing contract vehicle with established pricing to any federal government agency or prime contractor. This shortens the procurement process considerably. In some procurements, a GSA Schedule is necessary to qualify for bidding certain jobs. You can read more about applying for a GSA Schedule by going to the General Services Administration Web Site at:  GSA Web Site

Under Indefinite Delivery/Indefinite Quantity (IDIQ) Contracts, terms and conditions and labor hour pricing are agreed upon in advance with an agency for a period of time (usually a multi-year arrangement). Many large government agencies contract utilizing IDIQ contract vehicles and often make multiple awards to several companies who then compete for work on a delivery order basis thereafter. 

The GSA also manages large scale IDIQ procurements in high technology areas such as Information Technology (IT). Individual agencies then compete and procure IT products and services against the standard with established terms and conditions and known pricing. Once qualified, winning in this type of environment is simplified to submitting the best technical solution to a given delivery order with the lowest man-hours or product pricing. It is not uncommon for competitors to offer discounts during the competition.

Under both GSA Schedules and IDIQ Contracts individual delivery orders are negotiated separately regarding the labor hours, material and travel cost necessary to complete a discrete scope of work.

E. Teaming

Because the federal government buys on such a large scale and in many acquisitions chooses to package related technologies or services, it is a necessary part of your marketing plan to consider teaming with other companies. As discussed in paragraphs II. and III., above, large businesses who are in the same line of work as you are have a requirement to subcontract to small businesses under federal government contracts. In addition, large and small companies who are in related or synergistic businesses to yours actively seek partners in the federal government market to permit access to larger packaged procurements.

Attend trade conferences, join trade organizations, get into technical blogs on the web. All large businesses contracting with the government have a small business liaison officer which you can locate at the company web site. Present your capability statement electronically or preferably in person to local large businesses engaged in federal government contracts who may need your services.

Many large businesses are willing to team as a subcontractor to a small business to get access to the small business set-aside market. A large business cannot receive an amount in excess of 50% of the dollar award of a small business set-aside, but many large businesses are willing to subcontract to multiple small businesses on federal government contracts to broaden their business base.

For SDB companies, the “Mentor – Protege’ Program is available. This is a federally sponsored program whereby a large business sponsors a smaller business through active teaming and mentoring. Your can learn more about this program at:

Mentor Protege Program

The best way to approach a large business or another synergistic small business is to have a program target as a discussion vehicle. If you find a project for which you need a partner or partners, carefully research the firms you are considering, check their D&B’s, see if they have entered their company in the “Interested Parties” frame of the solicitation at The System for Award Management (SAM).

When teaming with another company, most arrangements become mutually exclusive if you are subcontracting to one another and not just supplying off the shelf products. As the business relationship evolves and you begin sharing information a two way Non-Disclosure Agreement (NDA) is usually necessary to protect proprietary information.

As the business relationship matures and the parties agree to become exclusive, a teaming agreement is also necessary. At this point you have agreed upon who will be the eventual prime contractor and who will be the subcontractor. The areas regarding work share and proposal preparation are particularly critical in terms of thorough definition to avoid future misunderstandings among the parties. If and when the prime contract is awarded, the teaming agreement is replaced by a subcontract from the prime party to the subcontracting team member.

F. Small Business Innovative Research Program

Other federally sponsored programs are the Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) Programs for high technology small business. These are competitive programs awarding small business fundng in critical high technology areas. Your can learn more about the SBIR/STTR Programs by going to:

SBIR/STTR Program

SUMMARY:

This article has offered a template of avenues for small business federal government contract marketing. You should apply the template to your business plan and explore which avenues suit your enterprise. The federal government contract customer is motivated to buy from you. Your marketing task is to target and find your customer considering the supplies and services you sell. The federal government offers competitive advantages to various types of small business, depending on ownership and size. Federal government contracts offer small purchases and long term contractual arrangements from firm fixed price purchases to cost type and time and material contracts.  The opportunities are there for small business entrepreneurs’ to pursue.”

Marketing A Small Business In The Federal Government Contracting Environment

Principal Factors in Forming a Small Business Federal Government Contracting Company

“SMALLTOFEDS” By Ken Larson

“Factors to consider in determining if the time is right for you to form a small business federal government contracting company.”

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1. EXPERIENCE

Small business federal government contracting is not rocket science – to succeed one must take what one does well in the commercial marketplace or what experience leads one to believe one can plan successfully as a commercial enterprise and then apply it in a slightly different manner from a business perspective to accommodate federal government contracting requirements.

Very few companies enter federal government contracting without some commercial experience and success or prior professional employment.  Very few start ups entertain initially contracting exclusively to the federal government without commercial work or other employment to sustain operations while the more lengthy government procurement process is being pursued.

Introducing Federal Government Contracting

2. DEFINITION

There is often confusion regarding the definition of the term, “Contractor” in government work. The term is used in a conflicting manner to describe companies, individuals and business relationships. It has different connotations within corporations as opposed to government agencies, and is often confused with terms like “Subcontractor”, “Supplier” or “Vendor”. The article linked below defines the term, “Contractor” and discusses the regulatory factors and practical considerations related to use of the term from a small business federal government contracting perspective:

What is a Small Business Federal Government Contractor

3. STRATEGY

Consider carefully a product or service area in which you have experience and talent as well as for which there is a demand.  Make it in a field in which you would enjoy a long term involvement.  Then give your small business company concept the following test:
1. Do you have a product or service niche in mind?
2. Do you believe you have a market for 1 above and the means to reach it?
3. Are you willing to develop a business plan using the tool kit linked below to validate 1 and 2 above before you launch?

How to Write a Business Plan

Business Plan Samples

If the answer to the above questions is “Yes”, take the actions indicated above, observe the results, and make an informed decision on whether or not to proceed.

4. FORMATION

Executing the below process establishes the firm officially on paper and commits the owner(s) to the enterprise:

For the majority of individuals who are starting single person or no more than 2 or 3 person operations, a Limited Liability Company (LLC) registered with the state and with the federal government is recommended.

It will separate personal assets from company assets and protect them. When product or services sales begin generating revenue an LLC has many tax advantages.  It can be registered as Sub Chapter ‘S’ for tax purposes and revenue and the expenses can be passed through to personal tax returns, paying no taxes as a company. The double taxation issue prevalent with many of the other types of incorporation is avoided with a Sub chapter “S” LLC. An LLC assists in limits your personal liability for debt and court judgments that may not fall in your favor.

Representing the business as a company allows pursuing financing as an enterprise. You can think of a creative name for your LLC and you can complete the articles of incorporation necessary to bring your enterprise into existence. The term, “LLC” must conclude the name of your company if you decide to form such an organization.

Free instructions for registering in your state and federally with the IRS are available at the Box Net “References” cube in the right margin of this site. You will receive tax and employer identification numbers by registering your business.

A very common mistake is not generating and executing an operating agreement among the founders if there is more than one person involved in forming the company. An operating agreement, is a separate document, not controlled or required by the state or the federal government, but very important to your company.

It should be a simple,  straightforward document  you and the prospective partner(s) can draft  yourselves addressing such  matters as % of ownership, how revenue will  be distributed and other  general matters, as well as who can commit the  company in the form of  credit cards, employment offers and who signs  checks on the company  account and other administrative matters. Buying out a partner should also be covered as well as adding new members if the need arises down the road.

I have seen many enterprises fail or go through terrifically hard times   due to lack of an operating agreement. The parties should sign it after a review by a lawyer. It should then be notarized and made an official   part of the company file. You can download a generic operating agreement at the Box Net “References” cube in the right margin of the site linked at the base of this page.

It is for an LLC but you could modify it for other types of corporations.  You can feel free to borrow from the sample or supplement it as you see fit. It is fairly comprehensive in order to cover most business situations and there may be elements of the example you feel are not necessary.

5. TEAMING

You will not be able to go it alone.

Evolving niches and industry teaming leading to larger projects as part of multiple company efforts is a necessity in forming a small government contracting business, particularly in the services venue.

Synergism is paramount in teaming with any size company, whether in a lead or subcontracting role. There should be technical, management and market segment similarities between you and any company with whom you are considering teaming. Your prospective team member ideally will not be a direct competitor; rather a business in a related field with whom you share a mutual need for each other’s contributions in pursuing   large-scale projects.

Relationships must be developed with primes and other small businesses that can help you, team with you and keep you in mind as they search for success. That takes time, patience and open-minded, out of the box thinking. It also takes more than a   Non-Disclosure Agreement (NDA), a teaming agreement (TA) and a proposal   to succeed. It takes dynamic marketing and communication with strong   partners and hard, innovative work. Nice buzz words you say – but it is the truth and you have to find what that truth means to you.

Small Business Government Contract Teaming

Carefully consider the 5 factors noted above when evaluating the formation of a small business government contracting company. For additional details on any of the factors, please see the free book in the BOX at the right margin of the following site:

5 Principal Factors in Forming a Small Business Federal Government Contracting Company

Job Cost Accounting Basics For Small Business Government Service Contractors

“SMALLTOFEDS” BY Ken Larson

“Job cost accounting and business system challenges involving Federal Acquisition Regulation (FAR) Cost Accounting Standards (CAS) requirements in the service contracting start-up environment.”

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“Small enterprises in the start-up service contracting business to the federal government often experience DCAA audit difficulties, suspended billings or negative marks on pricing proposals for not having addressed job cost accounting and business system issues involving Federal Acquisition Regulation (FAR) Cost Accounting Standards (CAS) requirements.  This article will address the basics of resolving those issues in a service contracting start-up environment.

