Starting a small federal contracting / state contracting company....

[steppinthrax]

Oh here goes.

I"m a 33 yo IT professional male in the DC area. I make a good salary (mid six-figures) but I've been getting tired of working period and I see how much money passes to me from the federal contractors I work for. I want to start my own small (at first) federal contracting firm. Initially my idea is I want to bid on some state/local gov contracts then I use those to build my portfolio to bid on some actual federal contracts. A few things are motivating me for this.

1. I'm getting old.
2. I don't want to be a old engineer
3. I've been told by several different people at several different companies I've worked with that I have business sense and I should be a manager/start a business etc (i.e. why the hell are you working).
4. I have bumped into several people I know that are self employed (usually themselves and another person) and do the contracting biz and do well.

I'm a minority and I've been reviewing information at the SBA.gov site. It appears I need to come in under a 8i (small disadvantaged). This would make it a little easier.

Several questions.

1. I think the first thing first is I need to register a business entity, doing this shouldn't be an issue with sequence since I will have to do this anyway. I'm a little confused on what "business type" I should use. Ultimately I need to look attractive to federal/state customers so it seems a "Stock Corporation". I'm interested more in a LLC. In my state (Maryland) I can also go Sole Proprietorship, General Partnership, LLC, Non-Maryland LLC, Tax-exempt Non-stock corp, close corp and non-Maryland corp. I"m concerned I might choose a business type that would not be good for contracting and/or open me up to all kinds of problems. Imagine this will be more/less me (to start). It seems a LLC is much easier. When filing for a Corp you need to specify board members, incorporators, resident agents and initial stock price!!!!!

2. Do I need to have a business partner?

3. I have a few ideas for business names, are there any guidelines for this. I"m planning to use the name of a system I developed for a gov customer a few years back.

4. Please if you have knowledge in this area I would want to message you.

Thanks

[Fulcrum]

I make a good salary (mid six-figures) but I've been getting tired of working period and I see how much money passes to me from the federal contractors I work for.

I do believe that you are suffering from a malady known as "The Grass is Greener". I'm not a doctor nor a psychologist and I'm basing my observation on experienced earned as both an employee and a business owner. Mid six figure salary so I would assume somewhere between 375k-625k (you don't need to answer)? It'll take a lot of jobs and more work than I can imagine to exceed this as a business owner - regardless of field.


A few things are motivating me for this.

1. I'm getting old.
2. I don't want to be a old engineer
3. I've been told by several different people at several different companies I've worked with that I have business sense and I should be a manager/start a business etc (i.e. why the hell are you working).
4. I have bumped into several people I know that are self employed (usually themselves and another person) and do the contracting biz and do well.

1. Old at 33? Really? Guess we got a few Methusula's (spelling?)here.
2. Some day you will be an old engineer due to the fact you have your degree.
3. At least you have some people who are encouraging. Many people don't.
4. Some do quite well but I would bet the majority break even at best.


I want to start my own small (at first) federal contracting firm. Initially my idea is I want to bid on some state/local gov contracts then I use those to build my portfolio to bid on some actual federal contracts.

Do you have the proper licenses? Insurance? Experience?
How about contacts for what you can't do yourself?


I'm a minority and I've been reviewing information at the SBA.gov site. It appears I need to come in under a 8i (small disadvantaged).

I know governments offer these programs, but what does ethnicity have to do with anything? I firmly believe that offering segregated programs based upon race/gender are adding to our social problems - not fixing them.

[Brian Altenhofel]

I agree with a lot of what Brad said.

One thing to keep in mind is that government is extremely slow at paying. I told myself for a long time that I would never do government contracts for that reason. Then I gave into demand and went through the vendor registration process for my state.

I definitely agree that giving preferential treatment to certain groups in government contracting further adds to social problems (and I personally believe that is by design). I still haven't decided if I want to go through the minority certification process or not (I'm Native American and meet all of the requirements, thus I am presumed to be "economically disadvantaged"), especially since I am ideologically opposed to all such programs. Fortunately, though, I provide a very specialized service with very little competition. I've been told that in my state the unspoken contract award priority basically goes Veteran-owned --> Native American-owned --> Woman-owned --> Other Minority-owned --> white male-owned, and a lot of contractors game that system by ensuring that their company is at least 51% owned by someone who fits the criteria to move to the front of the line.

The most important thing you can do is network. Not every contract is bid out. Typically there are thresholds that say if a contract is under $XXXX, no bid required; between $XXXX and $XXXXX, 3-5 solicited bids required; over $XXXXX, public bidding period of Y days. And contrary to popular belief, contracts aren't always awarded to the lowest bidder. If a contractor already has a history with government contracts, that can often be used as justification for awarding a higher bid. Sometimes a stakeholder's previous experience with a contractor in the private sector is used as justification. And yet other times, the content of the bid makes the justification for itself. Networking with decision makers is a good way to ensure that you receive an invitation to bid, which generally can place you at an advantage to bidders who found out through other channels (such as searching for RFPs).

