Federal agencies are required by law to allocate 23% of annual competitive procurement funds to small businesses. State and local agencies also have policies encouraging partnerships between the government and small businesses. The State of California, for example, requires its state agencies to award at least 25% of their annual contracting dollars to certified small businesses. Despite these enormous opportunities for small businesses, and a desire by government agencies to purchase from them, a recent survey found that 93% of small businesses report significant barriers to selling to the government, with 85% of respondents reporting that the biggest barrier is complex and inefficient government procurement processes.
This article covers the government processes that have hindered the growth of small businesses within the government market segment, and how online stores can help simplify or even eliminate them, allowing small businesses to reach their full potential.
The complexities of government procurement
The typical government procurement journey for suppliers, from finding contract opportunities to competing for them through a Request for Proposal (RFP), can be complicated and arduous. A recent survey found that aspects of the government procurement process, including the duration of the sales cycle, complex document requirements, vague and confusing guidance and inefficient and outdated IT government systems, make it difficult for small businesses to participate in government contracting.
In a new report, Censeo Consulting Group shares findings from 455 small businesses on the challenges they face in selling to government customers. Of the 85% of small businesses surveyed that agree the overall government procurement process is difficult and complex to participate in:
- 74% stated the documentation required to respond to a contract makes it difficult to communicate their business capabilities;
- 72% agreed the overall sales cycle is significantly longer than their commercial customers;
- 66% believe contracts are complex and costly to join;
- 54% believe contracts do not clearly articulate their needs, requirements and desired outcomes; and
- 50% agreed deadlines for government contracts do not give enough time for suppliers to respond.
It’s not surprising to learn that there’s an entire industry built around assisting businesses to navigate the complex government contracting process. Yet not all small businesses can afford to pay for a service to track and find opportunities, hire legal support to review complicated government terms and conditions, or hire consultants to advise them on proposal responses.
According to one Pennsylvania-based small business owner surveyed, the process of “finding, reviewing and completing most federal or state contracts requires almost 100% of a typical 40-hour workweek of one employee.” And that’s just where the work starts. If a small business is lucky enough to win a contract, they must manage that contract, which can include further contract negotiations over any new regulations, performance reporting and proof of compliance with various regulations.
While these challenges may seem daunting, there are strategies that enable small businesses to get in front of more government buyers and compete for government dollars, without major complexity or time commitments.
Circumventing small-business challenges
Small business owners are turning to online stores for accessing more government customers, expanding into new market segments (like commercial companies) and selling a higher volume of products per year. One small business owner said, “Without an online marketplace, we would not exist. There is no other intelligent way to market.” Just as important: Most survey respondents are able to achieve all of these benefits with the same or lower cost of sales as compared to traditional government channels.
Online stores provide small businesses with an opportunity to highlight their small business certifications in their seller profile.
When a buyer wants to purchase from a certified small business, an online store featuring multiple vendors on a marketplace uses technology to allow buyers to prefer these authorized sellers and track and report their spending to them. In King County, Washington, the procurement team figured that an online store was the key to driving more dollars to local, certified small businesses. So they released a video encouraging King County registered small businesses to sell through an online store used by King County buyers, so their government buyers could more easily find and purchase from them.
Online stores also remove geographic constraints, allowing small businesses to sell to government entities across the country, so they don’t have to spend the time and money marketing themselves to hundreds of procurement teams.
Tips from a small business owner in Texas
Texas-based small business owner Rita Bonarrigo was used to driving across the state of Texas to knock on the doors of potential government customers. When Rita began selling through an online store, she found new government and commercial customers without the time and cost investments associated with traditional government procurement processes.
“Implementing a marketplace-based ecommerce business model was the equivalent to hiring several full-time sales people, but for far less money,” she said. “We effortlessly bridged the gap between our inventory and our suppliers, reaching tons of new global customers without having to get out there and knock on doors or launch a nationwide marketing campaign to find them.”
Securing new opportunities as a small business owner is challenging, especially when they’re up against complex and inefficient procurement processes. But government agencies want to do business with small commercial product suppliers — and online stores can help bridge the gap.
(The first article in this series on government procurement, “Online stores level the playing field in government procurement,” ran on July 27.)
Anne Rung is Director of Public Sector for Amazon Business. Prior to joining Amazon in 2016, Rung was the U.S. Chief Acquisition Officer in the White House Office of Management and Budget. Also, she has held senior management positions in procurement at the U.S. General Services Administration, the U.S. Department of Commerce and the Pennsylvania Department of General Services.