This post is part of an ongoing series covering events and opportunities offered by the Golden Gate Business Association (GGBA). The GGBA’s mission is to champion opportunity, development, and advocacy for the LGBT & Allied business community. The Impact Builder series focuses on how the LGBT community and other diverse suppliers can develop the relationships and build the skills they need to get corporate and government contracts, build their businesses, and make a difference in the business community.
The second workshop in the ongoing Impact Builder series, “Subcontracting Strategies and Opportunities,” was hosted by Southern California Edison at the Small Business Association offices on San Francisco’s Market Street. The workshop concentrated on procurement, supplier diversity, and subcontracting opportunities in the federal government. (For those new to these words, don’t worry! Read on to find out more about what these terms mean and how understanding and leveraging them can build your business.)
Presenter René Cota is a certified management specialist and contract negotiations expert, with over 15 years of experience. His company, CMG Alliance, is a management consulting firm specializing in government acquisitions for their clients. Mr. Cota gave attendees an insider view of how supplier diversity and subcontracting work. This information-packed presentation reminded me of how important it is that LGBT businesses take advantage of all the GGBA has to offer.
Yes! There Are Opportunities
You might be surprised at the range of opportunities available through government contracting. For example, if you’re thinking “big utility,” you might not be thinking “flowers.” But government agencies hold events regularly, and everyone loves flowers. Mr. Cota shared a story about a sole proprietor business woman who, through her tenacity and ability to build relationships, got a contract to supply a well-known utility company with flowers for their ongoing awards events. The take home? There is a place for everyone at the table, from flower sellers to cement contractors.
Procurement and Supplier Diversity Defined
Procurement is the process by which the federal government (along with state and local governments and larger companies) find prime contractors to provide the services and products the government needs to in turn provide our citizens with the products and services we need. Prime contractors work with subcontractors to implement all the projects they contract for, in part because of government-established goals or mandates to subcontract with small businesses (see below) and in part because the contracts they receive can be so massive they need help with implementation.
Supplier diversity is the profession that helps procurement officers to find diverse suppliers. Supplier diversity professionals find diverse suppliers to implement the contracts that ultimately provide our communities with everything from advertising to zippers (really!).
As indicated, above, prime contractors, on a federal level, must have small business subcontracting plans in their proposals for contracts above $1.5 million. The federal government’s mandate is that 23% of small business contracts should go to subcontractors. Of those, differing percentages must be diverse businesses.
If you are new to the world of subcontracting, it might help to have some basic procurement, supplier diversity, and federal subcontracting opportunity vocabulary. If you already know all this, skip the vocabulary lesson, below, and read on for strategies to help you make the most of subcontracting opportunities.
Procurement and Supplier Diversity Vocabulary
Agency. A department or subsection of the federal government (each federal agency has small business mandates).
Mandate. Non-optional small business/diverse business goals.
Goals. Optional diversity inclusion goals.
Federal Acquisition Regulations (FAR). Regulations covering procurement.
Procurement. Sourcing companies for government contracts.
Supplier diversity. Finding diverse companies for government contracts.
State of California procurement. DGS and CalTrans.
Department of General Services (DGS). A California department dedicated to helping
California Public Utilities Commission (CPUC). The organizing bodies for California utilities that has recently set the goal to include certified LGBTBEs.
General Order 156 (GO 156). Specific to the CPUC, this is the voluntary program for including LGBTBEs.
CPUC En Banc. The CPUC’s yearly report on diversity and inclusion.
Prime contractor. A contractor that contracts directly with an agency.
Subcontractor. A contractor that contracts with a prime contractor.
Contracting agency. Government agencies or businesses that offer RFPs.
Request for Proposal (RFP). An announcement offering the guidelines for a given proposal.
North American Industrial Classification System (NAICS). The system that the federal government and other agencies use to classify businesses. This code is used in contracts.
Contract officer. Represents the (federal) government in contracts.
Office of Small Disadvantaged Business Utilization (OSDBU). The agency in charge of disadvantaged businesses.
Circular marketing. The relationship among agency, prime contractor, and subcontractor.
Memorandum of understanding (MOU). A non-binding agreement with a prime contractor.
Teaming agreement. A legally binding agreement that can be used in court if a prime contractor defaults
Business relationship management (BRM). The process of managing your business relationships.
Capabilities statement. A one-page marketing document.
Statement of qualifications. A longer look at project management past performance.
Capabilities brief. A face to face conversation about what your business does.
Pass-through. Being used for your certification and possibly being paid although you do no work (illegal).
There’s plenty more new vocabulary where that came from, so keep watching this blog for more.
Key Players in Government and Utility Procurement
In California, the key players in procurement are the federal government, the state of California, and the CPUC. Specifically, GO 156 is the legislation that encourages business to include LGBTBEs in their procurement on a voluntary basis. In practice, individual utilities decide their own rates of LGBT diversity inclusion and the GGBA is active in developing those relationships on behalf of our LGBT business community.
What Is a Subcontracting Plan?
