8(a) Sole-Source Contracts – First Stop for 8(a) Firms in Search of Federal Sales
By Robin James,
Out of the $44+ billion spent with 8(a) Firms annually, almost half of that figure is spent with 8(a) firms through Federal Sole Source Contracts. For many 8(a) firms sole source contracts are their entire source of revenue for the entire nine year duration of their program life. Understanding Sole Source Contracts and their uses is an important element for drafting your firm’s 8(a) Strategy.
There are three broad categories of contracts 8(a) firms can engage.
8(a) Sole Source Contracts – Considered by many to be the smallest of the contract types in terms of size. This is a contract that is directly awarded to an 8(a) firm by a Federal Contracting Officer without a formalized bidding process. Dollar values for these contracts are greater than the $150K Simplified Acquisition Procedures (SAP) yet less than the maximum 8(a) Sole Source award amounts of either $7.0MM for manufacturing or 4.0MM for all other industries.
Sole Source Contracts are direct award, meaning that as long as the contracting officer has reason to believe the 8(a) firm's pricing is fair and reasonable, (generally a guideline for this is that the 8(a) firm's pricing is not more than 10% above market rates) then the contracting officer can directly award the contract to the 8(a) firm. The benefit to the federal government is that they can save administrative time and costs by not having to go through a formalized bidding process.
8(a) Set-aside Contracts – These contracts are “set a side” so that only 8(a) firms are permitted to bid on them. In most cases, to win these contracts, past performance is leveraged from prior 8(a) Sole Source Contracts. More successful 8(a) firms migrate from Sole Source Contracts to exclusive use of Set-aside contracts as their larger contract size becomes the firm’s primary focus.
GWAC/IDIQ Contracts – Contracts that have Indefinite Delivery Indefinite Quantity can either be government wide, or single or multiple agency contracts. 8(a) Stars III would be an example of a GWAC that is 8(a) only. However, on almost any GWAC or IDIQ contract that small businesses are participating, a predetermined number of 8(a) firms will be awarded a contract. A GSA Schedule would be an example of a broad GWAC where the 8(a) firm could be found by contracting officers so that products or services easily procured from the schedule. Another example of an IDIQ contract would be several agencies partnering up to have their janitorial needs met for an entire state or geographic region. In this example, some amount of those sales will go to the few 8(a) firms that successfully obtained a place on the contract. Therefore obtaining certain contracting vehicles can represent a million or more dollars per year in 8(a) sales to the participating firms.
How to get started with 8(a) Sole Source Contracts
The Search Process for Sole Source Contracts generally consists of four methods:
1. SBA Search Letter – This process begins when your local SBA Business Development Specialist sends out a group of “Search Letters” on behalf of your company advising various agencies of your firm’s capabilities and NAICS codes. The letter asks the agency to identify current or planned acquisitions that your firm could qualify to perform. This can also be followed up by a phone call and a meeting between your SBA Business Opportunity Specialist, the Target Agencies Procurement Officer and the 8(a) firm’s owner.
2. Search and 8(a) SBA Targeted Letter – The 8(a) firm conducts research and finds a forecasted procurement (often times a graduated 8(a) firm's past contract) that they think their 8(a) firm could perform. The next step is to contact the SBA’s District office who will work to prepare an introduction. Additionally, the 8(a) firm should send a letter to the SBA asking for consideration on the procurement, because in the event the SBA receives two letters from different 8(a) firms for the same procurement, the SBA will generally choose to support the firm on first-come-first serve basis, based upon the date of the letter.
3. Agency Unilateral Process – The third pathway is when the agency has a procurement that they wish to place with an 8(a) firm. The agency will then typically evaluate the capabilities of 8(a) firms at that local SBA office and select the firm they believe is the most capable. This is likely to occur when a contract held by a graduating 8(a) firm requires a new 8(a) firm to perform on the contract. Therefore, it is critical that your local SBA office understand the scope of work that your firm engages and has good rapport with your local SBA representatives.
4. GSA Schedule Market Research – The Procurement Officer conducts market research searching for 8(a) firms to work with. Often times, for more niche or specialized needs sole source contracts, it is easier to identify the 8(a) firm first via GSA Schedule Contracts. This is because a greater amount of information is available about the firm through the GSA Schedule process than simply a capabilities statement such as work provided, D&B Open Ratings, as well as the 8(a) firms pricing.
Note: GSA Schedules are not applicable for most construction businesses.
TIP: Proactive 8(a) companies extensively use Search Process #2 (above) in their efforts to market themselves to Federal Agencies. In most cases sole source search process #1 & #3 requires working with your local SBA office, and networking to make sure the SBA is well aware of your firm’s capabilities. #4 Requires the firm undergo the lengthy process of obtaining a GSA Schedule. All can be very good sources of 8(a) Sole Source Revenue.
If you are wondering how each of these business certifications could be an advantage to help expand your business through federal contracting, give us a call, as we have the expertise in evaluating your firm's potential. You can reach me at 859-572-4482.
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