Live Workshop: Determining a Government Contracting Niche (Podcast Transcript)

[00:10] Richard C. Howard: Yes. Ricky Howard here with DoD contract academy. DoDcontract.com. And today I am with Eytan. Eytan, how are you today?

[00:22] Eytan: Hi, Rick. I'm doing great. How about yourself?

[00:25] Richard C. Howard: Good. So today we're doing something a little bit different. I've been working with Atom a little bit about starting selling to the federal government. So he already has a business. We're not going to get into that. But what we are going to talk about is where the best place to start is. Because he's involved in a few different areas, he has access to a few different companies. But if you're listening to the podcast or been on our blog website, we're a big proponent of looking and seeing what the federal government is doing, spending wise, before we start actually trying to sell to the government. And that's very important because you may just have to pivot a little bit to really hit on a government need. So doing some of this research ahead of time is very important. So what Eytan and I are going to do today is we're going to talk about some of his ideas, and we're going to look at the federal spending, and we're going to start making maybe a list of what we think is going to be some of the best places to start. So how does that sound, Eytan?

[01:29] Eytan: Sounds awesome. Looking forward to it.

[01:31] Richard C. Howard: Good. All right, so first why don't we talk a little bit? I know we've talked we've exchanged some emails, but once you give kind of a brief like, hey, here are some of the ideas that you're thinking about because as we reverse engineer, we're going to have to start with something. We'll start analyzing where the spending is.

[01:48] Eytan: Right. So I think we doing our exchanges. We spoke about originally Cold Sensor Services. We have access to different companies that offer this kind of customer relation services, whether it's for appointment setting, tech supports customer service, that kind of things. Right. We talk about a contact with the manufacturing business, plastic bags manufacturing based out of the US. We talk about painting liberty painting services, painting houses, military bases, whatever that may be. So we have a lot of different contacts. So the idea of this meeting was really to see us do some kind of reverse engineering and see if we can come up with what's the best thing most efficient that the government is currently looking for and try to get for them.

[02:40] Richard C. Howard: Yeah, no, I like this approach, and this is something that we'll do with other businesses as well. A lot of times it will be something that they specialize in, and we just need to figure out, hey, I use cyber security companies all the time because I get a lot of them coming through. And the key with them is, hey, let's really pick in the area within that huge topic, that huge industry that's going to make sense for you. That, by the way is a very competitive industry to be in if you're selling to the government. So as far as some of the things that we talked about, I was discouraging you from focusing on products. So I like to put those when I say products just for everyone listening, I'm talking about low dollar products, things like office supplies. And I'm not saying that the plastic bags, those things may be able to work, but we're usually talking about a low margin of error or a low margin of profit, potential bidding wars. And there's a different way of selling products, too. So I do like to focus on services, technologies, those type of things. I think they resonate a little bit more. And the way that I see as a productive way of selling to the government and making money for small businesses, it seems like that is a better path forward. And so that doesn't apply to high dollar products. Like if you're selling high dollar medical equipment or you're selling software licenses or you're selling, you name it, the higher dollar stuff, especially if it's unique, that's a little bit different. But if we're talking about kind of commodities, I guess is a better way to put it. Typically I like to stay away from those type of things, especially when we're starting out. So if you're okay with that, then I'm okay with that.

[04:30] Eytan: Yeah, sounds good.

[04:31] Richard C. Howard: Okay, cool. So if I share my screen, you're going to be able to see what I'm looking at?

[04:36] Eytan: You should be able to, hopefully.

[04:39] Richard C. Howard: All right, perfect. So what I'm going to start off with is we're going to look at and I've got another computer over here. I have a couple of other systems on. I use a variety of paid for tools to do some of my searches. So I'm going to start off by looking. And what I like to look at is federal spending history when I'm trying to decide something like this. So it's a little more inaccurate if you're just looking at opportunities, right? So let's say that we were looking at call center opportunities and we had over the next six months, we saw, hey, there's $200 million in call center opportunities coming out. But then we look in the federal sales history and we see, well, hey, the government's only spent $250,000,000 in call center contracts. This isn't true. But over the past five years, well, then we know, hey, maybe there's a mismatch there. So if we look over the past three to five years, we get a good sense of what the government's spending and hey, is that going to be consistent over the years? Let's start with call center. Since you mentioned it.

