NEWS

Experts Say Federal Construction Should be Long Term Strategy Vs. Quick Fix

Representatives from the SBA, US Military, Finance and Construction Industries Explain Federal Procurement Procedures at ABC Conference

FAIRFAX, VA—February 19, 2009— More than 100 people representing a cross section of the construction industry learned how to procure federal work at a conference organized by the Associated Builders and Contractors of Virginia today.

Representatives of the Small Business Administration, Naval Facilities Engineering Command, the U. S. Army Corps of Engineers, banks, sureties and construction companies discussed procedures and strategies at the all-day event held at the Marriott Fair Oaks in Fairfax.

The program was designed by the ABC Virginia Chapter’s Management Education Committee as “a good way to help ABC members to diversify their companies and become stronger going forward,” explained Mark Bailey, president of Centennial Contractors Enterprises, Inc., and a member of the committee.

Speakers made it clear that doing work for the federal government should be viewed as a long term strategy for growth and diversification rather than a short term solution to shrinking private sector opportunities.

Getting Started Working with the Federal Government

How to get established as a small business in the eyes of the federal government was foremost in the minds of most attendees. “Getting business with the government is very important to me,” explained Edwin Veiazga of ED Construction, LLC, an Arlington, VA-based drywall contractor. Referring to his counterparts at the conference, “Many of us don’t know how to go about getting these jobs.”

The SBA offers a variety of programs aimed at helping small businesses improve their chances of winning federal contracts. Most federal construction projects require a significant percentage of work be provided by participants of these programs, and with the anticipated surge in federally funded construction tied to the passage of the American Recovery and Reinvestment Act of 2009, now is a perfect time for small businesses to take advantage of them.

SBA Business Development Specialist Joyce Mears explained SBA’s core certification programs, including Small Disadvantaged Businesses, 8(a) Business Development and the HUBZone Empowerment Contracting Program.

Mears encouraged small businesses to register on the Central Contractor Registration (www.ccr.gov), a search engine tool for a variety of federal agencies to locate small businesses, but reminded small business owners that 8(a) certification does not guarantee business; it is still important to offer competitive services that bring value to users.

Joint Ventures Offer Opportunities for Smaller Firms

Getting started in federal contracting is challenging because in order to work with the government, contractors must often demonstrate experience on similar projects. “We want to get into federal contracting, but without experience, we do not exactly know where to start,” said Gassan Kassira of A&A Transfer, Inc., a rigging company located in Chantilly, VA.

The SBA’s Mentor-Protégé program is an a development tool for 8(a) participants. The program is a way for small businesses or protégés to team with and learn from larger businesses or mentors in order to win federal contracts and develop their business.

Stanley Fujii, SBA assistant district director of business development, explained that under old rules, each party in a joint venture had to be a small business in order to win federal contracts. “Under the Mentor-Protégé program, only one of the joint venture partners, the protégé, has to be an 8(a) small business,” Fujii said.

Financial Support is Available to Firms with Solid Balance Sheets

Borrowing money is harder today than it has been in years and few financial specialists would dispute that fact; but money is available for potential borrowers that have their financial house in order.

Robert Carpenter, SBA business development specialist, discussed SBA finance resources and programs that help companies start or grow their business and effectively compete in the marketplace. He explained that the SBA does not directly lend money to small businesses but instead is a guarantor of loans and bonds issued by private institutions the agency considers its partners. Carpenter stressed the importance of having a carefully developed business plan and a strong balance sheet before approaching the SBA for financial assistance.

The SBA has a variety of loan programs depending on the size and needs of small business clients. Prior to the enactment of the American Recovery and Reinvestment Act of 2009, the ceiling for loan guarantees was $2 million, but Carpenter pointed out that those caps will likely be changed.

Today fewer loans are being made, but it is not because funds are unavailable. “Banks are getting back to their policies and regulations,” explained Robert Lowery of PNC Bank. He said that banks are doing much greater due diligence than in recent years. “We are looking under the hood more carefully for all our clients,” he added. He suggested that all businesses keep their leverage down; banks are looking for a much lower debt to equity ratio than before.

Archisha Mehan of Sandy Spring Bank and fellow local bank executive Michael Terpak of Access National Bank explained that they are willing and anxious to assist small businesses with their financial needs when they have the 3-Cs of banking in order: personal credit, collateral and cash flow.

A similar position was echoed by Michael Youngblut of Hess Egan Hagerty & L’Hommedieu, a national surety practice that is a division of M&T Insurance Agency, Inc. “Money is available now,” he said, “it is just that the standards are higher so there are fewer people qualified to get it.” He added that sureties are looking at cash flow and liquidity. Before the economic crisis, receivables that were 90 days were considered part of a business’s cash flow, but today, anything older than 60 days is not considered.

