Many small businesses are afraid of taking on GSA contracts because they believe compliance issues, red tape, and payment issues will simply put their small business underwater. Small businesses all over the country consistently hear rumors that companies of their size will fail if they take on a GSA contract.
However, this information isn’t accurate. In fact, GSA contracts can be one of the best ways to grow your small business. A government contract can be a strategic advantage to grow or pivot the core competency of your business that thereby allows you to take on even more contracts in both the government and private sectors.
If you want to learn more about GSA contracts and how you can leverage them to grow your small business, keep on reading. We are going to take you through some of the common misconceptions and dispel some of the myths about taking on a GSA contract as a small business.
The Perceived Risk of Taking on a GSA Contract as a Small Business
Below, we are going to take you through all of the perceived risks of taking on GSA contracts as a small business vs the reality of those risks. You may be surprised how feasible taking on a GSA contract actually is for your small business.
Red Tape – Government Contracting is Far too Complicated for Small Businesses
A lot of small business owners think that there is a lot of red tape when it comes to taking out a GSA Contract for a small business, but the reality is that the GSA Schedule program simplifies everything.
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What you may find surprising is that the government actually desires to buy products and services from small businesses, so it takes the time and effort to seek out and establish those contracts. These outreach programs cost them a lot of money, but it is important for them to stimulate the economy by including small businesses within government spending.
The government will give you the information you need ahead of time to help you create a bid that has less risk than you may think. They will give you historical information on similar bids as well so that you can see if the estimated payment is worth it for your company to take on the GSA contract. Your commercial customers will never give you this kind of information, so it is actually an amazing advantage that you should be taking part in.
However, it is good to know that there are some requirements that you will need to meet in order to be eligible for GSA scheduling so that you can fast-track your way to government contracts without all the red tape. These requirements are:
- 2 years’ experience in business
- Healthy financial statements
- Ability to execute the category
- TAA compliance
- Evidence of past performance
Once you have met these requirements, there isn’t much more red tape than that. Many commercial clients are going to have many more nit-picky requirements than what we’ve listed above, and they still may deny your bid after you’ve spent time on it for ambiguous reasons. With a GSA contract, you’ll be able to make a straight-forward bid without as much run-around as you might normally be used to.
Compliance is Difficult to Manage
Compliance is a scary word that small businesses fear when they consider taking on government contracts. However, GSA Contracts remove much of the common compliance issues with regular Government Contracts that you may have heard about in the past.
There will be compliance regulations that both parties will have to agree to. You will have to agree to abide by certain rules and regulations as a contractor. However, these standards will be decided upon before the contract is finalized, so you don’t have to worry about things getting sprung on you out of nowhere. The important thing to remember here is to not agree to anything that you do not think you will be able to abide by.
Here are a few other compliance rules regarding the sales of your business that will apply to GSA contracts:
- Minimum sales of $25,000 per year
- Price reductions versus standard commercial practices
- TAA compliance related to the country of origin for products
- Wage determinations for SCA or Davis Bacon wages
While it will be your responsibility to ensure that you meet all compliance standards, you will know what they are before agreeing to the contract and will be able to ask any questions you need to as you go.
The Government Takes Forever To Pay Its Vendors
One of the biggest myths surrounding government contracts is that the government takes a long time to pay its small vendors. So, people believe taking a government contract can potentially bankrupt a small business. However, that is simply untrue. In fact, the government has to pay the small businesses it works with more promptly than its other contracts, as deemed by law. Additionally, if there are any late payments due to something like a government shutdown, they will pay interest on those late payments.
Most Small Businesses do not Succeed with a GSA Contract
You may have heard that most small businesses don’t succeed with a GSA contract. The reality is that while many GSA contracts are canceled due to lack of sales, far more do succeed under this program.
Like most things in life and in business, you are going to get what you put into it. If you have a great work ethic as a company and put in a lot of effort to grow in this market, your business can rapidly expand via the contract and you’ll be able to reach heights that were previously unattainable to you.
Federal Buyers Only Want to Work With Giant, Incumbent Contractors
This myth is quite obviously untrue, simply because the GSA program exists at all. The GSA works with the SBA to ensure that federal agencies are always looking to small businesses to fulfill their needs whenever possible.
While every agency is going to be different, you are going to find that many government agencies would actually prefer to work with small businesses. Government agencies find that communication is often much more straightforward, it is easier for them to check any compliance issues, and ensure they are getting what they need when they need it. This sets small businesses apart in a way that giant, incumbent contractors simply cannot compete with.