New Help in Making Government Sales
Small Businesses Benefit From Government Micro-Purchasing Standards in New Bill
It’s rare, but occasionally small businesses do get good news from the government. It happened just a few weeks ago, when the Senate passed the Purchase Card Waste Elimination Act (S. 457), an obscure bill that could have big benefits for owners of small businesses.
Why? Although, as the name implies, the bill is aimed at forcing the federal government to be more diligent in tracking purchases of up to $2,500 that can be made on government credit cards, it also has special language aimed at helping small businesses get their share of the federal purchasing pie. The bill requires government purchasers to prove that they are meeting the goal of buying 23 percent of their goods and services from small businesses. S. 457 passed the Senate unanimously and is not expected to meet any roadblocks in the House.
“Federal agencies spend $16 billion each year through credit card orders that are not subject to Federal competitive requirements,” said Sen. Olympia Snowe (R-Maine), the bill’s sponsor in a statement when the bill passed the Senate. “That leaves me concerned about fair small business participation in these purchases.”
Snow, who chairs the Senate Committee on Small Business and Entrepreneurship, is trying to align standards for so-called “micro purchases” with those of other federal procurement programs, which include the 23 percent goal.
Since credit card purchases valued at less than $2,500 ($7,500 for the Department of Homeland Security) are not subject to general competitive bidding requirements— unlike major government contracts— many small businesses may have been losing out to larger, more established competitors, Snowe noted.
The government credit card program was implemented in the late 1980s to simplify routine purchases. It is now the primary procurement and payment method for purchases under $2,500. The cards, called Government Services Administration SmartPay or government purchase cards, enable designated employees to circumvent the time-consuming purchase-order process.
Under the proposed law, the Office of Management and Budget, the General Services Administration and major credit card issuers such as VISA and MasterCard, must promote accurate accounting of micro-purchases from small businesses. There’s some irony in a bill that adds a level of bureaucracy to a tool that was designed to streamline procurements, but the effect should be to help small businesses.
Small companies that do business with government agencies are applauding. National AV Supply (http://www.nationalavsupply.com/), a sales presentation and training products cataloger that currently generates nearly 20 percent of its sales from government agencies, is one of them. “Traditionally the government spent its money with larger companies,” says Scott Heller, president of the Grafton, Vt.-based business. “This bill is positive for all small businesses.”
“The perception has been that if you do business with the government it involves red tape, contracts and an inordinate amount of time to get paid,” says Heller. “However, small businesses that accept VISA and MasterCard are better suited than large companies to process these transactions— and we get paid within 72 hours.” Any business that accepts credit cards can conduct transactions with government employees.
Getting a Slice of the $16 Billion Pie
There are 300,000 government credit card holders. They have the responsibility for buying everything from simple office supplies and landscaping services, to ship and vehicle parts, consulting services and information technology. Because of post-9/11 security concerns their names are no longer available online, notes Guy Timberlake, chief executive officer of Columbia, Md.-based American Small Business Coalition (ASBC) (www.theasbc.org), a membership organization that supports small companies conducting business with the government. But contacts can be purchased through list brokers.
“There is no single step you can take to get your business on the government purchase radar,” says Timberlake. Instead, it’s a process of steps. “But if you work your way through the process it can be very lucrative.”
Timberlake should know. Prior to starting The ASBC, he was owner of GT Technology Enterprises, a value-added computer reseller. In one two-month period, he processed $400,000 in orders just on government credit cards.
If you’re interested in tapping the government-buying machine, here are a few steps to help you get started:
Establish merchant status. You can register at the GSA Web site and download the SmartPay logo to display in your storefront, Web site and marketing materials. “It shows that you are a government-friendly business,” says Mark Amtower, a Highland, Md.-based government marketing consultant, and author of Government Marketing Best Practices.
Do competitive research. Find out what your competitors are doing in the market and the types of products and services various agencies and departments are purchasing by visiting websites like FederalBizOpps (www.fedbizopps.gov), a data base that includes information about federal contracting opportunities and recent awards. Even though these contracts are valued at $25,000, you can learn a great deal about the needs of various agencies and which businesses are fulfilling those requests.
Build relationships. Most government agencies and facilities are required to have an Office of Small and Disadvantaged Business Utilization (OSDBU) office. “It’s their job to make sure that small businesses get a piece of the action,” says Amtower. The main website (www.osdbu.gov) lists each OSDBU office from the Defense Contract Management Agency and the Department of the Air Force, Army, and Navy, to the U.S. Environmental Protection Agency, the USPS and U.S. Department of Veterans Affairs.
Go in and visit with the OSDBU or a local government small business specialist, find out how they run their purchase card programs, and inquire about their cardholder list availability, suggests Timberlake. Take advantage of valuable seminars such as vendor outreach programs offered by OSDBU, and the Departments of Homeland Security (www.dhs.gov/openforbusiness), Treasury (www.treas.gov/sba) and Veterans Affairs (www.va.gov/osdbu/conference/register.htm). “Building relationships with people who are interested in your products or services is key,” says Timberlake.
Use direct mail to promote your business. There are numerous mailing lists such as the 161,000-name Federal Government Credit Card Buyers file (www.federaldirect.net), which costs $95 per thousand names. Don’t inundate any one department, warns Timberlake. The government regulates the number of standard mail and e-mail messages from any one company in a given time period to reduce spam. The average response rate among government officials is 15 percent to 20 percent higher than traditional business-to-business shoppers, says Amtower.
Team up with other businesses. Join forces with other businesses that sell complementary products or services to provide one-stop shopping. For example, a garbage removal and landscaping company could join forces to get a facility management job.
Tap Credit Card Companies. Ask your credit card processor if it can offer assistance. VISA has an online supplier locator to help agencies find small businesses that meet their procurement needs, according to Bruce Sullivan, vice president of government services, VISA USA. The company has also developed a seminar series, “How to do business with the Federal government.”
Think Big. Sure, a few credit-card purchases by federal agencies won’t change your life—unless you follow up and go after bigger deals. “I’ve seen a lot of government agencies leverage the micro-purchase program as a proving ground for small businesses,” says Timberlake. “It’s easier and less risky for them to give you an order for less than $2,500 than it is for a $25,000 or $250,000 procurement. It’s a great way for small businesses to get their foot in the door.”
Remember, the government officials who buy on credit cards aren’t strictly purchasing agents. They have numerous other responsibilities and when they aren’t making smaller purchases, they may be managing or participating in huge programs for, say, NASA or the Environmental Protection Agency. The person who buys two toner cartridges from you this week might have an opportunity worth $20 million next week, says Timberlake.
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