“Small to Feds” has addressed the requirements of CAS and the associated business system design requirements previously in the following articles that are suggested for review as refreshers:

Establishing FAR and CAS Compliant Business

A Business System Framework

DCAA Audits and Small Business Job Cost Accounting

Provisional Indirect Rates

DEFINE YOUR COMPANY APPROACH AND ITS COMPLIANCE WITH GOVERNMENT REQUIREMENTS 

Please view the below matters in the context of your business system design at the cost element and job description level:

You must consider the job cost accounting implications of the government contract environment; i.e how do the individual labor charges every day on time cards for the company employees and management get booked to the correct accounts or expense pools and do they or do they not become part of the labor distribution directly to contracts or indirectly though overhead and G&A applications at month end (in effect is the government billed for the cost?).

In most small start-ups the best way to handle this is to write job descriptions for every position, including the owners and executives as well as other employees. Each job description is declared chargeable as direct only, indirect only or in rare exceptions, both direct and indirect chargeable.

Job descriptions are also declared salaried or hourly, exempt and non-exempt under the Fair Labor Standards Act,  which drives eligibility for time and one half for overtime.  All company personnel are furnished copies of job descriptions and informed of their direct or indirect, salaried or hourly status as a function of their employment offers. (You should generate retroactive offer letters for everyone in the company, have all personnel accept them in writing and put the letters and the job descriptions in the company personnel files for audit purposes)

Job descriptions are assigned to labor cost element codes in the job cost system (as opposed to other codes for materials, subcontract, travel and other direct costs that may require separate cost element codes to distinguish them for accounting purposes.

A direct charge job description will always have a contract charge number every day for every hour of work (typically technical performers) This usually drives the employee eligibility for overtime pay for hours in excess of 40. A company policy should be established early for this matter. Most companies pay straight time for hours in excess of 40 for salaried direct charge personnel.  Exceptions are hourly non-exempt personnel who must be paid time and one half under the law.

An indirect job description performer will charge every day on a time card to an overhead or G&A account and the associated labor cost will become part of expenses that are distributed at month end to all contracts, based on the direct labor dollar content of each contract for the accounting period (typically secretaries, administration personnel and the like charge to overhead and the owners and executives charge to G&A (unless an executive is working exclusively in an individual overhead cost center – that person would then charge the overhead charge number for that cost center or directly to a project if performing project-direct effort).

Exceptions to the above would be where a direct charge employee has no contract home and his labor must be charged somewhere. In that instance he would charge to a company overhead account or G&A account outside the overhead pool and his or her labor would not become part of the allocation to contracts, effectively making it come out of the company bottom line (profit). This situation normally drives layoffs or finding the person a contract home to charge.

Labor donated to the company as a form of loan must also be charged in the exceptions manner discussed above (loan labor liability account) and may not be charged or recovered via a contract bill to the government directly or as part of an overhead allocation. DCCA really goes looking for this type of thing.

Where an executive normally charging to an overhead or G&A pool, is a key person on a contract or performing direct effort on a contract for parts of his or her day, that person would charge the contract charge numbers for those efforts and the overhead or G&A accounts for company business of an indirect nature.

CHECKLIST
The above rules of the game (disclosure practices in DCAA parlance) normally force several business system tangibles.  It is suggested that you generate the following as a minimum in your startup preparations for demonstration during a proposal or fact finding audit:

1. Time Cards with a time card policy requiring they be filled out daily and turned in and approved by a supervisor weekly, then booked into the accounting system weekly.

2. Expense Reports bearing charge numbers for accounting as direct or indirect expenses.

3. Written Purchase orders to suppliers bearing charge numbers for accounting as direct or indirect purchases

4. Labor Job Descriptions – specially ear marked in the manner discussed above.

5. Cost element assignments for accounting purposes for 1-4, above.

6. Charge numbers for 1-4 above. A charge number is the combination of an employee number, supplier number, expense report number and a cost element, charged to a unique direct charge contract number, an overhead pool expense account or a G&A expense account.

7. Consider hiring a payroll service company  to support salaries and regular paychecks plus tax and withholding for EVERYONE IN THE COMPANY.

8. A monthly closing where direct costs are burdened with indirect costs and billings are generated to customers creating accounts receivable for that which can be billed and liabilities for that which cannot.

9. Revenue accounting upon receipt of a payment from a customer directly to the contract against which a bill was generated with offsetting receivable reductions at the contract level.

10. The discipline and attention to set up 1-9 and demonstrate its operation to a DCAA auditor.

Every successful small business in federal government service contracting has gone through the above; some proactively and others when they have had difficulties with a DCAA audit during a proposal or cannot get paid when they are under contact. The choice is yours.  It is not rocket science, it is different and it is a serious matter and must have your attention.

Job Cost Accounting Basics For Small Business Government Service Contractors

How Business Partnering Can Help You Become A Government Contractor

“FEDERAL TIMES” By Melissa Rayworth

“For entrepreneurs, it’s part of the central mythology: You launch your own business because you want to be your own boss. To thrive as a business owner, it helps to have an independent streak and be comfortable going it alone.

But when small and mid-sized companies begin pursuing government contracts, it can help — immensely — if they strategically collaborate with other businesses.”

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“There are several ways to make this happen:

• Getting work as a subcontractor is one good possibility.
• You can also seek mentoring from more experienced companies already working with the government and use that knowledge as you pursue your first contract.
• Some companies break into the industry through a true partnership, pairing up with another applicant to submit a joint bid.

“One new entrant might complement a gap or a void that another existing business may have, and together they have a better opportunity moving forward,” says Antonio Doss, deputy associate administrator for government contracting and business development at the Small Business Administration.

What kind of matches can work?

If you’re considering working as a subcontractor, ask yourself: How might your product or service be used by a larger company to help fulfill a contract they’ve won or they’re pursuing?

Building a relationship with a prime contractor “can be a great place to start and learn,” says Lauren Weiner, co-founder of WWC Global. She has worked as a government contractor since 2006.

One key to landing a contract: really understanding the needs of a particular government department or agency, Weiner says. While working as a subcontractor, you can learn about a particular sector and really come to understand those needs – while getting paid.

Going in on a joint bid with another company can give you the same advantage. If you’re partnering with someone who has a bit of experience, it can help speed up your learning curve.

But whether you’re seeking to be an equal partner on a contract or looking to be a subcontractor, the key is building relationships.

Where does a company find potential partners?

Your local SBA office may be able to help you connect with potential partners or folks who would need you as a subcontractor.

SBA district offices do their own training and also do training in partnership with local chambers of commerce and economic development organizations “to help demystify the whole government contracting space,” says Antonio Doss, deputy associate administrator for government contracting and business development.

These training events can be opportunities for networking with other entrepreneurs who are curious about government contracting or already pursuing contracts.

The current administration is making it a priority to increase the number of American small businesses working as government contractors, Doss says, and supporting business owners in networking with others is part of their plan. “Not only can you be a part of that space,” Doss says, but “as a newer entrant into the environment, you can learn from the other people.”

Seek mentors, even among competitors

The SBA points businesses to mentorship through organizations like score.org. But Doss also recommends reaching out directly to companies that are more experienced and thriving in the government space.

You might be surprised how many people – even competitors – are willing to share their knowledge about breaking into contracting within a specific industry.

“Those persons are often a season or two or three further down the path of where you are right now,” Doss says. “Often they’re willing to share with you, because sometimes they’re also realizing that you might be a good teaming partner at some point.”

One way to avoid stepping on toes as you seek advice: Since companies usually choose a particular government agency to do business with, you might learn from a competitor and then target a different area of the government.

As you pursue subcontracting jobs, partnerships and mentorship, Weiner says, keep this in mind: There are as many ways of earning a government contract as there are businesses that do it.

“So don’t get discouraged if another business owner says, ‘it was impossible,’” she says. “It may not be impossible for you, given what you offer.”

How Business Partnering Can Help You Become A Government Contractor

For More on Federal Government Contact Teaming please see:

Small Business Teaming In Federal Government Contracting

Utilizing Your Federal Government Contracting Small Business Set-aside Designations

“SMALLTOFEDS” By Ken Larson

“A small business set-aside designation can be a valuable tool if adequately documented, registered, certified and prudently used for bidding work that your enterprise is capable of performing successfully.

Carefully select your small business designations when preparing your business and marketing plans for federal government contracting. Keep in mind that self-certifications are verified through records checks and site visits before contract awards are made.“

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“A small business set-aside designation can be a valuable tool if adequately documented, registered, certified and prudently used for bidding work that your enterprise is capable of performing successfully.

The following are the major small business set-aside designations in federal government contracting:

1.  Small Business – Established by North American Industry Classification (NAICS) Code for all categories of government business (Please download the “SBA Small Business Size Standards” SBA Table of Size Standards for further information). Federal contract solicitations  have a NAICS Code assigned to them when thy are registered at the below web site:
System for Award Managment (SAM)

2. Minority Business Enterprise (MBE) – A  good interim designation while an 8(a) application is in process for minority-owned companies:
National Minority Supplier Development Council MBE Information

3. Woman-Owned Business – Applicable to Women-Owned Businesses only:
SBA Woman-Owned Business Information and Application Site

4. Veteran-Owned Business – Applicable to Veteran-Owned Businesses only
SBA Veteran-Owned Business Program Information

5. Service Disabled Veteran-Owned Business – Applicable to Service Disabled Veteran-Owned Businesses only
SBA Service Disabled Veteran-Owned Business Information

6. Small/Disadvantaged Business SBA 8(a) Program – Requires 2 years in business and a lengthy application process with the SBA at the following web site:
SBA 8(a) Information and Application Site

7. Historically Under-Utilized Business (HUB) Zone Located – Pertains to small businesses located in geographic areas with a historical record of low government contracting. This designation requires application at the following HUB Zone Site Web Site:
Hub Zone Information and Application Site

QUALIFICATIONS, REGISTRATION, CERTIFICATIONS AND REPRESENTATIONS

“To qualify as a small business for a given solicitation an enterprise must have registered at the System for Award Management Web Site under the applicable NAICS code for the procurement and meet the SBA eligibility size standards for that code.