The Path to Success with the Federal Government

Companies looking to break in to the federal marketplace should make it a long term decision, not just a move to get by during a recession.

“What drives success as a federal contractor is a long term commitment, experience and capabilities that fit contract requirements, demonstrated quality of work, reasonable and cooperative behavior, past and present performance of meeting commitments, a history of few surprises and experience helping customers,” explained Bill Sweetser, retired founder of Centennial Contractors Enterprises, Inc., a contractor who built itself on federal construction.

“If you are going to work for the federal government,” Sweetser said, “this is a good time to start. The stimulus package is going to put pressure on contracting officers to spend money quickly.”


Marketing through SCORE and Old Fashioned Networking

One of the many resource partners of the SBA is SCORE, a nonprofit association providing small businesses with counseling, workshops and business reviews from a nationwide network of 11,200 volunteers who previously held senior management or ownership positions in the private sector.

In spite of the recession, now is a great time for business because resources are cheap and opportunities are vast. “The federal government buys everything, so there are opportunities for everyone, but there is a process in getting federal work and you need to get accustomed to it,” stated Arnie Westphal, a retired business owner who now volunteers for SCORE.

Contractors should focus on one agency or even one area within an agency of the federal government that purchases their services, rather than trying to tackle the entire government. “The bottom line is network, network, network,” Westphal said. “You have got to get to know contracting officers and you want them to know you and your product. Then they will call you.”

That sentiment was echoed by contracting officers Kimberli Gray and Linda Wright with the U. S. Army Corps of Engineers and the Naval Facilities Engineering Command (NAVFAC) respectively. They described step-by-step procedures for contractors getting started with the government:

1. Identify your product or service by federal supply classification code (FSC) or product service code (PSC) on the government’s Web site (http://fpdcapp.gsa.gov/pls/fpdsweb/PscWiz)
2. Identify your North American Industry Classification Codes – as many as apply since this is a primary way government search engines find contractors (http://www.census.gov/eped/www/naics.html)
3. Determine SBA size standard (there is a separate size standard for each NAICS) (http://www.sba.gov/services/contractingopportunities/sizestandardstopics/index.html)

Both Gray and Wright urged attendees to visit FEDBIZOPPS (www.fedbizopps.gov), where most proposed DOD and federal contracting activities above $25,000 in contract value are synopsized with requirements and contract awards. They made it clear, however, that not all government contract opportunities are listed on FEDBIZOPPS, and encouraged contractors to contact each government installation’s facility manager to enquire about their projects.

Many Paths to Federal Opportunities

Growth through federal construction opportunities begins with a plan and a focus on the different agencies and departments within the government and what they are looking for. As a construction business you can take the skills and experience from other market segments like commercial or residential. You do not always have to go direct; there are other ways to start working on federal projects.

“We utilize local, small construction businesses to fulfill 100 percent of our federal clients needs,” stated Mike O’Neill, regional executive for Centennial’s Mid-Atlantic region. “This way, a business is able to start getting the experience and the knowledge established before going on to do work directly. In many ways we are a federal construction incubator business. As an example I recently connected with a commercial restaurant kitchen setup company at an ABC event and started exploring the potential of them helping us on a larger military base kitchen remodeling project we are working on. It was exciting to talk with someone who has ideas on efficiencies from the commercial world that is new to the federal market.”

Benefits to federal contracting abound. It’s a stable market. Federal construction does not fluctuate as dramatically as the commercial market can, particularly during economic downturns. Federal construction offers diverse opportunities for a wide array of contractors, from huge projects like the Pentagon to small renovation and retrofit projects. And awards are made based on very strict procedures that are professionally administered. Contracting agents look after the best interests of the federal government and those of the contractors.

“If you’ve got a company that has been making a living in the private sector, you would be well served to put emphasis on federal work,” urged Sweetser.

See http://www.cce-inc.com/whitepapers.html for the white paper, Federal Contracting as a Long Term Business Strategy, to learn more about this topic.

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About Centennial Contractors Enterprises, Inc.: For more than 20 years, Centennial Contractors Enterprises, Inc., has been a leader in construction services supporting government, educational and business facilities and infrastructures, with construction projects focused on renovation, rehabilitation and repair. To date, Centennial has supported over $2 billion in project solutions for its diverse customer base. Headquartered in Northern Virginia, the firm has over 45 offices nationwide. For more information go to www.cce-inc.com or contact David Carrithers, vice president of marketing, at 703-287-3042 or contact@cce-inc.com.