If you read a lot of RFPs, you might notice that they are often written with a specific vendor in mind. It's a lot more common in construction, but it's not unusual for an RFP to specify processes unique to a vendor (often patented).

If I was making $350K-$650K as an employee, I'd stay put as an employee. Running a business, especially one as volatile as contracting, brings a lot of stress that people don't have as employees. I'd just stick with who I was working for and continue working up the management ladder.

By the way, many government contractors turn around and subcontract most (if not all) of the work. If I was dealing with the federal government, I'd prefer to set myself up as a vendor for one of those government contractors rather than directly with the government. Let them have the bureaucratic headaches and leverage their expertise in landing government contracts.

[steppinthrax]

Thank You for providing some information, however it seems more/less I received more/less discouragement v.s. answers to my questions.

Yes, I know 33 is young, however I'm thinking for my future and I'm kind of seeing the path I'm taking. In life I'm not satisfied with just "good" or "great", I want to be challenged. I get bored fast and I live in the DC area, a lot of my friends and people I know are doing "crazy ****". They work some place a few years, get some connections and create their own company. They bid on contracts, respond to RFP and nail a good one doing App Development. I"m not saying it's easy, I"m saying it's pretty possible, esp in the fertile market that I"m in.

My fear is when I hit my 40-50s people are not even going to give me the time of day and/or I will answer to people half my age!

When working in previous federal contracting companies I have helped them prepare proposal responses and submit this information. I don't know a lot, but I understand the process. I understand I will need to purchase some sort of insurance. I understand the business will need to be registered on SAM and other entities. I just don't know all of this process and I would really want to know if someone can indicate to me what's involved.

I had done some research anyway after submitting this forum. My main questions are in regards to the APPROPRIATE business structure I will need to setup. I understand they are many types. It seems a "LLC" is to be the easiest, but it may not be the best for approaching federal customers.

In regards to the statements pertaining to "preferential treatment". I'm sorry but I wasn't aware this was a political forum!!! Those services (8i) are available, they have been available for a long time and I will take advantage of them (since I'm a member of that protected class). I don't think it's appropriate to get involved in this discussion :).

Anyway, my questions pertain to business structure and discussion on setting up federal contracting company (registered).

[Pita]

I work right now for a defense contractor. I'd suggest you organize as an LLC. It's easy to do. If for some reason you become wildly successful you might consider changing your corporate structure, but that's a decision that can be made at a later date and time and will involve lawyers and accountants who by then you can afford to pay. For now a simple LLC should suffice.

I believe their are thresholds you must meet to prove to the government that you are eligible for 8i set-asides. Find out what those are so that you can start the paperwork rolling now because it will probably take some time.

If you have connections in contracting work start asking around to see who you might partner with. Depending on your skills you can sub-contact with another company for your job. If there are more positions available perhaps you can agree to provide bodies to fill those open positions. You hire the contractors through your firm and place them with the client to fill those posts. The contractor with whom you sub gets paid from the government for the work your people do. They take a small percentage as a pass-through charge and the rest goes to you. Then you pay your employees and keep whatever is left.

[Harold Mansfield]

I just want to comment on this belief that everyone other than white males gets preferential treatment when it comes to government contracts.

I hear this all the time from white males. Yes, there may be specific grants that target diversity especially in areas where there is none, but overall when it comes to the MILLIONS of government contracts and grants awarded there is no bias to exclude white males. White males still dominate and contracts are still a good old boys club.

Who you know, what Congressman or Senator is on the committee, do you have a lobby, if you're from their state, and so on. It's even worse at the state and local level. Most of us don't stand a chance not because of what race or sex we are, it's because we aren't connected to anyone who can get us the meeting or special mention from someone who has influence. Welcome to the world. It's pretty much how it works for everyone.

In the general pool there are more factors that people who don't get contracts never consider as the reason why they got denied that has nothing to do with the race, sex or disposition of the person awarded the contract. Things like criminal background check of your team or employees, tax issues, credit, interviews with people who know you, debt like student loans, and 1000 other things. Some people just botch the paper work. If it's not perfect, it doesn't even get read. Your disposition may get you a notice if it's a program specifically targeting diversity, but if you suck it's not a leg up. And even in the target market of whatever the diversity program is, most people in that market never hear about them or have any better chance than anyone else. It's the same BS and back scratching.