A small business certifying under the above must have individuals qualifying for the designations with at least 51% ownership interest and an operating role in the company. 60% is recommended to avoid the appearance of a front. Silent partners and investors without qualifying status or an operating role in the firm do not count toward the designation. It is suggested that ownership interest be specified by name on the articles of incorporation with the state and by % of ownership in an operating agreement or similar document.

To qualify as a HUB Zone Enterprise the business must be located in a HUB Zone and a qualifying percentage of the members (owners or employees) of the business must also live in the applicable HUB Zone.

Carefully select your small business designations when preparing your business and marketing plans for federal government contracting. Keep in mind that self-certifications are verified through records checks and site visits by contracting officers, DCMAO and Source Selection Boards for federal procurements before contract awards are made.”

Federal Government Contracting Small Business Set-aside Designations

The Pentagon Is Rewriting How It Buys AI To Control The Future Of Warfare

“FEDERALNEWS NETWORK” By Roslyn Layton, PhD

“A“best of breed” strategy – assembling a mix of commercial providers instead of betting on a single vendor – as a way to accelerate its “artificial intelligence-first” warfighting vision.“

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“The Pentagon is quietly overhauling one of its most entrenched systems: how it sources and buys modern technology — and by extension, who controls it.

After a public split with Anthropic, the Defense Department is cutting deals across the tech industry, assembling a line-up of top-performing commercial players to deploy their models on its classified networks.

In this emerging model, different layers of capability come from different firms: connectivity and battlefield resilience are expected from SpaceX; frontier model intelligence from OpenAI and Google; compute and hardware acceleration from Nvidia; open-weight model ecosystems from Reflection; and enterprise deployment at scale from Microsoft, Oracle and AWS.

The Pentagon is billing this pivot toward a “best of breed” strategy – assembling a mix of commercial providers instead of betting on a single vendor – as a way to accelerate its “artificial intelligence-first” warfighting vision.

But read more closely, it’s something bigger: a deliberate move to avoid winner-take-all dominance and retain long-term control over the technologies that will define modern warfare.

From defense giants to modular power

For decades, Pentagon contracts were dominated by a small group of entrenched defense primes. That system delivered reliability at scale, but it also came with familiar downsides: cost overruns, slow innovation and limited competition. Once a vendor was chosen, the government was effectively locked in.

What’s changing now is not just who builds military systems, but how they’re built.

Instead of monolithic, all-in-one platforms, the Pentagon is shifting toward a model that looks more like modern cloud architecture: modular, interoperable and composed of multiple vendors. No single company owns the full stack, and that’s the point.

By distributing capability, the Pentagon reduces its dependence on any one provider, especially those offering proprietary systems it can’t fully inspect, audit or replace. The tradeoff is real: integration becomes harder, and coordination more complex. But the alternative, opaque systems controlled by a single vendor, creates a different kind of risk that is much harder to unwind.

Control isn’t just strategic – it’s evolutionary

As AI becomes embedded in military decision-making, the question of control becomes more than a technical issue. It’s a governance issue. Military AI systems will shape life-and-death decisions, and in a rule of law system, they can’t be black boxes. They need to be subject to meaningful scrutiny by government operators, auditors and ultimately elected officials.

That’s where the Pentagon’s multi-vendor approach starts to look less like procurement reform and more like a safeguard. Overreliance on closed, proprietary models risks concentrating power in private hands, limiting visibility into how decisions are made. A modular system, by contrast, creates conditions for accountability.

Inspectable, open-weight models are especially important in that equation. They allow the government to test for bias, enforce rules of engagement, and ensure systems align with United States law and international norms. Closed systems, however advanced, introduce a fundamental tension: The military may deploy tools it doesn’t fully understand.

Why open-weight models matter

There is also a geopolitical dimension to this shift.

Companies like DeepSeek, Alibaba, Tencent, Zhipu AI, and Huawei-linked infrastructure are being folded into China’s military ecosystem, supporting everything from surveillance and target recognition to war-gaming and command-and-control functions. Chinese-developed open models are already spreading across global software ecosystems – and in many cases, sovereign customers and developers are adopting them simply because they’re affordable, accessible and customizable.

That creates a subtle but powerful form of influence. If U.S. institutions rely primarily on closed systems while open ecosystems elsewhere continue to expand, the balance of technological gravity could shift.

The Pentagon appears to recognize this risk. Supporting open-weight alternatives isn’t just about flexibility; it’s about ensuring that the global AI ecosystem isn’t tilted toward Beijing.

A quiet but consequential shift

In that sense, the Pentagon’s new AI multi-partner strategy is about far more than modernization. It’s a structural shift away from concentrated power – both the old defense primes and the risk of a new generation of tech monopolies – toward a system that preserves competition, visibility and control.

The ability to swap vendors, benchmark performance and avoid lock-in gives the Pentagon something it hasn’t consistently had in decades: negotiating power and flexibility as technology evolves. More importantly, it creates the foundation for transparency and auditability to exist in practice, not just in policy.

That’s the deeper story behind this shift. It’s not just about adopting AI faster. It’s about preventing any single company – old traditional defense giants or new tech leaders – from becoming indispensable.

For a military increasingly defined by software, that’s not just a strategic advantage.

It’s a democratic one.”

ABOUT THE AUTHOR:

Roslyn Layton, PhD, senior vice president of Strand Consult and visiting researcher at Aalborg University Copenhagen, is an international technology expert focused on its intersection with economics, security and geopolitics. She is a fellow of the National Security Institute at George Mason University and a senior advisor to the Foundation for American Innovation and has testified before the U.S. Congress on multiple occasions.

Practical Intellectual Property Management for Small Business Federal Government Contractors

“SMALLTOFEDS” By Ken Larson

“Intellectual property and proprietary data protection should be tailored to your organization, its industry relationships, people and practices.  It must grow as the company grows, adapt to changing conditions and be ever-sensitive to risk.“

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DEFINITIONS
The World Intellectual Property Organization defines IP as:
“….creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce.
Industrial property, which includes inventions (patents), trademarks, industrial designs, and geographic indications of source; and Copyright, which includes literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectural designs.    Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and those of broadcasters in their radio and television programs.” https://www.wipo.int/about-ip/en/

OWNERSHIP ENCOUNTERS AND CONTROLS
Bringing IP into existence requires that the tangible property as a result come under control.  For small business this is usually brought about by a series of encounters with IP.  They are discussed below in the relative order in which a small business encounters them.

Company Founding Personnel
A small business usually encounters IP and PD concerns when it is formed.  The operating agreement between the founders must address these matters from the perspective of who brings property to the venture and who owns it as well as the rights to the property developed thereafter. A typical operating agreement may be downloaded from the Box Net “References” cube in the right margin of this site.  Please examine it as a framework and add those elements that are unique to your enterprise.

Employees and Contractors
The next encounter usually entails employees or contractors who apply for work.  It is wise to inquire as a standard practice, and as part of an employment agreement or contract, whether or not an individual has signed a non-compete or proprietary data agreement with prior employers.  If they have, acquire a copy of the agreement and assess whether or not the employment of these personnel poses a risk of IP violations in terms of another company’s property or their claim to ownership of what the candidate may develop on your behalf while in your employ. 
Make it clear in your agreements of hire and contracts that IP and PD that employees may participate in developing are the exclusive property of the company, that they will not own it and that they are expected to protect it, even when they leave your firm.

Industry Partners
Declare in your non-disclosure, teaming, and contract agreements the precise definition of the IP and PD ownership brought to the table and the exact share of ownership in subsequent development items.  Most firms use the efforts of their employees (labor records) as a basis to make these distinctions, but further specificity may be necessary on complex projects.  

Government Agencies and Prime Contractors
Ensure your policies and practices utilize assertions to document the ownership of IP and sound job cost accounting records for any IP developed at company expense, either in the past or during the course of contract performance. The following are the major rights assertions. They are discussed in detail at the link concluding this post.

・ Unlimited Rights

・ Government Purpose Rights (GPR)

・ Limited Rights

・ Restricted Rights

・ Small Business Innovation Research (SBIR) Data Rights

・ Specifically Negotiated License Rights

・ Prior Government Rights

・ Commercial License Rights

CONCLUSION
Intellectual property and proprietary data protection should be tailored to your organization, its industry relationships, people and practices.  It must grow as the company grows, adapt to changing conditions and be ever-sensitive to risk.
The best intellectual property protections are well understood, practical, teaming relationships among partners, employees, industry and government.  All sides in such relationships lose if disclosure or violations occur. 
Establish sound operations practices and train to insure these practices meet the objectives discussed herein to protect your organization IP.

Practical Intellectual Property Management for Small Business Federal Government Contractors

GSA Is Preparing An AI-Specific Acquisition Reform Rule

“NEXGOV/FCW‘ By Alexandra Kelley

“The updated rule is expected in the next couple weeks and will set a preference for fixed-price models, making the GSA a “more predictable business partner” to original equipment manufacturers”

_____________________________________________________________________________________________________

“The General Services Administration is developing changes to artificial intelligence acquisition provisions within its general rules that will prioritize a firm fixed-price procurement model and reduce hurdles to agency adoption.

In the coming weeks, the agency is planning to debut a draft AI acquisition rule for addition into the General Services Administration Acquisition Regulation, according to two people familiar with the proceedings. 

The new rule is part of GSA’s effort to balance implementing AI procurement rules that encourage market growth and foster competition while benefitting government buyers and taxpayers, the same person said, and part of the government’s mission to bring a “common sense” approach to AI acquisition. To do so, the rule will focus on removing bureaucratic rules and hurdles to commercial item acquisition, including AI and IT software.