[05:43] Eytan: You just mentioned could that be because there's a need, but it hasn't been fulfilled?

[05:49] Richard C. Howard: It could be for a lot of reasons. There are some things that the government buys almost everything right, but there are limitations to that, right? And I'll just use an example of I think it was the government hired someone was involved with piano lessons and like, performing like, songs on the piano and, you know, and so the government we'd certainly found contracts or the government hired people to play piano out of that, like 20,000 contracts. Okay, but, you know, if I let's say I was looking for an opportunity and for piano, and I saw, hey, there's a, you know, 20, $40,000 opportunity here next week in piano. If we based for, like, to perform at, I don't know, a retirement ceremony or something, if we saw that and we based your business to the government off of that, we would have missed the fact that the government hasn't purchased any of it in the past three years. So that's kind of a one off. So there are some things the government buys, but it's only now and then or it's not going to be enough to sustain you over time. So that's really what I mean by that. We want to make sure the government is buying it and they're buying enough of it. Where a small business and from small businesses, so a small business can jump in there and make that work. Now, what I'm looking at right now are product service codes. This is one way the government classifies contracts. It's usually a more specific way than a NAX code. That would be a North American Industry Classification code. There's a lot of different ways to search for opportunities. I can also search by keyword, but I find these codes, although not perfect, give us a good sense of potentially what we're looking at. So when we're talking about helpdesk, like you can see here, this particular Help desk code is specific to It and Telecom. Is that something like when you say Help Desk services or Call center Services, is there a specific industry or kind of general?

[07:48] Eytan: If I had to give very broad categories quickly, they would be answering services. That would include customer service, could be It, could be tech support, could be appointments, appointments, booking, and settings.

[08:06] Richard C. Howard: This is for computing, including Help Desk service, desk side support workspace, technical support, audio, video conferencing, printer support. So it looks like a lot that would have to do with kind of it or personal workspace, conference room and whatnot. Now we can see that over the past three years, the government spent $1.6 billion in this just on that, just on that right in the field on that particular job there, as I described, helpdesk services. So this is for anybody that's wondering what I'm looking at. This is a product service code, and the code is de zero, one, delta, echo one, It and Telecom. And so this is showing me how much and basically, by the way, like any tool you pay for, I use a lot of different ones. Any tool you pay for is taking the information from the government websites that are free for everyone to use. So you can go to a website like USAspending.gov or FPDs Sam.gov. That's where the public repository is. Because federal spending is public and the government has to report its spending. There's some stuff that's not going to be reported because it's classified. But then I will also say in the same breath, this is the government, right? And there's so many different, there's thousands of different offices out there making purchases. So they're all different. So some of them are good about reporting, some of them there's going to be a lag. So I always assume, and they'll even tell you, hey, assume a six month lag in reporting and then these numbers are going to change. So if you look at anything up as far as federal spending, especially big picture stuff, if you look at it the next week, that number is going to be different and it could go up or down. But we're trying to get the big picture.

[09:54] Eytan: That's a pretty nice baseline.

[09:56] Richard C. Howard: Yeah. So if you see 1.6 billion, you know they're spending. If this number was 20 million over the past three years, I'd say we're probably in the wrong place. Right, because that's not a lot of money for the government to be spending, especially over three to five years. Okay, so that's the first thing. The next thing I want to get a sense of, how does the government make those purchases? 1.6 billion. I can see that roughly a third of that is going through GSA. Do you know what GSA is?

[10:30] Eytan: No, I forgot. I knew that. The government small administration, it's just a.