I know someone will chime in on one instance where they "know" someone where they think a certain thing happened or they'll claim "They were told..." something, but the truth is if you're the best, they like what you have to offer, the person in charge isn't a jerk, and are at the right place and right time you will succeed. Just like always. Maybe competition is steeper now because everyone is allowed to participate, but you are not being excluded just because other people exist too.

100 special programs targeting diversity is a drop in the bucket compared to the millions of programs, contracts, and grants out there. In comparison there are just as many or more special dispensations for businesses overall. And some target specific people or situations because the contract or grant requires (or they'd rather have it go to) someone with direct experience.

How can I be mad that a grant to build a Native American community center, in a Native American area, for Native Americans, went to a Native American company located right in the same town?

Be the best. Sometimes you'll win, sometimes you'll lose, but it's not owed to you. And yes, I say the same thing to black people who use that as an excuse. "I didn't get it because I'm black". Really? Maybe you didn't get it because you weren't the best and someone just told you that to make you feel better. Yes it happens, but in the grand scheme of things it doesn't stop people who really want to succeed. You side step it and keep it moving.

Business doesn't respect excuses, blame and finger pointing no matter who you are, and NO ONE wants to do business with anyone who does it. Black, White, Cuban or Asian.

Last thing, if you know for sure you've been discriminated against because you're white, go to court. If you're correct, you'll probably win and I'll be the first person to congratulate you. It's not acceptable in any situation. That's the whole point.

[Pita]

I think the OP was simply pointing out that he/she would be eligible for an existing government program, not to argue for or against the merits of such a program. Much like I could have preferential treatment if I registered myself as a veteran-owned business. In the federal government these programs have been around for years and are nothing new. Fair or not,it's part of the playing field. Companies know how to leverage their proposals to qualify for these contracts, such as having the disadvantaged company be the lead company for a proposal, with the larger, non-disadvantaged company acting as a sub. Like in any business, maintaining relationships with your "competi-mates" is important.

I do know that it's not as easy as just stating you're veteran-owned or minority-owned. You have to jump through hoops to prove that your are.

I've been involved in working with contracting and acquisition with the U.S. DoD and with international organizations. In my experience they try very hard to be transparent and remove all objectivity and base the contract award only on the merits of the proposals, so at the end of the day those companies with the best proposal, at the best price, are the winners. Losing companies can - and do - sue the government if they feel the award process has been unfair. I know of no contracting officers who are willing to go to jail to provide preferential treatment to one company over another through this process.

[steppinthrax]

I think the OP was simply pointing out that he/she would be eligible for an existing government program, not to argue for or against the merits of such a program. Much like I could have preferential treatment if I registered myself as a veteran-owned business. In the federal government these programs have been around for years and are nothing new. Fair or not,it's part of the playing field. Companies know how to leverage their proposals to qualify for these contracts, such as having the disadvantaged company be the lead company for a proposal, with the larger, non-disadvantaged company acting as a sub. Like in any business, maintaining relationships with your "competi-mates" is important.

I do know that it's not as easy as just stating you're veteran-owned or minority-owned. You have to jump through hoops to prove that your are.

I've been involved in working with contracting and acquisition with the U.S. DoD and with international organizations. In my experience they try very hard to be transparent and remove all objectivity and base the contract award only on the merits of the proposals, so at the end of the day those companies with the best proposal, at the best price, are the winners. Losing companies can - and do - sue the government if they feel the award process has been unfair. I know of no contracting officers who are willing to go to jail to provide preferential treatment to one company over another through this process.

Correct,

The purpose of my post was to ask some questions on the process and get some understanding. In no way was I trying to start a debate about how the Fed Gov provides subsidizes to minorities in business areas.

Thanks, your LLC information helps.

[Harold Mansfield]

I think the OP was simply pointing out that he/she would be eligible for an existing government program, not to argue for or against the merits of such a program. Much like I could have preferential treatment if I registered myself as a veteran-owned business. In the federal government these programs have been around for years and are nothing new. Fair or not,it's part of the playing field.

Yes, and this specifically is a promise that we make to our Vets and we have since after WWII. Help with mortgages, business loans, special consideration when apply for government contracts or grants. It's not a gift,. They (we) earned it. But you still have to be capable and it's not by any fashion a large number of situations.

More than anything who you know is still the main way people get government contracts. We can all name at least 10 companies off the top of our head that got a no bid contract because of who there were or who they know. No bid. Just think about that.

I understand the OP's point and I'm not discounting the existence of things like favoritism, nepotism and so on. I just hate hearing people use them as excuses for why they aren't personally succeeding or didn't get something they thought they deserved and just wanted to nip it in the bud.

Whatever the game is, play it and be better than everyone else. Life isn't fair for any of us.