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Why Can't Startups Get US Government Contracts?

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Re: Why Can't Startups Get US Government Contracts?

#21

Post by ethbro »

drewpc wrote: post #8

Startups can and do get government contracts, but the government isn't going to come court you. You (the startup) have to figure it out yourself. Selling to the government is very similar to selling to any other industry/company: you (the seller or maker) have to understand the customer's acquisition process. The big difference is that the federal government is the largest customer--millions of people and trillions o…

I think another key point is that often the government tags a much higher cost on "risk of failure" when evaluating proposals.

Startups are fast, but they aren't always reliable. At least for values of reliable that == being able to throw money at {Large_Technology_Contractor} to have them parachute in an additional team of engineers to solve unexpected problem X. Or being around 10 years from now for support.

But agreed, there are all levels of involvement. Consider the prime contractor's cut off the top the price of getting bid into the game and contact with the right people, then do your best to work your way up!

Re: Why Can't Startups Get US Government Contracts?

#22

Post by mynameismonkey »

drewpc wrote: post #8

Startups can and do get government contracts, but the government isn't going to come court you. You (the startup) have to figure it out yourself. Selling to the government is very similar to selling to any other industry/company: you (the seller or maker) have to understand the customer's acquisition process. The big difference is that the federal government is the largest customer--millions of people and trillions o…

We run a data/dev shop inside a non-profit 400 person company that is mostly gov contracting. _We_ will come courting. Most of our contracts require us to satisfy some percentage from five to 20% small business/woman/minority-owned. This could be services, consulting, pencils, you name it.

We. Cannot. Find. You.

The small businesses we know and love are not suitably registered with the fed/state certifications. We routinely have to document what we did to try and find adequate set asides. We'd love to be doing more business with small businesses, but yes, the paperwork is a hassle. But if you sub contract, you can negate 90% of the problem, let the prime contractor deal with it.

Re: Why Can't Startups Get US Government Contracts?

#23

Post by mtberatwork »

ejcx wrote: post #12

Like others have mentioned, in my experience small startups can and do win Government contracts. Most founders have intimate knowledge of the contract process and a large network from previously working at a large DoD contractor. Once they have this information and rolodex, they normally have an easy time running a small defense contracting firm as a sub on large contracts and winning their own through contract vehic…

> Most founders have intimate knowledge of the contract process and a large network from previously working at a large DoD contractor.

That's precisely part of the problem. Without a clearance, prior past performance or any other form of insider access, it's incredibly difficult and needlessly complex to navigate your small business through the maze of the procurement process.

Re: Why Can't Startups Get US Government Contracts?

#24

Post by mynameismonkey »

et2o wrote: post #20
Spooky23 wrote: post #13

These good government groups complain about this stuff, but they are the reason we have this ridiculous situation. Google "New York State Appendix A" for a good example of standard contract terms that you need to comply with to do business with that state government. Examples include: - You must certify that you don't use certain tropical hardwoods. - You must report on minority and female employees in some circumsta…

Is it really "ridiculous" to not use endangered tropical woods, or to report minority or female employee statistics? I understand it's a headache, but these seem pretty logical. Here is the link: http://ogs.ny.gov/About/appendixa.asp

It's not ridiculous, but it can be costly to document and certify in a non-standard method that upsets your routine workflow. In a larger entity, you can soak the hit and assign it to someone to deal with who maybe has some spare time or a pool of time spread across a few staff, in a smaller start-up, you may not have this flexibility. Legal adds up pretty quickly too, if they're dealing with compliance issues.

Edit: and that's just one part of a larger process for one state. I just had to have an independent contractor working in the UK apply to be registered as a valid sub contractor in NYS, and certify that he (a sole proprietor) carries adequate worker's comp... Multiply by 50 for states, throw in municipalities (I'm looking at you SF/NYC) and the feds and then add in different agencies, everyone has their own idiosyncracies. Unless you target one state, one agency, you're in for a world of pain on compliance.

Re: Why Can't Startups Get US Government Contracts?

#25

Post by joesmo »

Invest money in buying politicians (lobbying) and you'll get a ton of government contracts. What's that? Startups don't have money to waste buying politicians? Gee, I wonder why they can't get these big contracts that constantly go to unqualified companies (healthcare.gov anyone?) and pay orders of magnitude above the actual cost of building a product ... yeah, it's a total mystery.

Re: Why Can't Startups Get US Government Contracts?