[10:37] Richard C. Howard: Way that the government just think of it this way, the government can't make purchases the way you or I do. And this is where the Federal Acquisitions regulations come in, right. So the Federal Acquisitions regulations, just thousands of pages that can make this complicated, right. So that's why we want to focus and we only want, like for you as a small business owner, I just want you to have to understand the piece that applies to you. Now, having said that, the government can't just put anyone on contract because they want to. There has to be a way or a mechanism to put them on contract. They can compete something. They can have an open competition where everybody bids on it. They can use something that I loosely would throw GSA and other contract vehicles into, something called category management. Category management. Because competing something takes a long time. Right. So when I was a program manager, if I had to put a company on contract to do help desk services, right. So I know that I'm going to have if that was like the program I was running, I would know that I'd probably have several contracts and tons of different efforts related to help desk that I had to put on contract. And a lot of them, I wouldn't even know or were coming over the next three years. And I definitely did not want to have to compete every opportunity and spend a year putting a solicitation out there and competing and making an award, like every time I had to do that. So one way the government gets around that is they will have either these contract vehicles GSA I'll talk about GSA in a second where maybe your company and 100 other companies will call it the Ricky Howard contract vehicle. You all apply to be on the Ricky Howard Help Desk contract vehicle. And then just like you were sending a proposal in on a solicitation, and then we would have a board, it would probably take a year to get through them all. And then we would whittle it down to maybe ten companies that were going to be on the Ricky Howard contract vehicle. Now, once you're on this contract, you don't necessarily make any money. So all that means is that I can now go to your company. I don't have to have a competition. I can go to your company and put help desk delivery orders on your company through that contract vehicle. And usually there's a ceiling. So it might have a ceiling of, say, $100 million. Right. It doesn't mean you're going to make $100 million, but it means that I have $100 million of ceiling on there to put any of those companies on contract when I need them, when I have funds, and when I have a requirement. So hopefully that's not too confusing. But I want to understand if those type of things are in place and how much they're being used, because that could make it difficult for a company that's not on those contract vehicles to compete.

[13:15] Eytan: So you mean to say that if they are already competent under the GSA, then it would be too difficult to now compete and get into the picture?

[13:22] Richard C. Howard: GSA is a little bit different because now GSA is you can apply to be on GSA for most of the GSA, like the multiple award schedule. For the most part, you can put an application in, and it takes about six months. I would plan on where they're going to review your pricing, your past performance, and then eventually you get put on the GSA schedule, and now the government can buy your stuff through GSA. Now, a lot of companies have come to me. A lot of companies have been frustrated because they go and they get a GSA schedule, thinking they're just going to win a bunch of work, and they never and they don't it doesn't work quite like that. It just gives the government a way to get to you. So first thing I want to know is how much is it being used? Right? So in this case, I can see that roughly a third of that 1.6 billion is going through GSA. What that means for you is you don't need to be on GSA, right. And I very rarely recommend a company try to go get a GSA schedule before they start selling to the government. Only if it's an industry where, like, 70% of the purchases are made that way. That's where you really need to start thinking, hey, this is probably what I need to do. Because you also have a quota, right? If you're on GSA, they expect you to pull in. I don't know what the min is right now. It's like 25 or 30 grand a year or something. But you have to be able to sell on that schedule, and they have requirements, and it's a pain to get it. I mean, it's once you have it, it's good. And you know, this like, for this, I would say, hey, right now, like a recommendation would be, hey, we can start selling this type of thing. You don't need GSA right away. But once you start making some progress and we start getting you into some agencies, if the customers that you're targeting like to use GSA, at that point, you can start the application process to get on there because there's also plenty of companies that have a GSA contract that you can partner with and go after.

[15:15] Eytan: That interesting.

[15:16] Richard C. Howard: Yeah. So just a little bit on GSA, 1.6 billion. So not a small amount. Right. By the way, we can look, there's other ways. I don't want to make this AG nauseam here, but here are some other larger contract vehicles that we can see. Like I was describing, this is NASA soup. This is. Let's see ciosp. Three is another. See, these are big contract vehicles that have been competed, and there's a lot of businesses on there. And when you're on there, the government can use those to put companies on contract. But I wouldn't worry about that for now. If we find an opportunity for you and you want to sell something like this, you can partner with a company that is on one of those vehicles.

[16:02] Eytan: Okay.