The same person said that part of the process will be to analyze which contracts are not on a firm fixed-price basis and what is able to be shifted over. Per the rules, resellers and partners will remain part of GSA’s business strategy, the same person said, but the agency is also trying to make itself a “more predictable business partner” to original equipment manufacturers, including AI developers.

“It’s … not going to be a one size fits all solution,” the same person told Nextgov/FCW. 

In addition to the AI-focused draft rule, new Federal Acquisition Regulation rule updates are also underway and are set to continue overhauling the government procurement process. These updates are intended to be finalized at the end of the fiscal year, pending approval by the FAR Council, and will consist of roughly a dozen rules, the source said. Both revisions will have a 30-day public comment window.

The FAR is a series of procurement regulations that govern how executive agencies enter into, develop and manage contracts. In his second administration, President Donald Trump has worked to overhaul the FAR, issuing an executive order that primarily aims to streamline the acquisition process and bring more companies to the federal market. 

The future of OneGov

Changes to GSA’s contracting structure will further cement the government’s preference for firm fixed-pricing, echoing mandates outlined in a late April executive order that seeks to move the government away from cost-reimbursement models.

GSA’s landmark OneGov program could also see changes in its contracting structure. Through the initiative, GSA has partnered with roughly two dozen tech providers to offer deeply discounted rates on software to government customers by treating the government as a single large customer. 

The person familiar predicts that OneGov contracts will change, anticipating the focus of the initiative to adopt longer-term contracts, echoing sentiments expressed in an agency leader’s remarks last week. 

“I think the major change in OneGov from this year to last is going to be working to put in more longer-term OneGov agreements, things that are still going to be very competitively priced,” the same person said. “

Washington Technology Editor-in-Chief Nick Wakeman contributed to this report.

https://www.nextgov.com/acquisition/2026/05/gsa-preparing-ai-specific-acquisition-reform-rule/413855

Aligning DOD Small Business Innovative Research (SBIRs) With Private-Sector Forces Driving Defense Innovation

“BREAKING DEFENSE” By Jon Chung and Dan Berkenstock  

“If the goal is delivering new capabilities at the speed of relevance, then SBIR — and programs like it — must be aligned with the private-sector forces driving the next wave of national defense innovation.”

___________________________________________________________________________________________________________

” What is the purpose of the $35 billion the Department of Defense has invested in Small Business Innovation Research (SBIR) over the past 40 years — and the $1.5 billion it will award annually moving forward? Should success be measured by the number of small businesses funded and jobs created, or by the operational capabilities delivered to warfighters?

With SBIR authorization set to expire this fall, Congress has a rare opportunity to provide strategic clarity on an effort that is a major tool for pushing advanced technologies into the Pentagon. If the goal is delivering new capabilities at the speed of relevance, then SBIR — and programs like it — must be aligned with the private-sector forces driving the next wave of national defense innovation.

A strong step in that direction would be passing a reauthorization bill that includes the Strategic Breakthrough Funding (SBF) program, as recently proposed by Sen. Joni Ernst in the INNOVATE Act. This program, which would provide up to $30 million in SBIR funds when matched with non-SBIR government contracts and/or private capital, would immediately supercharge the small business defense industrial revolution.

Created through the Small Business Development Act of 1982, SBIR is funded as a carve-out from extramural R&D budgets — making it one of the largest pools of DoD development funding not tied to congressional line items. The program was intended to harness the innovation potential and agility of small businesses in meeting federal R&D needs, particularly in accelerating new technology to tackle pressing national security challenges.

For its first 25 years, the program was focused on early-stage innovation — funding feasibility studies and system prototyping. The underlying assumption was that companies completing Phase II prototyping would be ready for program offices to take over, transitioning promising technologies into acquisition programs.

By the mid-2000s, it became evident that this assumption was flawed. Too many companies had good ideas and working prototypes, but no path forward. The bridge to operational adoption didn’t exist. In response, Congress passed the SBIR Reauthorization Act of 2011, introducing a series of reforms that aimed to fix the so-called Valley of Death, where businesses struggle to get from prototype to program adoption. These new authorities included the ability to award sequential Phase II grants, support later-stage technology transition, and match SBIR funding with program office dollars and/or private capital.

The most visible outcome of these reforms is the Strategic Funding Increase (STRATFI) program, administered by AFWERX and SpaceWERX. STRATFI awards match up to $15 million in SBIR funds in a 1:1:2 ratio among SBIR, DoD program offices, and private investors — enabling total awards of up to $60 million. More than 65 companies have received STRATFI funding to date, building systems ranging from smart rifles to hypersonic vehicles.

The authorities contained in the 2011 language have coincided with the rise of a new generation of highly capable small businesses. Today, more than 200 venture-backed defense startups are tackling some of the most critical national security challenges across space, autonomy, cyber, and advanced manufacturing. These companies are staffed with top engineers from both Silicon Valley and the traditional defense base. They’re fast, focused, and fiercely mission-driven — demonstrating a new model for capability development that begins with commercially viable technology and ends with deployable systems.

A typical hardware startup delivers its first operational capability after about one million hours of labor, mostly engineering, funded almost entirely by private investors. Multiply that by 200+ companies in today’s defense innovation ecosystem and you’re looking at over 200 million hours of cutting-edge technical work — a resource America’s national security establishment fails to fully embrace at significant risk.

But startups are also on a clock. Capital comes in waves, often in 24-month cycles, with increasing expectations at each stage. A company might close a $25 million Series A round based on $10 million in contracts or bookings. To raise a $40–50 million Series B — often the round that carries a company to fielded capability — it may need $20 million or more in booked annual revenue. Government contracts act as a demand signal, not just for procurement, but for investors, too. Missed signals have real consequences.

Programs like STRATFI are a good start — but to truly align with the tempo and scale of private investment, the current model needs refinement. First, STRATFI currently spans four years and is limited to $15 million SBIR dollars. Venture-backed companies operate on two-year fundraising timelines and need two distinct award moments, spaced roughly two years apart, to sustain investor confidence. Additionally, each sequential award should be larger than the previous one to match venture expectations of revenue milestones. Hence, STRATFI should be modified to provide two distinct awards of increasing dollar value, spaced two years apart so that government-derived revenues match expectations of venture investors at each of the various investment stages.

Second, current rules allow companies to count past investments as matching funds. Instead, legislation should require that matching dollars be raised after award notification — making the award itself a catalyst to force additional investment commitments.

Finally, STRATFI is currently just a Department of the Air Force program. Acquisition executives across the other military departments should have access to similar tools to fully benefit from the emerging innovation ecosystem.

The good news is that none of this requires sweeping acquisition reform. Most of these improvements — and several others — are already included in the Strategic Breakthrough Funding program proposed in the INNOVATE Act. Strategic Breakthrough Funding would raise matching caps to $30 million, reduce red tape, and make funding more accessible across the Department of Defense.

With a few key refinements, this approach could become the framework that aligns the SBIR program with private investment in order to unlock the full potential of America’s defense innovation base — an urgent national priority in an increasingly dangerous world.”

The $35 billion question: Is SBIR funding delivering for America’s warfighters?

ABOUT THE AUTHORS:

Jon Chung is a US Space Force Fellow at the MITRE Corporation.

Dan Berkenstock is a Distinguished Research Fellow at the Hoover Institution. Together, they are authors of the recent Hoover paper “The Warfighter’s Pipeline: A Blueprint for Aligning Defense Acquisition with Venture Capital.”

Seize the Moment in Small Business Federal Government Contracting

“SMALLTOFEDS” By Ken Larson

“The small business segment of the huge federal government contracting market is poised to grow exponentially due to advances in technology and the need for flexibility, mobility, agility and economic performance.”

__________________________________________________________________________________________________________

“THE MOMENT

Trends on the horizon point to a bright future for small business in federal government contracting. Federal government agencies have set a record in exceeding the legal requirement for small business contracting goals. 

FY 2024 Goal Attainment

Small business is uniquely qualified for work in the current economy, particularly in the services sector, due to lower overhead and G&A rates, as well as agility in work force development.

New industries in Robotics, 3D Printing, Energy, Environmental Protection, Security and Geo-spatial IT and AI Tools are creating fields for small enterprises to compete against bigger firms or lead teams involving larger businesses on large scale projects. 

Government small business set-aside procurement is on the rise and becoming recognized by many agencies as a way to remove stodgy, entrenched companies when long term contracts come up for renewal.  These agencies look to smaller firms for cost effective, vibrant management, while inheriting an existing, trained, incumbent work force available to the winner. The process can dramatically grow smaller firms. 

Managing Incumbent Work Forces

PREPARATION

A small business anticipating participation in the federal contracting market must make pursuing it part of a long term strategy.  Success in government contracting does not happen overnight. 

Like any other market venue, a niche must be located, market research must confirm the need for products and/or services and the competition; the customer and the potential sales must assessed.  Unlike many other fields, success relies on early requirements identification and strong marketing.

Marketing to Achieve a Small Business Set-aside Contract

5 Factors in Forming a Small Business Contracting Company

The government contracting market allows a small business to pass on the costs of operations at a project level as well as write off company-wide expenses if allocated in a defined manner to single government cost objectives (contracts).

 
Small business can also operate in a lower risk environment with contract types suited to the challenges involved.  The trade-offs to these features are requirements for audits and job cost accounting that require verified consistency from cost estimating to billing and contract closeout. This does not occur without preparation. 

Small Business Sytems Development

Entering the market requires carefully sculpting commercial past performance into prospective government contract performance and accumulating strong customer satisfaction ratings.  The feds talk to each other. 