Prime contractors must create a subcontracting plan within their proposals that shows which subcontractors they will work with and what those subcontractors will do. Subcontracting goals are listed within the RFP for the following designations:
- Small businesses
- Woman owned businesses
- Service-Disabled Veteran-Owned Small Businesses (SDVOSB)
- Minority owned businesses
- Disadvantaged businesses 8(a)
- American Indian owned businesses
At the federal level, LGBTBEs are not yet on the list, but it is expected that we will be included in the future. Mr. Cota pointed out that the LGBTBE community is an exception because we have gained traction at the state level, which will eventually push the federal government to include us. Typically, he said, it is the federal government that pushes states to be more inclusive. He also pointed out that an alternative way to get into federal contracting as an LGBT business is to become certified as an 8(a) disadvantaged business.
Subcontracting plans are submitted to the government by a prime contractor and contain detailed information about each subcontractor, including who the business is, what certification it possesses, and how much of the contract will be allocated to the small business. During the contract performance the prime contractor is responsible for submitting quarterly subcontracting performance reviews.
Small business action plans are monitored by a contracting officer and usually have secondary personnel (in the case of the federal government, a typical job title is small business specialist or small business advocate) on hand to make sure the contracts are legitimate. It’s important to understand this role and be in good communication with the people who monitor your subcontracts.
The Dark Side of Subcontracting
Unfortunately, not everyone plays by the rules. Once a contractor submits a proposal, responsibility for follow up falls to the contracting officer (see above) to ensure that the prime contractor has provided accurate information about subcontractors and is acting in good faith.
In certain cases, prime contractors have been known to list small businesses on their contracts but not let them know they were included in the contract and then pocket the profits themselves. Although Mr. Cota assured the group that this type of thing does not happen often, he said it is important to develop relationships with contracting officers and closely monitor the process.
Before you get to the point of getting a contract, he also said that it is a good idea to safeguard your contract. When you provide a quote to a prime contractor, insist on a teaming agreement (optimal) or MOU (second choice because it is less iron clad) stating that if the prime contractor is awarded a contract, you will be awarded a subcontract. Otherwise, the prime contractor may seek a less expensive alternative.
A final pitfall that Mr. Cota mentioned is those unethical businesses that have tried to cheat the system and pretend they are eligible for certification when they are not. On the positive side, a business’s fairly earned certification is a valuable asset that sets them apart from the crowd.
How To Break into Subcontracting
Small businesses as a whole do not usually possess the resources or capabilities to act as a prime contractor for the federal government. Additionally, prime contractors, in addition to federal goals and mandates, need support to execute large projects. For these reasons, businesses starting out in federal contracting incorporate subcontracting into existing marketing plans to create actionable strategies for obtaining a federal subcontract.
According to Mr. Corta, these are the keys to successfully breaking into the subcontracting world:
- Creating, leveraging, and managing existing relationships with prime contractors.
- Honestly assessing your business capabilities.
- Leading with your competencies, not your certifications.
- Using your business certifications to provide added value to prime contractors.
- Through forecasting and market research, identifying the agencies with whom you would like to work and the geographic region your business has the capacity to supply.
- Always showing prime contractors that you understand procurement and always following up on your promises.
- Marketing your products and services directly to the government in addition to prime contractors.
- Being specific about the problems you can solve.
- Staying involved in the proposal process to ensure you are benefiting from your inclusion in contracts.
Marketing to both the government and subcontractors is called circular marketing; this two-pronged approach will help your success. One great way to do this is through membership in organizations like GGBA.
Maintaining Your Credibility
Once you get a contract, it’s important that you show your credibility and your willingness to value risk mitigation. For Southern California Edison, the formula is credibility = risk mitigation = reduced friction and ultimately increased efficiency. Other large companies may state it differently, but the bottom line is that you must safeguard the reputation of the contracting agency or company with whom you are working and at all times remain easy, efficient, and effective to work with.
Mr. Corta offered the following ways to create and maintain credibility:
Stay true to your core values. Credibility begins with your business values. Because of the large amount of money involved, there are sometimes temptations to bend the law or the spirit of the law. Protect your reputation and do not respond positively to requests to be a passthrough or other illegal activities.
Develop your expertise. Become the industry expert. Be known as the “go to” person. Stay up to date on your industry.
Communicate clearly. Provide regular and clear communication. Develop your capacity to listen and understand.
Be professional. Maintain a professional appearance, avoid letting your emotions guide you or show during negotiations, do what you say and say what you do, when you make a mistake quickly apologize and take corrective action.
At the end of the day, it all boils down to relationships.
Anatomy of a Relationship
Mr. Cota gave the group some tips on how to build and nurture relationships. His tips include:
- Staying connected
- Taking an interest
- Remembering the rule of “3”
The rule of “3” is to have three substantive interactions in the first 90 days of meeting a person in order to establish a meaningful relationship. Mr. Cota also stressed the importance of being open, honest, and transparent so that companies do not have to guess what your motivations or intentions are. These actions will lay the foundation for creating trust and credibility.
Read about the GGBA’s first Impact Builder, on the dos and don’ts of relationship building and cyber security, to find out how to make a good impression on supplier diversity professionals (and all of your professional contacts).
The Take Home
Find opportunities, build relationships with prime contractors, and provide great service. Following this advice will open the door to you becoming a prime contractor. And, says Mr. Corta, remember: Tenacity is the cornerstone of success.
The next Impact Builder will focus on how to team with other businesses to create opportunity. Here are some of the details:
What: Impact Builder III, Teaming for Larger Opportunities
When: October 19, 2016, from 12 to 4 pm
Where: 455 Market Street, 6th Floor, San Francisco
Stay informed! Keep checking the Colibri Digital Marketing blog for the latest GGBA news and events.
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