The Set-Aside Gauntlet

As I gave myself another shot of caffeine in terms of a soda to keep me alert until the adrenaline kicked in at Marvel’s Endgame premiere, I had the opportunity to think about the conversations that I’ve had this past week.

Selfless plug and quick background, AOC Key Solutions provides end-to-end Capture and Proposal support to government contractors and in my role I work with these organizations ensuring their Capture to Proposal transition is smooth and that their proposal teams put together the best response possible both efficiently and cost effectively.

Along with the larger organizations, we support a lot of growing businesses as they create their Capture and Proposal structure to better position their organization for new business opportunities.

So, after two calls a piece on Monday and Tuesday and then another Thursday I was noticed a path that CEOs and Business Development Leaders at emerging organizations were taking in hopes of growing their footprint in the public sector.

Two organizations in particular were coming to us for proposal writing support and for help getting on contract vehicles that they thought would make it easier for the government to procure their services. It made sense and is a logical approach.

But after digging in a bit further, I found that this was the ONLY approach they were taking. They were focused solely on acquiring government set-asides and contract vehicles and expecting work to follow. With all the different boutique consultancies and advisory teams out there pushing the importance of set-asides, I'm wasn't surprised to see them focusing on this but I wanted to help expand their mindset further.

Most importantly, an organization needs to understand the WHY. Why will the government work with you at all? 

Types of Set Asides

For those of you that are experienced in the public sector, feel free to skip a section. For those of you that are just breaking in, here’s a breakdown of the current small business set-asides thanks to the SBA.

8(a) – created to help provide a level playing field for small businesses owned by socially and economically disadvantaged people or entities. The government is supposed to award >5% of all government spending to this set-aside annually. Requirements include:

• Be a small business
• Not already have participated in the 8(a) program
• Be at least 51 percent owned and controlled by U.S. citizens who are economically and socially disadvantaged
• Be owned by someone whose personal net worth is $250,000 or less
• Be owned by someone whose average adjusted gross income for three years is $250,000 or less
• Be owned by someone with $4 million or less in assets
• Have the owner manage day-to-day operations and also make long-term decisions
• Have all its principals demonstrate good character
• Show potential for success and be able to perform successfully on contracts

Women-Owned Small Business (WOSB) - created to provide a level playing field for women business owners. The government is supposed to award >5% of all government spending to this set-aside annually. Requirements include:

• Be a small business
• Be at least 51% owned and controlled by women who are U.S. citizens
• Have women manage day-to-day operations and also make long-term decisions

HUBZone Program - created to drive economic development in historically underutilized business zones. The government is supposed to award >3% of all government spending to this set-aside annually. Requirements include:

• The company must be at least 51% unconditionally and directly owned and controlled by United States citizens;
• The company must be a small business under its primary NAICS code;
• The company’s principal office must be located in a HUBZone; and
• At least 35% of the concerns employees must live in a HUBZone.
• Re-certification every 3 years

Service Disabled Veteran Owned Program (SDVO) - created to support service-disabled veteran-owned businesses. The government is supposed to award >3% of all government spending to this set-aside annually. Requirements include:

• Be a small business
• Be at least 51% owned and controlled by one or more service-disabled veterans
• Have one or more service-disabled veterans manage day-to-day operations and also make long-term decisions
• Eligible veterans must have a service-connected disability

But having a designation isn’t enough on its own.

If you think “Alright, I’ve got 4 designations, everyone will want to use us” – think again. Having the Set-Aside Gauntlet, like Thanos' Infinity Gauntlet, doesn't guarantee success.

Here’s a rough estimate of your competition:

• 8(a) – >4,500
• WOSB – >1,000,000
• HUBZone – >21,000
• SDVO – >442,485 (those with employees)

Sure, you can work to combine some of those designations to downsize the competition but that’s solely focusing on the HOW you will be procured by the government. More importantly you need to ask yourself, WHY will the government work with you? What can you do to help them reach their mission?