Meeting The Small Business Federal Government Contracting “Past Performance” Challenge

Business Ethics and Past Performance

EXECUTION

With the right combination of planning, preparation and opportunity, a small enterprise can seize the moment with:

Identification of specific opportunities that fit company capabilities

SAM Contract Opportunities

Astute bid/no bid decisions
Making an Astute Bid/No Bid Decision

A solid team of resources both internal and external
Vital Tips for Project Management

Managing Industry Teaming Relationships

A Winning proposal, effective project start-up/execution and quality products and services
Government Contract Proposal Preparation

SUMMARY

The small business segment of the huge federal government contacting market is poised to grow exponentially due to advances in technology and the need for flexibility, mobility, agility and economic performance. 

Rule changes are being considered to enhance entrance of commercial enterprises into the government contacting venue. Congress and the federal agencies are looking hard at constructive changes to make the challenges we have discussed here easier to meet for the small enterprise.  

Seize the small business contracting moment by being diligent in learning about the market and pursuing it. Make your company well equipped to succeed:

• Define your niche
• Learn the rules
• Plan 
• Prepare 
• Execute “

Seize the Moment in Small Business Federal Government Contracting

What Small Business Needs to Know About SAM Contract Opportunities

“SMALLTOFEDS” By Ken Larson

“Strategic guidance on The System for Award Management and factors for using it in small business marketing to government agencies and prime contractors.”

__________________________________________________________________________________________________

“A PUBLIC DOMAIN ACQUISITIONS BULLETIN BOARD

Established as the public announcement vehicle for federal procurement, SAM Contract Opportunities is a web-based, “Public Announcement Bulletin Board” to satisfy fairness in government contracting laws mandated by US law. It is a terrific market research tool and an absolute necessity once a solicitation has gone formal to stay abreast of modifications, changes in proposal due dates, questions and answers and other necessary information that contracting officers are required to make public.

WHAT ANNOUNCEMENTS MEAN

SAM Contract Opportunities is the mandated posting point for contracting officers in all federal agencies. It is also the required notification point for GSA schedule solicitations, contract award announcements of all types and other information that is required by law for communication to the public in a fair and open manner regarding federal government procurement of supplies and services. The site contains “Sources Sought” and bidders conference notices, government requests for industry comment on draft RFP’s and formally published solicitations with proposal due dates. 

A solicitation posted at SAM Contract Opportunities  generally means that a procurement has received funding and the contracting officer has been authorized to start the source selection process.

Often misunderstood, is that much has occurred in the way of marketing activities by companies in advance of notices formally published by the government on SAM Contract Opportunities. By the time the formal, solicitation is published it is too late to market for setting a procurement aside for a small business designation if it has not already been established as such. In addition, formal solicitation publication closes the window on self-marketing by HUB Zone and 8(a) firms for set asides to them individually without competition. In short, businesses have been marketing for the requirement long before it became formally announced at SAM Contract Opportunities.

Finding a solicitation that is ideal for your company for the first time on SAM Contract Opportunities is excellent market research insight into what the agency publishing the requirement is buying. However, a careful bid/no bid analysis should be conducted as to whether it is prudent to go through the expense of a proposal if the opportunity has not been a new business target for your firm earlier in the game. Please see the following article on completing a bid/no bid analysis:

Small Business Federal Government Contracting Proposal Preparation

NAVIGATING THE SITE

Start by registering at SAM. Many of the features available to users are not accessible without a registration. Begin some careful searches by key words into agency solicitations that could use your products and services. 

The data base is huge and it is best to move from specific key word selections to the more general with experience to avoid being inundated with meaningless solicitations. 

As you examine the solicitations, see who has indicated an interest in bidding them among your competitors and the primes you are pursuing and then target such projects for participation by your firm either as a prime yourself or as a subcontractor. Pay particular attention to “Sources Sought”, Draft RFP “Request for Industry Comments” and similar announcements that indicate an early requirement taking shape.

For active solicitations that you wish to monitor, check receive updates and announcements by email. Once the solicitation reaches the formal RFP stage and a due data for a proposal has been established, if you have decided to bid the job the “Follow” feature is especially critical.

If there is a bidders conference and you intend to bid the job, make plans to attend. When questions are solicited you may ask them but remember that your question and its associated answer will be published by the government so be careful not to educate your competition to your win strategy in the process.

You do not have to indicate you are interested in bidding the job by registering as an “Interested Vendor” in order to bid a solicitation. Some companies prefer not to advertise their bid intentions, seeking to avoid competitors modeling their firm.

A MARKET RESEARCH SOURCE

If you are new to federal government contracting and wish to determine the best market for your supplies and services, observing what a given agency is buying on SAM Contract Opportunities is a key factor.

Keep in mind that the decision makers in government contracting are the technical managers and process people behind the scenes in an organization (either government agency or large company). They have the budget authority, program responsibility and accountability. These people pass their decisions on to buyers and contracting officers via signed requisitions. Buyers and contracting officers are really no more than gate keeping staff members, knowledgeable in legalities, terms and conditions and who sign on behalf of the agency or company AFTER an internal review by the executives who have technical and management responsibility.

Thus your real marketing targets are behind the gatekeepers and little is achieved by marketing to a contracting officer or buyer. This rule of thumb applies with prime contractor contracting specialists and administrators as well as government personnel. For further details on the roles of these personnel please see the following link:
`
Federal Government Contracting Customer Relations

Once again, bidding an active solicitation after it has hit SAM Contract Opportunities may be too late. The idea is to use them for market research so you can target similar projects earlier in the process. Research the technologies and services in which your targeted agencies and primes are involved through trade magazines, Internet articles, web sites, employment hiring fairs and industry conferences.

Focus your marketing campaign on finding evolving projects you can use as vehicles to approach teaming partners and agencies directly with a marketing campaign geared to your capability statement. Develop a solution to the specific needs of the project and present it to gain their attention.

Your principal challenge as a small product and services provider is finding evolving programs and projects into which your capabilities fit. Once you have found such targets it is then a matter of marketing brusquely to get into the game with eye catching solutions and capabilities.

SUMMARY

When a procurement becomes public on SAM Contract Opportunities it stays public, but many invisible strings behind the scenes are likely already attached to it by aggressive and talented companies who may have sculpted the requirement with the agency, assisted in writing the statement of work or influenced the structure of the specifications to favor their products and services. All this is good, competitive marketing practice in the government contracting venue, just as it is in the commercial marketplace.

Use SAM Contract Opportunities as discussed here in consonance with the following teaming and marketing articles:

Small Business Teaming In Government Contracting

Multiple Front Marketing In Government Contracting

Marketing A Small Business In The Federal Government Contracting Environment

SAM Contract Opportunities is an absolute necessity once you make a bid decision. It is an extensive resource prior to such decisions and if utilized prudently it can enhance your small business government contract marketing plan dramatically.”

What Small Business Needs to Know About SAM Contract Opportunities

How A New Company Can Compete On Federal Government Contracts

“SMALL TO FEDS“ By Ken Larson

“As a volunteer counselor over the last 2 decades, I have noted common traits among the most successful small business federal government contractors. The following are 10 of the most prominent traits and tips on how successful small companies developed them.“

“Teaming with an existing firm and developing a capability statement and proposal that rings the bell on a government requirement, particularly one that is set-aside for small business is one of the most practical ways to achieve entry into government contracting.

Commercial success before entering government contracting. From maintaining buildings to keeping the lights on, from grounds maintenance to flight maintenance, look for niches that can be pursued based on successful past performance, transitioning via industry teaming via subcontracts, partner roles with larger companies or in small business set aside orders for minor items and simpler services provided directly to the government. Your Entry Points

Willingness to concede there were things they did not know and seeking advice early. You may download the book, SmallBusiness Federal Government Contracting and its supplement from the “Box” in the left margin of this site. You may also benefit from the free “Reference Materials”. Contract agreements, incorporation instructions for all the US states, guidance on marketing and business planning are also included. Free Books and Supplements

Recognition of the value in industry teaming. Synergism is paramount in teaming with any size company, whether in a lead or subcontracting role. There should be technical, management and market segment similarities between you and any company with whom you are considering teaming. Your prospective team member ideally will not be a direct competitor; rather a business in a related field with whom you share a mutual need for each other’s contributions in pursuing large-scale projects. Small Business Teaming in Government Contracting

Strong capability statement (CAPE) development, networked prudently among government agencies and large government contractors. Your CAPE targets contracting officers and prime contractor buyers who are seeking to fulfill their small business buying goals. It is a way to get you in the door and speak to, or correspond with, the management and technical personnel who are the decision makers in sourcing small business buys. A good quality CAPE is the spearhead of your marketing campaign and your visual image; focused and direct, it must be informative, concise and a snapshot of the very best you can offer. Your Capability Statement

Maximizing set-aside qualifications in seeking both prime and subcontract opportunities. Small business group-designated procurements are far more frequent than sole source contract awards. Agencies must prepare special justifications for sole sourcing and those most frequently approved are for Hub Zone and Small, Disadvantaged [8(a)] firms. Small business group designations are beneficial to firms who hold them by enhancing the probability of an award through agency restrictions on prime contractor bidding to only those who hold the group designation. Others may bid as subcontractors to the prime but the prime small business contractor must be capable of performing at least 51% of the total effort in terms of work scope, hours and dollars. Marketing to Achieve a Small Business Set-aside Contract

Prudent bid/no bid decisions. Government contract proposal preparation is time consuming and can be costly. Meeting agency Request for Proposal (RFP) requirements with a responsive proposal can be well worth the effort if a winning strategy can be formulated. When considering a proposal to a given government solicitation, conduct a bid/no bid exercise. By going through that process you will begin formulating your win strategy or you will discover that you should not bid the job for lack of such a strategy. Making an Astute Bid/No Bid Decision

Ethical business conduct and avoidance of conflicts of interest. A small business ethics image is different than a product or service “Brand Identity”. The latter focuses on that which the customer receives from you in the way of products and/or services. A company ethics image is how the organization is viewed in general from a public perception as positive or negative. That view is held by customers, your industry partners or prospective partners, regulators and the average citizen. If carefully sculpted your public ethics image can be a vital element in business success; if neglected it can pose a high risk to your enterprise. Maintaining an Ethical Company Image