[16:04] Richard C. Howard: By the way, this is for labor. Says labor right there. So I'm guessing that this is going to be a lot of providing people to do the work. Is that something you'd be interested in?

[16:17] Eytan: Yes, that's what we have. We have a couple of hundred employees who are behind the phones.

[16:22] Richard C. Howard: Okay, perfect. Okay, so now we want to take a look at who are you selling to, who is actually doing the spending, because you don't want to focus on all of the federal government. It's a huge place. So we can see here there's a breakdown that shows us kind of the top three, four, five agencies that are going to be involved. And usually we can break out the DoD into the separate services. So Department of treasury and Homeland Security are at the top or the top two, and then the next are going to be all Department of Defense, Navy, army and Air Force. So it gives us an idea of who your targets are going to be. Now, that can change depending on how your company is set up with the small business that's registered and selling here. Would they be woman owned or potentially eight A or HUBZone?

[17:16] Eytan: No, all inclusive of a little bit. Not a minority or anything like that.

[17:22] Richard C. Howard: Right. Okay. Got you. Okay. So it gives us an idea of who's doing the spending. Now, I want to know because you are a small business, so I want to have an idea of is there any difference in how these are competed? If they're set aside, we can see that full and open competition is 22. Sorry. Full and open, 61%. Another 20%. Full and open competition after exclusion of sources. So it's about 81%, you know, is going to be competed. What this means full and open after exclusion of sources. That just means that or it could mean that the government says, hey, I'm going to set this aside for a small business or an eight, or, I'm going to use some way to exclude other sources, and then I'm going to compete the solicitation amongst those businesses. So that's what that means. Do you have questions about that?

[18:24] Eytan: The full open competition after exclusion sources. So that's something that would be good for me, I guess.

[18:29] Richard C. Howard: Potentially, yeah. Company potentially. What I really like to see is here where it says not competed. Not available for competition. Not competed under SAP. Competed under SAP. What that means is because with any small business, my recommendation is I want to be able to get in before a solicitation comes out and try to sell.

[18:49] Eytan: No.

[18:50] Richard C. Howard: Okay, so here what this tells me. Is there's going to potentially be simplified acquisitions is a way of putting small businesses on contract, and typically you're doing that without an open competition. Right. So that's where we find an opportunity ahead of time, and we are influencing the government, like influencing the potential solicitation. But there are a lot of sole source contracts out there, and this is one of the ways those happen.

[19:16] Eytan: Nice.

[19:16] Richard C. Howard: Yeah. So we could see that the opportunity potentially for sole source is there. Look at set aside. So this is not necessarily how they're awarded, but this is before when the solicitation goes out. Is there a set aside used, like small business, like eight A? So we could see 61% of these. Roughly. No, set aside was set in the beginning and then the rest, obviously, there's about 40% remaining. Do have set aside? Eight A is like the certification to get if you can get it, what.

[19:52] Eytan: Does it stand for?

[19:56] Richard C. Howard: I don't have it right in front of me, but it's basically, if you are a minority owned business, there's usually a financial piece to it as well. Meaning you've been disenfranchised in some way. There's a variety of parameters, and I can show you. You go to the small business SBA website and SBA website is going to give you all of the parameters there. You can look it up. Some of them are it's not letting me do that. Some of the parameters are going to be like how much you make each year, or what is your total value, not including your house of assets that you own. So there's going to be those type of questions, but you can go through the list of parameters and see if you meet those. And if you do, you could potentially put in an Eight A application. But what's great about Eight A is Eight A has language in there that allows the government to give you a sole source contract. Sole source contracts are typically not easy to get, but Eight A makes it a lot easier. And there's ways that we work with businesses to make that a little bit easier. If everyone not watching this, we're just looking at kind of like a list of the different certifications and set aside use from Eight A to service, disabled, veteran owned, small business, et cetera. But something else we can do, we can split that up by a major agency. So I can see all right, well, what does the Department of treasury, how do they award? Is it going to be different than the government at large? And of course it's going to be so basically what I'm saying is, hey, are any of these agencies better to sell to than others that will show.

[21:35] Eytan: You which ones to approach?