Contract Vehicles

Another route that I’ve seen common, and I’ll admit that this was one I fell into as well, is getting on as many contract vehicles as possible. Now, this approach for those that sell a product such as IT hardware/software, makes sense. IT is procured in a more structured format across most agencies and since the government knows they frequently procure, especially in August and September, they want it to be as streamlined as possible.

For those of you that provide a service such as consulting or a managed support, being on a contract vehicle, simply makes you more attractive at the end of the buying cycle. No one will buy you simply because you sit on the contract vehicle.

This takes us back to the WHY.

The government has both the largest budget and the tightest procurement structure in the world. They have hierarchies of staff in procurement that are in place to ensure there is discretion in spending.

It is important that the investment you make towards a contract vehicle aligns with your organization's vision and will actually benefit you in the procurement process.

“Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.” - Jack Welch

Agency Alignment

The quickest success I’ve seen for small businesses breaking into the space is from organizations that are lead by former employees. These individuals did a certain job well while they served and when their service time is up, created their own company doing exactly what they were doing while they were employed by the government. Past performance is validated by their colleagues and they are given the opportunity to continue to do the work as an independent organization.

Now if you are not a former government employee you may look at that and say “How can I replicate that? I never worked in the government.”

In reality, it’s not matter of replicating their service, it’s about understanding WHY they were procured. The government is supposed to be protectors of their spend. They don’t award contracts just because you have prior service, they award based on need and capability alignment.

Let’s take a moment to understand the buying mindset.

A small business comes in, knows the government has a need in a certain area, aligns their capabilities to that area and details the ROI to the government client. The government then validates the need, recognizes the ROI that would come from the partnership and works to procure the service/product.

What in that above paragraph is your business unable to do?

Sure, no one wants to cold-call the government but there are many other avenues. Industry days, trade shows, government match-making sessions etc. that you can participate in, that will give you the opportunity to tell the story of how your company will help the government drive towards their mission.

"Big" Alignment

Truthfully, penetrating an agency does take time. Past performance is important to them and takes time to build. To build your brand in the government and drive awareness of your capabilities can be exhausting. Some contractors have sped this up by aligning to a larger systems integrators or services providers.

Now, I know many of you will say “Ya, I tried that and they never call me back”. This happens. I’ve sat in a solution room at a large systems integrator with 13 other sub-contractors knowing that 9 of them will not get any work from the large contract or if they do, it will be a small sliver in a support role. It’s discouraging.

While there is no silver bullet for aligning to a larger company, trying to partner with them while you are still relentlessly working to get into the government independently, makes it easier for all parties involved. If you want to be in on the solution strategy session with a large company, have some knowledge of what the customer wants. If you want to dictate your role on a big contract, be able to tell the story of how you fit and how you will be supporting the government. Many times the personnel at these large organizations aren’t sales people, they are already in with the customer and are just trying to grow their footprint. They don’t know how to sell you in especially if the government has never heard of you. If you already have penetration, they are more inclined and get excited about helping drive you in there as well.

Also, it's important to keep in mind that each one of these large organizations is required to have a subcontracting plan in place for each of their large contracts. These subcontracting plans are many times much larger than the overall government requirements for set-asides. If you are already penetrating the government space, this is a great avenue to be a part of and your past performance can grow quicker as they go after multiple bids throughout the year. Be aware of the opportunities they are tracking and detail how you can benefit them in each one.

Strategy and Vision

When you sit down with your leadership team, start by understanding the WHY you are in the public sector. Why are your capabilities able to help the government? Build a story off that. From there focus on the agencies of best fit and build out your relationships concurrently with the larger companies.

It takes some time initially, but strategy should always be in place before you get into tactics. Know the WHY you want to work with an agency, WHY you need that contract vehicle, and then maximize your set-aside(s).

Even Thanos took 90 seconds to explain to the audience his WHY and how he will affect the universe.