Excellence in risk analysis. The challenges and difficulties for the small business in government contracting are not so much in the areas of barriers as they are in lack of knowledge (which I concede is a form of barrier but one that can be dealt with) Large business and government agencies take advantage of the small enterprise lack of knowledge or make poor assumptions regarding what a small business knows about the Federal Acquisition Regulation (FAR) and associated Cost Accounting Standards (CAS). This leads directly to abusive practices.Managing Small Business Risk

Solid long range planning and plan maintenance. The time to consider separating government from commercial work and/or establishing new cost centers for bidding, accounting and billing purposes is when the enterprise is generating a long range marketing plan to determine rates for bidding new long term contracts. The location of the work (both geographic location and whether performance is in or out of a government facility, its duration, skill set requirements, government-mandated fringe benefits for workers and the competition are all factors to consider).Strategic Planning for Small Business

Excelling in meeting the past performance challenge, building a performance record with solid customer service and sensitivity. How can a new organization or one that is new to government contracting muster a response to the past performance challenge? The answer lies in historical projects that may be similar in the commercial arena and a high quality proposal that clearly demonstrates an understanding of the requirement at hand, a unique and cost effective project plan and high performing personnel and/or products tailored to the statement of work to offset an interim, light past performance record. Meeting the Past Performance Challenge“

800 VIOLATIONS & 1,000 OPEN VULNERABILITIES found at DOD cleared contractor facilities in 2025 - contractors fail to comply with the National Industrial Security Program Operating Manual.
https://rosecoveredglasses.wordpress.com/2026/05/15/800-security-violations-and-1000-open-vulnerabilities-found-by-dcsa-at-dod-cleared-contractor-facilities-in-2025/
#GovernmentContractors #SecurityViolations

Contractor Convicted for Destroying Dozens of Federal Databases

A contractor's reckless actions led to the destruction of dozens of federal databases, showcasing a staggering disregard for the security and integrity of sensitive government information. After being terminated on February 18, 2025, the contractor and his twin brother intentionally caused chaos by accessing…

https://osintsights.com/contractor-convicted-for-destroying-dozens-of-federal-databases?utm_source=mastodon&utm_medium=social

#DataDestruction #FederalDatabases #InsiderThreat #GovernmentContractors #EmergingThreats

Tips For Small Business In Teaming With Prime Contractors

“WASHINGTON TECHNOLOGY” – By Mike Lisagor

Adapted from the book: How to Win in the Government Market (co-authored with Mark Amtower)

“There are plenty of pitfalls and possible mistakes when you form partnerships.There is no such thing as a risk-free proposition as a subcontractor. But here are eleven guidelines that can increase your chances of picking the winning prime contractor.”

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1. While established relationships often influence teaming decisions, business associates can be re-assigned or leave their company. Having a definitive teaming agreement is one of the few ways you can mitigate this risk.
2. Your company’s technical role and work percentage should be clearly defined in a written teaming agreement (usually Attachment A). Avoid terms like “best efforts” or “goals.” These rarely pan out. On IDIQ and GWAC bids where work content is guaranteed, get an agreement on which technical areas you will lead…something like “all the work in our core competency.”
3. It is a good practice to request a Dun & Bradstreet credit report on a potential small business prime contractor to assess whether they will be deemed financially credible in the eyes of the client. I’ve seen the government throw out bids because the small business prime couldn’t pay their bills. This was incredibly frustrating for subs.
4. Ask the client what they think of potential teammates – the worst that can happen is they’ll decline to comment.
5. Most acquisitions require either the prime contractor or the entire team to provide a certain number of project citations. Confirm that the prime has the necessary past performance and relevant projects to cite in the proposal.
6. Look for a prime that has subject matter experts who meet the key personnel requirements. Negotiate having some of these be from your company.
7. Many government acquisition re-competes assume the winning team will hire some or all the incumbent contractor’s staff. This will need to be considered as part of your teaming and win strategy.
8. Make sure the potential prime contractor has the resources and ability to develop a professional winning proposal. Find out up front how much effort you will be expected to expend.
9. Discuss pricing strategy up front so you know whether the rates you will have to bid will fit within your company’s pricing model. This means you need to know whether the target agency has a history of best value or lowest price ‘barely’ technically capable awards. And the prime’s ability to be competitive.
10. Avoid companies that have a reputation for treating their subcontractors unfairly especially when negotiating a subcontract after the award and sharing the resulting work. Query your industry partners for their experience teaming with the prime. And, just as you should when hiring someone, trust your instincts. It won’t get better after the award.
11. One final suggestion — use a decision matrix to evaluate the teaming landscape for each specific new business opportunity. This will take some of the emotion out of the selection process. First, develop the important win strategy criteria (column 1). These should be based on both stated and perceived procurement needs as a result of client discussions and reading procurement documentation. Next assess your own company’s ability to meet these criteria and any gaps you can’t fill (column 2). Then, evaluate each candidate prime against the same criteria using colors; high, medium, low; or a numerical score to determine the best fit (one column for each company).

And, above all, avoid teaming just because it’s someone you already know…team to win!

Tips On Teaming With Prime Contractors

ABOUT THE AUTHOR:

Mike Lisagor

A (usually) retired writer, gov’t contractor BD & PM expert, and blues musician, Mike Lisagor is the founder of Celerity Works and a co-founder of GovFlex.com. His books include the just released, How to Win in the Government Market (with Mark Amtower), The Essential Guide to Managing a Government Project, and How to Develop a Winning SBIR Proposal (with Eric Adolphe). He can be reached at LinkedIn.com/in/mikelisagor and [email protected]

Industry Must Explain Commercial Best Practices To Government Agencies

“WASHINGTON TECHNOLOGY“ By Ross Wilkers

“Assuming government leaders know what those practices are and how they work is not a good idea, according to the General Services Administration’s chief acquisition officer.“

___________________________________________________________________________________________________________

“Multiple cycles are running at once in the Trump administration’s push for structural changes in how the federal government buys $1 trillion in goods and services each year.

One cycle involves a rewrite of the Federal Acquisition Regulation, the rules of the road that govern the purchasing. A second cycle focuses on shifting those buys more toward what is commercially-available and away from the custom-made route that dominates much of government acquisition.

A third cycle centers around how the government buys what it needs, especially on the technology front, and in particular the contracting mechanisms used to do so. Outcome-based or fixed-price contracting is high on the discussion agendas everywhere across public sector, and a focus for new leadership at the General Services Administration.

So if the government wants to move in the outcome-based direction that many at agencies and contractors have long wanted to go in, what does that mean for the GovCon industry and how does it alter the way tech services are priced?

At the Professional Services Council’s Federal Acquisition Conference on Thursday, GSA’s chief acquisition officer Larry Allen recommended companies both “promote those commercial best practices” and to not “assume that people in government know what they are.”

“Some will, some will not, but I think the general direction that we want to go in is getting away from government-unique pricing constructs,” said Allen, who also serves as GSA’s associate administrator for government-wide policy. “A large part of that is going to be looking at how we use cost-plus contracting and where we use cost-plus contracting.”

Wholesale changes in how those practices inform the structures of government contracts is likely to be a multi-year effort as FAR reforms and the movement to more commercial-like purchasing work their way through the system.

By the same token, elements of fixed-price contracting are being added as line items into larger programs as a way of introducing both the contractor and customer to that method.

Whereas cost-plus contracting means the risk is shared on both sides of the arrangements, outcome-based or fixed-price methods put substantially all of that risk onto the contractor. But the potential reward is higher based on savings achieved, which could mean higher profits for the contractor as opposed to cost-plus.

Carving out pieces of contracts and making them fixed-price is a method Leidos uses with its customers as a way to get both sides more familiar with the concept, Leidos’ chief growth officer Jason Albanese told us in an interview for our 2025 Top 100 ranking release.

During a June 4 earnings call, Science Applications International Corp.’s chief executive Toni Townes-Whitley told investors that some contracts could be better positioned for a fixed-price structure like enterprise IT.

Allen did caution PSC conference attendees that even if the idea is to bring down the overall use of cost-plus contracting, “it probably will not be eliminated” in its entirety.

The end result of how GovCon pricing structures change seems likely to be a hybrid of how commercial industries operate and the unique fabric of government buying, but Allen recommended companies make the connection between both worlds in talking with customers.

“I would try to emphasize, particularly to the senior leaders in our agency and other agencies, how these mirror your standard commercial practices,” Allen said. “The government isn’t going to be able to get there entirely, but we would like to move closer to those, and this is a particularly receptive audience to that theme.”

The onus is on industry to explain commercial best practices

ABOUT THE AUTHOR:

Ross Wilkers covers the business of government contracting, companies and trends that shape the market. He joined WT in 2017 and works with Editor-in-Chief Nick Wakeman to host and produce our WT 360 podcast that features discussions with the market’s leading executives and voices. Ross is a native of Northern Virginia and is an alumnus of George Mason University.

‘Total Time Accounting’ In Small Business Government Service Contracting

“SMALLTOFEDS” By Ken Larson

“It is necessary to establish a written policy and procedure disclosing time keeping practices to government auditors and fact-finding teams.

“Total Time Accounting” makes all hours a part of the record and keeps records free from waste fraud and abuse or defective pricing allegations.”

_______________________________________________________________________________________________________

“In small business government service contracting, it is necessary to establish a written policy and procedure disclosing time keeping practices to government auditors and fact-finding teams. Included must be the company process for both pricing and accounting for overtime. In doing so, topics such as compensated and uncompensated time must be addressed.