#26

Post by Afforess »

et2o wrote: post #20
Spooky23 wrote: post #13

These good government groups complain about this stuff, but they are the reason we have this ridiculous situation. Google "New York State Appendix A" for a good example of standard contract terms that you need to comply with to do business with that state government. Examples include: - You must certify that you don't use certain tropical hardwoods. - You must report on minority and female employees in some circumsta…

Is it really "ridiculous" to not use endangered tropical woods, or to report minority or female employee statistics? I understand it's a headache, but these seem pretty logical. Here is the link: http://ogs.ny.gov/About/appendixa.asp

Yes, it is ridiculous. I can not imagine how the choice to use tropical woods, or the number of minority employees would impact the final result of a business contract. The government should be concerned with the end result, not the minutia.

This sort of detail-peddling is why only massive corporations can attain government contracts. Regulatory capture is the inevitable end result.

Re: Why Can't Startups Get US Government Contracts?

#27

Post by zeidrich »

Two things:

1 - Regulatory capture.

2 - Startups might be efficient because they're lean on things that might be important to government. Like a small IT firm handling a presidential candidate's e-mail server.

#2 feeds #1 because lobbyists suggest important rules and regulations that can be justified by government which increase the barrier of entry to startups. Oh, you don't have certification that you do this? Oh you haven't submitted for these checks? Oh you haven't been reporting on this? If you haven't done all of these things, then you aren't eligible to win this contract.

Individually these points can be logically argued and make sense on a case by case basis. It's just that the enterprises that are in bed with the government already put themselves in a position where they are compliant with the new regulations that they're going to make, and then lobby to make those regulations to force competition to scramble for compliance at the last minute.

Re: Why Can't Startups Get US Government Contracts?

#28

Post by something123 »

In my own experience working in defense, there are tons of small businesses working on contracts, the government is forced to spend so much money on small business that they often simply throw away money. I worked on R&D for a military system which I 100% knew the gov't didn't care about and threw in the garbage.

All the big projects force the big guys to subcontract to smaller companies

The problem is actually completely different:

There is no way for a "little guy" to become a midsized company b/c the government is completely incompetent and relies on the huge defense contractors for guidance. The gov't has VERY little internal expertise - so if you have a brilliant new idea that is perfect for a midsized company to execute (which will often have to be on an existing platform built by one of the big companies) they have to go to the big companies to see if it's feasible. The big companies ofcourse say it's impossible and then (if it actually was a good idea) they steal the idea and implement it themselves.

So unless you can go from doing SBIRs (ie. under 200 employees) to build a whole tank on your own - you're fucked

Re: Why Can't Startups Get US Government Contracts?

#29

Post by drewpc »

mynameismonkey wrote: post #22
drewpc wrote: post #8

Startups can and do get government contracts, but the government isn't going to come court you. You (the startup) have to figure it out yourself. Selling to the government is very similar to selling to any other industry/company: you (the seller or maker) have to understand the customer's acquisition process. The big difference is that the federal government is the largest customer--millions of people and trillions o…

We run a data/dev shop inside a non-profit 400 person company that is mostly gov contracting. _We_ will come courting. Most of our contracts require us to satisfy some percentage from five to 20% small business/woman/minority-owned. This could be services, consulting, pencils, you name it. We. Cannot. Find. You. The small businesses we know and love are not suitably registered with the fed/state certifications. We ro…

This is a good point on a number of fronts. A key take away with this is that startups need to understand how to properly register their businesses to get maximum traction. SEO isn't everything. Things like Dunn & Bradstreet are often requirements to prove legitimacy, but overlooked simply because founders don't know what they don't know.

Re: Why Can't Startups Get US Government Contracts?

#30

Post by eropple »

Afforess wrote: post #26
et2o wrote: post #20

Earlier quoted context omitted.

Is it really "ridiculous" to not use endangered tropical woods, or to report minority or female employee statistics? I understand it's a headache, but these seem pretty logical. Here is the link: http://ogs.ny.gov/About/appendixa.asp

Yes, it is ridiculous. I can not imagine how the choice to use tropical woods, or the number of minority employees would impact the final result of a business contract . The government should be concerned with the end result, not the minutia. This sort of detail-peddling is why only massive corporations can attain government contracts. Regulatory capture is the inevitable end result.

The government is concerned with the shape of the society it represents as well as the end result. Accepting some inefficiency for social good is a feature, not a bug. Even when it makes you mad.

And, as described numerous times elsewhere in this thread, it's not that hard for small companies to get governmental work. But the process is different, for reasons that are not themselves unreasonable, and most don't really want to play with stuff like FAR. (Which is part of why many large governmental contracts require subcontracting to small companies--itself but the most efficient process, but a good one for growing those small companies.)

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