The government plans to cut $2.4 Trillion from the budget over the next 10 years, beginning in the 2012 budget. It is expected that up to $900 Billion in cuts could be included in the 2012 budget. The Defense department could see over $28 Billion in cuts in 2012 with an expected $350 Billion over the next 10 years. Federal agencies and departments are "running scared". Contractors should be too as many current programs either will not exist or may exist in a reduced form in the next budget. The Federal Budget is a large pendulum that swings from one extreme to the other. We have enjoyed almost 10 years now of increased spending that can only be viewed as a boom. Now there is a correction. Sometime in the future the pendulum will swing back, we need to survive in the meantime. Here are 5 strategies that small businesses can use to help mitigate their risk in this uncertain time;
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You maybe surprised to learn that the government attempts to us many of the same practices commercial firms use to buy products and services. In fact, you could say the majority of what the government purchases falls into this category. For the most part, the government purchases what it needs on a competitive, best-value, fixed-price basis. That’s no different than most commercially businesses, and it’s even how consumers chose the majority of their purchases.
What is wrong with the way we are currently operating our government? The government operates on a budget year from Oct. 1 to Sept. 30. Theoretically the budget for the fiscal year should be established and approved prior to the start of the year. Right now, the budget is not approved! What? That's right, the budget is operating on what is called a "continuing resolution" authorized by congress. This means uncertainty, it means inefficiency and it means slow actions by the acquisition arm of the government (since they are not sure of funding, whether it will be approved, reduced, increased, eliminated, etc). Undersecretary of Defense Aston Carter describes the problems well. This short video allows some of his views of the problem.
Well, as with anything from the government, there appears to be conflicting rules being issued. At first glance when you look at 15 U.S.C. 644 (g) (1) it requires that a minimum of 23% of the value of all federal prime contracts issued are being issued to small businesses. President Obama issued a memorandum (Memorandum for the Heads of Executive Departments and Agencies,Subject: Government Contracting, dated March 4, 2009) that called for 5 main objectives including to clarify the role of when functions should be performed by federal employees and when independent contractors may be used. When you consider this memo and read between the lines of actions by this administration it is clear that the size of the government workforce will be growing. If indeed that is the case, will it not take more of the federal contracting "pie" from small businesses? Most of the small business content has consisted of services provided to the government so by pulling more work into the government itself, this would logically have to reduce some of the small business contracting, wouldn't it? I know this is not the intent of the administration and if you ask, they will certainly say that is not the case. I rather suspect that this requirement will put more pressure on existing federal employees that are involved with the procurement of goods and services for the government, the contracting officers. As most small business people that do work with the federal government learn, the contracting officer (CO) is in control of your situation in a government contract. If the workload of the CO becomes more difficult, they will try to maximize their effectiveness by taking the path of least resistance. What this means to small business is that they must take extra care to make sure they meet the requirements of the RFQ and make the CO's job as easy as possible. This includes making sure your accounting system meets all the FAR guidelines and your indirect billing rates are up to speed.
It always amazes me to hear about small business entrepreneurs who are successful in receiving SBIR grants or government contract(s) but suddenly have difficulty in collecting money or continually have late payments from the government.