Include in the policy/process for pricing and job cost accounting those steps required for compensated overtime to personnel who are non-exempt from the Fair Labor Standards Act (hourly who receive time and one half).

Also include the policy/ process for pricing and job cost accounting, those steps required for uncompensated overtime to personnel who are exempt from the Fair Labor Standards Act (salaried who receive pay at straight time for hours in excess of 40 and those who do not receive pay at all for hours in excess of 40) The former are usually engineers and technicians. The latter are usually management or staff.

I encourage “Total Time Accounting” to my clients to make all hours worked a part of the record and stay away from waste fraud and abuse or defective pricing allegations.

I believe the below article by Find Law contains the best approach to the issue of uncompensated overtime and I encourage my clients to make part of their policy the practice specified:

 “In our view, contractors performing labor-hour, time-and-material, or cost reimbursable contracts should avoid any timekeeping system that fails to accurately report the total time worked. Such a system under-bills clients for work performed and thereby affects a company’s bottom line. Moreover, any timekeeping system that by its very design under-reports actual hours worked invites labor mis-charging and false claim allegations.

A total time accounting system that accurately reports hours will generate the proper amount of revenue for contractors on each of their labor-hour and time-and-material contracts. Cost reimbursable contracts have an added twist. Many cost reimbursable contractors who report total time use a diluted hourly rate approach for distributing labor costs to projects. For example, if an employee is paid $1,000 per week and works 40 hours, the projects are charged $25 per hour. If the same employee works 50 hours the following week, the hourly rate is diluted and projects are charged $20 per hour. In this example the contractor gets no additional revenue for the extra 10 hours of effort — they are provided free of charge to the Government.

 Fortunately, acceptable standard cost approaches will negate this windfall to the Government and still allow the contractor to take advantage of uncompensated overtime. The most common of these approaches involves charging direct labor to projects at a standard hourly rate established annually for each direct labor employee. Actual hours are charged to projects at this standard rate.

For uncompensated overtime situations, the variance between labor charged to projects and actual compensation is credited to overhead. Such an approach allows contractors to account for their hours in an accurate, straightforward manner, bill for the hours actually worked, and effect a competitively beneficial decrease in their overhead rates. DCAA has recognized this as an acceptable method of accounting for labor costs, and we think that it generally beats just giving the Government hours of effort for free.“

‘Total Time Accounting’ In Small Business Government Service Contracting

The First 100 Days of CMMC And What Comes Next

NATIONAL DEFENSE MAGAZINE By Ryan Heidorn

“The first 100 days of CMMC were never meant to be dramatic. The signal lies not in what happened immediately, but what is now unavoidable.

In its first year, expect imperfect translation, conservative interpretation and inconsistent execution. These are not signs of failure; they are signs that CMMC has moved from policy theory into operational reality.”

____________________________________________________________________________________________________

“Following a multi-year rulemaking process, the Defense Department’s Cybersecurity Maturity Model Certification program crossed the regulatory finish line on Nov. 10.

For much of the defense industrial base, that moment carried a simple question — now that CMMC had moved from concept to reality, what would change first?

In the weeks that followed, there was no sudden surge of solicitations carrying CMMC requirements and no visible disruption to contracting operations.

Immediate disruption, however, was never the signal to watch. Nov. 10 was not a switch-flip moment where every contract suddenly changed, but the final regulatory step that collapsed uncertainty into inevitability, transforming CMMC from a long-debated future requirement into a permanent feature of defense acquisition.

The absence of visible disruption in the first weeks of CMMC was not surprising. What had changed was certainty — that a verified cybersecurity posture is now a condition of doing business with the department, not a sudden wave of enforcement actions.

For organizations that had already leaned into existing cybersecurity requirements, this marked a shift from designing for compliance to collecting, validating and organizing objective evidence in preparation for assessment.

For those that had maintained a wait-and-see approach, November carried a tangible cost. Qualified service providers and third-party assessors were already in high demand, and the timeline to move from minimal readiness to assessment-ready — often 12 to 18 months — remained unchanged. Organizations that delayed action risked entering 2026 at a competitive disadvantage.

Those early weeks began to expose which organizations had established effective operational governance, and which had deferred ownership decisions or assumed accountability would come later.

By the second month, pressure began to surface. This didn’t stem from deadlines, but from supply chain dynamics.

Prime contractors began communicating expectations to their supplier bases, asking whether organizations were prepared and what actions were underway. Under Defense Federal Acquisition Regulation Supplement 252.204-7021, primes must ensure that subcontractors handling federal contract information or controlled unclassified information hold a current CMMC certificate or status at the required level prior to award.

An unprepared supplier base can undermine performance or expose the prime to risk, driving urgency well before solicitations appear. Because primes do not know in advance which contracts will include CMMC requirements or at what level, ensuring preparation for all potential suppliers must happen ahead of demand.

Organizations that move the fastest prioritize repeatable processes and clear ownership rather than one-time remediation. One-off fixes may satisfy a checklist, but repeatable processes are what stand up to verification.

By the 96-day mark, a clear divide began to emerge between organizations that could say they had implemented the requirements and those that could withstand scrutiny. Proving compliance is not a step that occurs after implementation — it is a permanent operating condition.

In practice, CMMC readiness is rarely constrained by technology. Documentation, consistency and governance are more often the limiting factors. Security tooling without evidence of governance becomes invisible during assessment.

Critics of CMMC 2.0 have pointed to its shift away from maturity levels toward more blunt enforcement of existing requirements. But demonstrating conformity to the many perform-type assessment objectives in Level 2 requires operational maturity, not just tools.

Self-attestation has repeatedly failed to produce durable cybersecurity outcomes. Verification is therefore inevitable, and it is quickly becoming the standard currency of trust.

This model is not unique to defense and will propagate into other regulated ecosystems. The scale of this shift is significant.

The next phase will test operational discipline. Rather than a single enforcement trigger, the final rule embeds CMMC into acquisition through multiple discretionary decision points exercised by program offices and requiring activities. This structure makes uniform application unlikely and accelerates urgency unevenly across the market as the rule integrates into real acquisition workflows.

Some organizations will face intense pressure quickly, while others may feel little immediate impact. That inconsistency is not evidence of failure, but it reflects a program being applied inside day-to-day acquisition activity with varying levels of risk tolerance, mission criticality and data sensitivity.

Supply chain pressure will continue to concentrate where mission impact is high, data sensitivity is significant and the pool of qualified suppliers is limited. This asymmetry determines who feels pressure first and who has time to adapt.

Demand for third-party certification assessments will continue to grow, exposing capacity constraints not only among assessors but also across the broader implementation ecosystem. Organizations that wait to see a Level 2 certification requirement in a solicitation may find themselves competing for limited resources on timelines that cannot be compressed.

CMMC shifts accountability away from point-in-time compliance events toward continuous operational discipline. The pre-CMMC mindset no longer holds. Discrepancies between paperwork and practice are already the most common reason for those “Not Met” determinations during assessment.

Friction in the early rollout is already acting like a sorting mechanism, distinguishing organizations that operationalize compliance from those that rely on static documentation.

The first 100 days of CMMC were never meant to be dramatic. The signal lies not in what happened immediately, but what is now unavoidable.

In its first year, expect imperfect translation, conservative interpretation and inconsistent execution. These are not signs of failure; they are signs that CMMC has moved from policy theory into operational reality.”

Ryan Heidorn is chief technology officer at C3 Integrated Solutions.

SDVOSB Contract Opportunities: Where $28.6 Billion Actually Goes

“FEDSPEND”

“Service-Disabled Veteran-Owned Small Business contracts hit $28.6B in FY2025. Here’s the agency-by-agency, NAICS-by-NAICS breakdown — and why 35% of those dollars went sole-source.“

______________________________________________________________________________________________________

“$28.6 Billion. The Veteran Advantage Is Real — If You Know Where to Look.

The federal government’s SDVOSB (Service-Disabled Veteran-Owned Small Business) program is the second-largest set-aside category by dollar volume, behind only general small business. In FY2025, agencies awarded $28.6 billion across approximately 52,000 contract actions to SDVOSB firms.

But the distribution is brutally uneven. A small percentage of SDVOSB firms capture the majority of those dollars. The difference is not capability or service quality — it is business development discipline and knowing where the money flows.

Which Agencies Award the Most SDVOSB Contracts?

The top 8 agencies account for over 82% of all SDVOSB dollars:

| Agency | FY2025 SDVOSB Awards | % of Total |

| Department of Defense | $12.8B | 45% |

| Department of Veterans Affairs | $5.2B | 18% |

| Department of Homeland Security | $2.1B | 7% |

| General Services Administration | $1.8B | 6% |

| Department of Health & Human Services | $1.4B | 5% |

| Department of Energy | $1.1B | 4% |

| Department of Interior | $890M | 3% |

| Department of Agriculture | $680M | 2% |

The VA Advantage

The VA deserves special attention. Unlike other agencies, the VA operates under the Veterans First Contracting Program, which gives SDVOSB (and VOSB) firms priority over all other set-aside types for VA contracts. This is not just a goal — it is a statutory mandate under 38 U.S.C. 8127.

What this means practically: when a VA contracting officer has a requirement, they must first consider SDVOSB firms before opening it to 8(a), HUBZone, or general small business. If two or more SDVOSB firms can perform the work, the contract must be set aside for SDVOSB competition.

If you are an SDVOSB firm not actively pursuing VA contracts, you are leaving your strongest legal advantage on the table.

