If you are wanting to double down on government contracting in 2025, I have some questions for you:

1) Are you bidding on supplies over services because it seems easier?

2) Do you feel like you’re doing everything right, but losing on price?

3) If you’ve won contracts, are you taking the money out of the business or are you reinvesting the profits into your business?

Let’s take a few minutes to take a closer look at what I think might be going on with the common answers to these 3 questions. 

Question one: Are you bidding on supplies over services because it seems “easier”? 

Let’s break down “easier” into terms that you may better resonate with-

1. Managing People- Many often perceive bidding on supplies contracts to be easier because you’re not managing people like subcontractors on service contracts. At face value, I can understand why some would think this. After all, supplies don’t talk back, at least most don’t. 

If you pursue supplies with this thought in mind, you might, unfortunately, be in for a bit of a rude awakening. Just because you don’t have to call around to find subcontractors, doesn’t mean you don’t have to manage people. You still have to call around to find manufactures or resellers who can provide the supply buy. You will also have to negotiate lead times and shipping times if the government wants the delivery sooner than your teaming partner can provide. Once delivered, you will have to get the supplies through inspection with a COR or PM who may not see this is urgent as you do, all so that you can send out an invoice to try to get paid before additional interest accrues on your borrowed funding. These are just some of the key people-dependent areas that you will have to manage when pursuing federal supply contracts.

2. Proposals VS Quotes- A second reason many perceive supplies to be easier than services is because of the reduced requirements for your offer. In many cases, that means no proposal response at all, just pricing. Only having to provide the government a quote to deliver supplies does seem significantly easier than investing time into writing a proposal that may not result in a win does seem a lot easier. Right?

Let’s take a closer look. First, a rising tide lifts all ships. This means, if it’s easier for you, then it's probably easier for the competition, too. With more competition comes more offers being submitted, and more competitive offers, which means you have to compete at lower margins to meaningfully compete at a lower win rate from the increased competition. 

So, as I so often speak to, what does this do to the numbers game you will have to play? You now have to submit more offers. For example, to win a couple contracts, instead of bidding 20 service contracts over a one-year period, you will likely have to bid on well over 100 supply contracts or more to achieve the same result. 

Contrasted against the perceptions of supply contracts being easier from the lens of managing less people and easier proposal responses, we see how this can quickly bring many budding new govcons to actually calling around to more suppliers and resellers than ever, in order to submit astronomical quantities of offers just to try to win. 

Maybe some of you watching this can relate, that in my personal experience, and what I’ve observed helping new small govcons for 6 years now, that what we’re describing becomes unsustainable very quickly, and is the spark that lights the fuse of a burnout cycle from chasing high numbers of price-only contracts. 

In essence, what I really want to say about this easier perception, is that it’s really a misconception. If you want to pursue supply contracts, that’s fine by me. But do it because it’s what aligns with your business growth strategy. Don’t do it because it seems easier, because it is not easier, and doing what’s easy is never a good business plan. 

My next question is Question 2: “Do you feel like you’re doing everything right, but losing on price”?

Before continuing with my thoughts on this, I first have to qualify what I mean by “doing everything right”.

Although there is no finite or perfect checklist for doing everything, and the term “right” is highly subjective, I submit that “doing everything right” could consist of doing many of these generally accepted best business practices:

1. Utilizing systems in your business. I recommend systems for prospecting, qualifying, bidding and winning.
2. Building your govcon strategy consistent with which agencies are buying the most of your goods and services.
3. Utilizing some form of an umbrella strategy to solve the problem of having slow bid months in order to stay consistent throughout the year.
4. Taking inventory of how you spend your time to better avoid the busy work of shiny object chasing or and investing into low return on investment activities.
5. Submitting several quality bids each month.
6. Improving the quality of offers submitted through various activities like self-assessed compliance matrices, feedback from AI tools, proposal debriefs or offer feedback from contracting officers, and a commitment to expanding your personal proposal and template libraries.