[21:37] Richard C. Howard: Yes. At the end of the day, it's all about relationships and how you find opportunities and influence. But this is just giving us an idea of, hey, are they looking at the spending? Are there some agencies that are going to in this category? Do we see more small business awards? Do we see a lot of set aside up front? Just gives us an idea. And especially if you did tell me, hey, we're eight, I would be looking for the agencies that use Eight A more than others. SDVOSB is a service disabled, veteran owned small business. They are going to I can tell you in almost every case, the VA is going to use that more than the other agencies. The Navy or the army uses Eight A sole source for 30% of these purchases. So you can see that looking through the data is extremely important when you're trying to decide who you're selling to and what you want to do. Because if you were Eight A, right, so this would tell me, even though the army is not the top purchaser of these services, they certainly use this set aside more than the others, at least percentage wise. So it just gives us an idea. And now I'm just looking through these are different federal contract awards. So if you had the time, you could go through and start looking at, hey, what are the types of contracts that have actually been awarded through here? And you might get in the first line of these contracts, you might get a little bit of information so you can kind of glean, hey, what kind of work would these guys actually have to be doing? So service and maintenance for camera systems. Sounds a little bit different than kind of the initial description. Copy or lease and maintenance looks like a lot of maintenance contracts, application support, service desk. That's a little bit more in line with, like, the actual description of the PSE code. Do those sound like things that I'm not sure, actually. Yeah. So that's why it's important to kind of look through this and dig into it. Managing printing services.

[23:43] Eytan: They all sound like tech support.

[23:46] Richard C. Howard: Yeah. So this is interesting. So they have a Security assessment and Vulnerability mitigation service, which is more of a cybersecurity, I would say, requirement that's coming out under this product service code. But I guess it's under It and telecom, so we're seeing a lot of that too.

[24:03] Eytan: Right. So I wonder if there's a better description to what we're looking for.

[24:09] Richard C. Howard: Yeah, probably. And again, with the code, you're going to get a lot of different things. I mean, that's just the way it is. It's not that specific. And if we were in a naked code, it would be even larger. Right. It looks like there's going to be some things in here that maybe have help desk that have a lot of other things kind of lumped in there. Let's take a look at a couple of the others. So now from listening, we're looking at Naics code. Naics code for telemarketing bureaus and other contact centers. It says here it gives a description in different examples. So customer service, call centers, order taking for clients over the Internet.

[24:44] Eytan: That's much more in lane.

[24:46] Richard C. Howard: Okay. All right. And the spending is higher too, of course. This is broad. These are a little broader too. So just so you know, it's still going to have a lot of different things in there. Some of them you'll probably resonate with and some of them you won't. So this one, $3.4 billion in spending over the past few years. We go to schedules here, and I'm just looking at different contract vehicles being used. So this is good. A little bit coming through GSA, but it's less than a third. It's probably, let's see, probably 20% ish going through GSA. So you don't need a GSA contract. Again, that's one of those things you want to determine upfront because you don't want to have to get that. You want to start selling first. And look at this huge segment here. So Department of Health and Human Services is doing 81% of the spending.

[25:46] Eytan: Wow.

[25:46] Richard C. Howard: So 81% of that number. That's a huge part of that. And now and there aren't a lot of companies that they're selling to. So you've got probably a big company right here and General Dynamics is a huge company and you get a bunch of other ones right here. So this makes me wonder how much actually is going to small businesses. So no set aside used for 84%, but again, that's I believe just for the solicitations. Can you still hear me?

[26:20] Eytan: Yes.

[26:21] Richard C. Howard: I'm going to use another tool that's not on the screen and I'm going to look at the actual contract awards. So for anyone listening, what now there's a lot of different tools and systems that you can use. Like I said, USA spending, FPDs are free, you can use Govtrive.gov, Win, IQ, you can use bid searches, different bid, matching tools and things that you can use to and by the way, different tools are good at some tools, are great at some things and really poor at others. So kind of get to play with them to figure out which ones work for you depending on the type of research that you're trying to do. So I'm going to do now, I'm going to take this Naics code and I'm just going to look for the awarded contracts and I'm going to try to sort through the ones that were just awarded to small businesses. And there's some other Naics coach too, like for telephone answering services. And whatnot interesting so of the 3.4 billion that we're seeing hold on, actually let me go back here. I don't think I have the right numbers here. Most of this is going to go to large businesses though.