Top NAICS Codes for SDVOSB Awards

| NAICS Code | Description | FY2025 SDVOSB Awards | Competition Level |

| 541512 | Computer Systems Design | $3.9B | Very High |

| 561210 | Facilities Support Services | $2.8B | High |

| 541330 | Engineering Services | $2.4B | High |

| 236220 | Commercial Building Construction | $2.1B | Moderate |

| 561612 | Security Guards | $1.6B | Moderate |

| 541611 | Admin Management Consulting | $1.3B | Very High |

| 541519 | Other Computer Services | $1.1B | High |

| 238220 | Plumbing/HVAC/AC Contractors | $890M | Low |

| 562910 | Remediation Services | $780M | Low |

| 237310 | Highway/Street Construction | $720M | Low |

Where the Smart Money Competes

The pattern from 8(a) data repeats here: IT services (541512) attracts the most competition per dollar. But look at the bottom of the table — Plumbing/HVAC (238220), Remediation (562910), and Highway Construction (237310) have significantly fewer competing SDVOSB firms relative to award volume.

Construction-related NAICS codes perform disproportionately well in the SDVOSB program. Veteran-owned construction, environmental remediation, and facilities maintenance firms have roughly 4x less competition per dollar than IT services firms.

If you hold SDVOSB certification and a construction or trades-related NAICS, your competitive position is stronger than you think.

The Sole-Source Advantage: $5 Million Threshold

The SDVOSB sole-source threshold is $5 million for both services and manufacturing — higher than the 8(a) threshold of $4.5M.

FY2025 Sole-Source vs. Competitive Split

~35% of SDVOSB dollars were sole-sourced ($10B)~65% were competitive SDVOSB set-asides ($18.6B)Sole-source average value: $1.4MCompetitive average value: $640K

The math is clear: sole-source contracts are worth more than double the average competitive award. And they require zero competition — just a contracting officer who knows your firm can perform the work.

How to Position for SDVOSB Sole-Source Awards

Target agencies behind on SDVOSB goals. When an agency is under its 3% SDVOSB statutory goal heading into Q4 (July-September), contracting officers are motivated to sole-source to SDVOSB firms to close the gap. This creates a predictable annual window.

Build PM relationships, not just CO relationships. Program Managers define requirements. Contracting Officers execute paperwork. The decision to sole-source happens at the PM level.

Register in VetBiz (VA) and SAM.gov. VA sole-source awards require VetBiz verification. All federal sole-source awards require active SAM.gov registration. Sounds obvious — but expired registrations are the #1 reason SDVOSB firms miss sole-source opportunities.

Submit unsolicited capability statements. Target agencies in your NAICS codes 6-12 months before contract expirations. Include past performance, key personnel, and specific relevance to the agency’s mission.

VA vs. DoD: Different Strategies Required

VA Strategy (Veterans First Program)

*SDVOSB firms get statutory priority over all other set-aside types

*VA must set aside for SDVOSB competition if two or more SDVOSB firms can perform

*VetBiz certification required (separate from SAM.gov SDVOSB self-certification)High concentration in healthcare IT (541512), facilities management (561210), and medical staffing

*Attend VA OSDBU National Veterans Small Business Engagement events

DoD Strategy (Standard SDVOSB Set-Aside)

*DoD follows standard FAR set-aside rules (no Veterans First priority)

*SDVOSB competes alongside 8(a), HUBZone, and general small business for set-aside goals

*Massive volume in engineering (541330), IT services (541512), and construction (236220)

*Security clearances dramatically narrow the competitive field — cleared SDVOSB firms have a significant advantage

*Pursue IDIQ vehicles: OASIS SB, STARS III, Alliant 3 SB

Recompete Opportunities: The Predictable Pipeline

Approximately 32% of FY2025 SDVOSB awards were recompetitions of expiring contracts. These are not surprises — they are predictable events with known timelines.

What recompete tracking gives you:

Contract expiration dates — know exactly when an incumbent’s period of performance endsCurrent contract value — understand the budget envelope before you bidIncumbent identity — research their past performance to identify vulnerabilitiesHistorical set-aside type — if it was SDVOSB last time, it is likely SDVOSB again

The Timeline Advantage

Most SDVOSB firms discover recompete opportunities when the solicitation posts on SAM.gov. By then, the incumbent has been positioning for months. The firms winning recompetes:

Identified the opportunity 12-18 months before solicitation

Submitted capability statements to the contracting office

Met with the Program Manager to understand evolving requirementsTeamed with complementary firms to strengthen their proposal

Fed-Spend tracks 85,000+ recompete opportunities with automated alerts when contracts in your NAICS codes approach expiration. 

The SBA Certification Change: What SDVOSB Firms Must Know

As of January 2023, SDVOSB certification transferred from VA’s VetBiz to SBA’s VetCert program. Key changes:All SDVOSB firms must now be certified through SBA (not just VA contractors)Self-certification is no longer sufficient for most contract opportunitiesSBA VetCert uses the same portal as 8(a) and HUBZone certificationsProcessing time: approximately 90 daysRe-certification required annually

If you are relying on self-certification alone, you may be ineligible for an increasing number of SDVOSB set-asides. Check your certification status at vetcert.sba.gov.

5 Mistakes That Cost SDVOSB Firms Contracts

Mistake 1: Ignoring the VA

The Veterans First program is the strongest legal advantage any set-aside category has. SDVOSB firms that skip VA contracting are leaving their best card unplayed.

Mistake 2: Competing Only in IT

NAICS 541512 has the highest award volume but also the highest competition density. Firms in construction, environmental, facilities, and trades NAICS codes face dramatically less competition per dollar.

Mistake 3: Letting Certifications Lapse

Expired SAM.gov registration, expired VetCert, expired GSA Schedule — any of these kills your eligibility. Set calendar reminders 90 days before every expiration.

Mistake 4: Waiting for SAM.gov Postings

By the time a solicitation is posted, the positioning phase is over. The winners identified the opportunity months earlier through recompete tracking and agency engagement.

Mistake 5: Going It Alone on Large Contracts

Mentor-protege agreements and joint ventures allow SDVOSB firms to pursue contracts above their individual capability. The SBA’s All Small Mentor-Protege Program and the VA’s Mentor-Protege Program both allow SDVOSB joint ventures to maintain SDVOSB status for set-aside eligibility.

FAQ: SDVOSB Contract Opportunities

How much does the federal government spend with SDVOSB firms?

In FY2025, federal agencies awarded approximately $28.6 billion to SDVOSB firms across ~52,000 contract actions. The statutory goal is 3% of all federal contracting dollars.

What is the SDVOSB sole-source threshold?

$5 million for both services and manufacturing contracts. Below this threshold, a contracting officer can award directly to an SDVOSB firm without competition, provided the price is determined to be fair and reasonable.

Do I need SBA certification to bid on SDVOSB contracts?

Yes. As of January 2023, SBA VetCert certification is required. Self-certification is being phased out. Apply at vetcert.sba.gov. Processing takes approximately 90 days.

What is the difference between SDVOSB and VOSB?

SDVOSB requires the owner to have a service-connected disability rated by the VA. VOSB requires only veteran status. SDVOSB firms receive sole-source and set-aside preferences that VOSB firms do not. Under the VA’s Veterans First program, SDVOSB firms receive priority over VOSB firms.

Can I search SDVOSB contract opportunities for free?

Yes. SAM.gov lists active solicitations filterable by SDVOSB set-aside type. USAspending.gov shows historical SDVOSB awards. Fed-Spend offers a free tier with 10 searches per month across all set-aside types and full contract data.”

SDVOSB Contract Opportunities: Where $28.6 Billion Actually Goes

Your Capability Statement For Small Business Government Contracting

“SMALLTOFEDS” By Ken Larson

“Focused and direct, your CAPE must be informative, concise and a snapshot of the very best you can offer.”

_________________________________________________________________________________________________________

“Federal government contracting is all about relationship development.  Marketing to influential agency personnel, industry partners, prospective team members, employees, associate contractors and others who can help you requires a hard hitting synopsis of what your firm brings to the table.

Place into a capability statement (CAPE) the specific information others need to know for a sound decision about your company qualifications. This information includes such items as a D&B Number, government registration numbers, North American Industrial Classification System (NAICS) codes and the like. These items are elected or determined when you register your company for government contracting.

KEEP IT SHORT

An electronic capability statement (CAPE) for government contracts should be short and hard-hitting. It should be 1 -2 pages and should highlight the salient points of products and offerings, personnel and qualifications.

Below are examples of two good capability statements in the public domain.  The first is a services company, the second example is for a company selling off-the-shelf products.

CLICK ON IMAGES OR DOWNLOAD TO ENLARGE 

CLICK ON IMAGES OR DOWNLOAD TO ENLARGE

MAKE IT PROMOTIONAL

A good CAPE  will be a promotional brochure that on paper and through the electronic media advertises who you are, what you do and why the government or prime contractors should buy from you. Major elements of your capability statement, in addition to your small business designation and certifications, are as follows: 

(1) Company overview

(2) Supplies and services description couched utilizing your marketing ideas and strategy.

(3) Past performance of your enterprise or your personal background and qualifications 

(experience, education, etc.).

(4) Facilities or capabilities overview (How you perform your service couched in a manner that will appeal to your target market).

(5) Explanation of the positive results the client should expect.

(6) Points of contact and ways to contact you for meetings, placing an order and contracting your services. 

INCLUDE GRAPHICS

The document itself should be created with graphics, photos, themes and sales pitches. A picture of your product and your personnel adds dynamics. 

DISTRIBUTION

Your capability statement should be distributed on paper to your target market as a brochure, emailed as an attachment and linked into related industry web sites or partner marketing to get the word out about your product or service. Your CAPE targets contracting officers and prime contractor buyers who are seeking to fulfill their small business buying goals. It is a way to get you in the door and speak to, or correspond with, the management and technical personnel who are the decision makers in sourcing small business buys. 

SUMMARY

A good quality CAPE is the spearhead of your marketing campaign and your visual image;  focused and direct, it must be informative, concise and a snapshot of the very best you can offer.”

https://www.smalltofeds.com/2011/05/your-capability-statement-cape-for.html

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