If you have been consistently performing these best business practices for at least one year, you have my buy in that you are doing many things right. If you find that you are constantly losing on price, the subs could be losing you the bids. This is a two-sided coin, if you will, that I must speak to, where either side could be responsible for the struggle of not winning.

The heads side of the coin represents the subcontractor’s numbers. In a situation where you are constantly losing on price, the subcontractor who is providing their pricing, could be doing so with an unreasonably high markup. This is quite common for subcontractors who are new to federal contracting and think they can charge the government more than fair market price. 

If you are not receiving multiple quotes and negotiating down the initial numbers that the subcontractor submits, it’s quite possible there is too much fat in their quote. By receiving multiple quotes, it can help to spot a quote that is unreasonably high. You can also do your own research on incumbent contracts (if they exist) and current prices for similar scopes of work to benchmark the numbers that the subcontractor is providing. 

The tails side of the coin represents the industry or service that you are bidding. If you are subcontracting the work by way of a legal middleman method and you are in a service industry where there are many small government contractors who self-perform the same work, you are never going to be able to beat them. You will always have an extra link in the chain that they do not have and your price will always be higher. 

In this instance, all you can do is move to another industry where there is a lack of self-performing prime contractors, leaving room for you to bring value to the government table.

It’s also for this reason, and I don’t say it often enough, but even after a few contracts, you should be paying attention and learning how to provide the service so that you can gain an even stronger advantage to start self-performing these services as the prime. Then, you can trade in your coin entirely for a new coin where nobody doing the legal middleman method will ever be able to beat you.

My final question is Question 3: “If you’ve won contracts, are you taking the money out of the business or are you reinvesting it into your business?”

This may sound like an oversimplified or even facetious question, but I mean it very literally because I have seen many who are not reinvesting their profits into their business.

If you need contract profits to live on, then you have to do what you have to do. But please remember, the more of the profits that you can reinvest into the business, firstly, you will pay a lot less in taxes, but more importantly, the reinvestment will help your small govcon business take off a lot faster. 

Just because you’ve won a few contracts does not mean that you are out of the woods or that your business is now able to stand the test of time. One bad year can put you out of business looking for a job.

Life automatically leans towards disorder and the natural state of entropy over time. One way to try to hold that off for as long as you can until you have some breathing room is by reinvesting your profits into revenue generating activities in your business. 

These can be activities like:

Hiring a proposal writing to push out more bids. 

Hire a project manager to free up your time. 

Bringing on a spouse or business partner so you can both bring in business

Use software to gain efficiency in your business and systems

Hire a mentor, coach, or someone who can help you accelerate your business without having to spend additional time to learn it on your own

And more

I affirm that everyone’s biggest win condition in small business government contracting is staying in the game.

This is not a game of Jenga tower building where you start out with zero risk, and with each stacked tile, things get more and more shaky.

No. This is a game of pyramid building, where each layer is stacked more easily than the last, and each layer stacked above makes each layer below that much more foundationally strong.

In government contracting, the longer you play, the more you learn. The more you learn, the more you win. The more you win, the more relationships you build and past performance you gain. 

If that’s true, it would also have to be true that being new and lacking all of this at the beginning is your biggest disadvantage. And that is true. When you start you have no relationships and limited experience (if any). You don’t know what a winning proposal looks like and you don’t know how to pick up a phone and get a quote from a prospective teaming partner.

 Reinvesting your profits, especially very early on in the game, will gain you the advantages that you need to overcome all the disadvantages you have when you’re first starting out. 

Remember, you’re competing against other established companies that have more advantages than you. You want to get to that same level as quickly as possible so that you don’t have to submit as many bids just to win your next contract. Too much effort without any results to show quickly becomes demoralizing, even after winning a few contracts. We want to put off sparking the burnout cycle as much as we can because that will take us out of the game entirely. Our biggest win condition when starting out is staying in the game for as long as we can, so we want to use all of the resources we have at our disposal, including reinvesting profits, to play towards that which gives us the biggest chance of being successful for the long-term.

-Derek James

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