[27:32] Eytan: I'll take 1%. I'll be happy with that.

[27:35] Richard C. Howard: It's all you need, right? Yeah. So I'm showing about 164,000,000 of that 3.4 billion. Again, these numbers are going to change there.

[27:46] Eytan: But for the most I can't do that it's less than 1%.

[27:50] Richard C. Howard: Yeah, how about 164,000,000? And keep in mind too, that's half a point that's over years, right? So that's over the past three to five years, FY 23, fiscal year, 23, nothing's going to be reported. The government fiscal year starts October 1 and ends at the end of September. So I expect the FY 22 numbers to be still updating all through this fiscal year personally. So that's interesting because I did see that there is a just because telephone answering services was another.

[28:29] Eytan: Telephone answer, would you even say virtual assistant? It's all related to the call center, but telephone services, definitely answering services.

[28:41] Richard C. Howard: So what's interesting about this, so I'm looking at telephone answering services over the past three to five years and it's 414,000,000. The average number of offers received is very, very low. Like three offers is what I'm seeing.

[28:58] Eytan: And again that's a good sign, right?

[29:00] Richard C. Howard: That is a good sign. That is a good sign. I'm going to go back and I'm going to check the other NAICS code as well.

[29:04] Eytan: That basically says that's not too competitive, right?

[29:08] Richard C. Howard: Yeah, well, just to give you, just to put it in context, like I was looking. At Cybersecurity Services the other day, and it was between 50 and 75 solicitations or 50. And 75 proposals would come in for each solicitation. Listen to this. Right. So the last code that we were looking on, the average number of offers received, 204.

[29:37] Eytan: Wow.

[29:38] Richard C. Howard: Got it. Think about that. Right now we're on telephone answering services. The money is not as much, but, you know, there's way fewer. And by the way, I don't have extremely high confidence in any system's ability to tell me how many offers are coming in.

[29:58] Eytan: You think it's not accurate?

[30:00] Richard C. Howard: I think it depends on what's being reported. Right. And I think some agencies are good at reporting and some aren't. And by the way, there's also for anything in here that wasn't competed, then look at this. Anything that's not competed, there are no solicitors. The only proposal they're getting is the proposal from the company that they're actually buying from. And they might just be giving them a quote. Right. Because there's no so you're going to see everything in here, but there's a ton of this is amazing. Actually not available for competition. $261,000,000 for telephone answering services, which just tells me so this could be relationships.

[30:42] Eytan: Already built from the get.

[30:43] Richard C. Howard: Yeah. I mean, your relationships, you respond to RFIs and sources sought, you're finding those opportunities ahead of time and you're winning. Or maybe you're also probably I would imagine a lot of this is going to be rolled up into larger contracts as well. With a prime who needs telephone answering services. Right. I think what I've seen so far, I think this is going to be a great area.

[31:09] Eytan: Oh, cool.

[31:10] Richard C. Howard: Telephone answering services. I think this is a winner. Hopefully this was provided some benefit and value to you.

[31:16] Eytan: Yeah, absolutely. Thanks.

[31:18] Richard C. Howard: Good stuff. All right, sounds good. So for everyone listening, hopefully this provided value. Just going through the drill of looking at research and data. Hopefully we didn't bore you here, but I think me and Eytan, we found a winner based on how they're actually putting some of this work on contract, what types of companies they're putting it on contract with. So it's not billions of dollars, but they're putting contracts on small businesses and there is not a lot of competition. So there's a lot more research to be done here. But what that tells me is it's a good niche to do to further investigate. So, again, this is just the starting point and we'll take this up again next time.

[32:01] Eytan: Thank you. Rick, you.

If you enjoyed this episode, you can also check out Graphic Designers Selling to the US Army where I went over how much the fed spends on graphic design services for the US Government and how to sell to them!