Government Procurement and Small Businesses
One of the things I worked on at my old job was helping small and minority businesses get contracts with federal, state, and local government agencies. After all, for many of the ventures we were helping, their next stage of growth meant progressing from servicing a bunch of small contracts to landing one or two big contracts. And governments are among the largest purchasers of goods and services in this country. Add to the fact that this transaction doesn’t always happen as often as it should – governments are notoriously confusing to do business with, and some have poor participation rates of small and minority businesses – and we had plenty of work to do in preparing our businesses and brokering the relationships.
But I have to balance this very important work with what is happening on the government side, which is that their mandate, as collectors and spenders of our tax dollars, is not necessarily to buy from small and minority businesses but rather to spend wisely and get the most value. And in many cases, as evidenced by the move in many agencies towards “strategic sourcing,” that involves using the government’s vast purchasing power to cut deals for larger contract amounts with larger vendors. Pennsylvania, for example, was buying computers from fifteen different suppliers and had 25 different cell phone contracts before Ed Rendell took office in 2003; consolidations and other strategic moves in these and other areas have saved the state government at least $140 million in three years.
So if you look at government procurement from the small business side, it is easy to cry foul at the low percentage of transactions going to small and minority businesses. And if you look at it from the government side, it is easy to clump together your purchasing and throw your purchasing weight around to cut the best deals in your purchasing. Is it possible for both sides to win?
I’d have to say that the solution for both sides is to understand that there is no “one size fits all” solution. Small businesses should understand that government doesn’t exist to benefit small businesses chiefly through procurement, but rather through creating “an environment that’s good for growing businesses” (a quote from the state’s General Services director, from this month’s Governing Magazine).
(As an aside, when did we begin to depend on the government for contracts and jobs? Isn’t it the private sector’s role to catalyze contract opportunities and job creation, and the government’s role to make sure that happens in a fair and expanding way? I guess that’s just one other tip-off of my Republican leanings.)
But small businesses should also not resign themselves to losing out to big business. Sometimes, the best vendors for government are small and nimble ones. Small businesses should be getting a share of the government purchasing not for social policy reasons but because sometimes they are the best value for government.
(Value can be one or a combination of price, quality, expertise, service, location, bundling, etc. Businesses that can’t offer a winning package to customers and have to settle for customers settling for second-best when they do business with them aren’t going to be very successful in business. And so it is for small and minority businesses doing business with the government: be the best option, or don’t expect to get the contract – whether this time or next.)
As for government, they should be held by taxpayers to getting the best deals. But they should also be proactive in looking for contract types that lend themselves to small and minority businesses, in terms of being able to get better value from them than from big business. It is easy to talk about the percentage of overall government purchasing that goes to small and minority businesses, but it is unfair to measure a government’s endorsement of small and minority businesses just by that one statistic. We need to get more creative in holding government accountable to doing what it can for small and minority businesses, not just depending on the fact that it spends a lot on goods and services. What about a task force that identifies goods and services that are a good match between big governments and small businesses? To take the cell phone example above, the solution to too many vendors isn’t just one big vendor; perhaps it is a mix of vendors, some for scale and some for specialized services and some for unique needs. Or a performance measure that measures government regulations that create expansion opportunities for small and minority ventures? Maybe government dollars and priorities can be better utilized on training programs or industry symposia or mentor brokering.
I’m still on both sides of this fence, wanting to hold both sides to task to perform better. Governments, understand where you can and can’t help small and minority businesses, and be effective and proactive in helping where you can, both in procurements and in policies. And small and minority businesses, understand that government contracts are earned and not granted, and hold governments to task for helping you in other ways besides spending money.
But I have to balance this very important work with what is happening on the government side, which is that their mandate, as collectors and spenders of our tax dollars, is not necessarily to buy from small and minority businesses but rather to spend wisely and get the most value. And in many cases, as evidenced by the move in many agencies towards “strategic sourcing,” that involves using the government’s vast purchasing power to cut deals for larger contract amounts with larger vendors. Pennsylvania, for example, was buying computers from fifteen different suppliers and had 25 different cell phone contracts before Ed Rendell took office in 2003; consolidations and other strategic moves in these and other areas have saved the state government at least $140 million in three years.
So if you look at government procurement from the small business side, it is easy to cry foul at the low percentage of transactions going to small and minority businesses. And if you look at it from the government side, it is easy to clump together your purchasing and throw your purchasing weight around to cut the best deals in your purchasing. Is it possible for both sides to win?
I’d have to say that the solution for both sides is to understand that there is no “one size fits all” solution. Small businesses should understand that government doesn’t exist to benefit small businesses chiefly through procurement, but rather through creating “an environment that’s good for growing businesses” (a quote from the state’s General Services director, from this month’s Governing Magazine).
(As an aside, when did we begin to depend on the government for contracts and jobs? Isn’t it the private sector’s role to catalyze contract opportunities and job creation, and the government’s role to make sure that happens in a fair and expanding way? I guess that’s just one other tip-off of my Republican leanings.)
But small businesses should also not resign themselves to losing out to big business. Sometimes, the best vendors for government are small and nimble ones. Small businesses should be getting a share of the government purchasing not for social policy reasons but because sometimes they are the best value for government.
(Value can be one or a combination of price, quality, expertise, service, location, bundling, etc. Businesses that can’t offer a winning package to customers and have to settle for customers settling for second-best when they do business with them aren’t going to be very successful in business. And so it is for small and minority businesses doing business with the government: be the best option, or don’t expect to get the contract – whether this time or next.)
As for government, they should be held by taxpayers to getting the best deals. But they should also be proactive in looking for contract types that lend themselves to small and minority businesses, in terms of being able to get better value from them than from big business. It is easy to talk about the percentage of overall government purchasing that goes to small and minority businesses, but it is unfair to measure a government’s endorsement of small and minority businesses just by that one statistic. We need to get more creative in holding government accountable to doing what it can for small and minority businesses, not just depending on the fact that it spends a lot on goods and services. What about a task force that identifies goods and services that are a good match between big governments and small businesses? To take the cell phone example above, the solution to too many vendors isn’t just one big vendor; perhaps it is a mix of vendors, some for scale and some for specialized services and some for unique needs. Or a performance measure that measures government regulations that create expansion opportunities for small and minority ventures? Maybe government dollars and priorities can be better utilized on training programs or industry symposia or mentor brokering.
I’m still on both sides of this fence, wanting to hold both sides to task to perform better. Governments, understand where you can and can’t help small and minority businesses, and be effective and proactive in helping where you can, both in procurements and in policies. And small and minority businesses, understand that government contracts are earned and not granted, and hold governments to task for helping you in other ways besides spending money.
Comments