Trying to Enter the World of Federal Contracts

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Melinda Emerson's car has logged a lot of miles. She has spent more than five years making the trip from her home in Philadelphia to Washington, D.C., in hopes that her multimedia company, Quintessence, would win a federal contract. Despite spending tens of thousands of dollars on filling out paperwork, attending conferences, and networking with other businesses that have federal contracts, Emerson's company has yet to win a single one.

Now she's not thinking of buying a new car but about coming up with a new game plan. "I have not given up on it, but I am being very strategic and targeted in terms of committing resources" toward working with the government, says Emerson. Last week, while the House Small Business Committee took up the issue of helping small businesses with federal contracts, Emerson and small-business owners like her were trying to figure out how to loosen the government's knotted purse strings.

It's tough to discern how well the government is doing in hiring businesses owned by women and minorities. In 2004, the latest data available, the federal agency awarded small businesses $69.2 billion in contracts. A handful of agencies accounted for most of that spending, according to the Small Business Administration, with 70 percent of the total coming from the Department of Defense alone. Female-owned small businesses grabbed 3 percent of the total share.

But there's confusion when it comes to some of the other numbers. One measure shows small disadvantaged businesses took 6.2 percent of the share, surpassing the overall goal of 5 percent. But the same report showed that businesses certified as 8(a), which also means they are disadvantaged, took 2.8 percent of the total. Even an SBA spokesperson couldn't explain the difference between the two definitions.

"The whole issue about [minority-owned small businesses] getting in the door is complicated," says Gwen Martin, director of research at the Center for Women's Business Research. Her group has been holding roundtables across the country for women of color to air their grievances and share advice about running their companies.

The forums touch on a number of topics, but when it comes to federal contracts many owners share the same frustrations as Emerson. As women of color, they "not only have to prove themselves on paper" to show they fit the criteria for a disadvantaged business, says Martin. "But once they show their face, they have to prove themselves all over again."

Emerson says she has been shut out by not having an "in" to the network of government workers. "Everyone knows people do business with people they know and like," she says. "But I thought the government awarded contracts that were supposed to be merit based." She believes she has put in the time–and put on the miles–to prove that's not true. The former broadcast journalist started her video production company in 1999 after dreaming up the idea as a Virginia Tech student years earlier. While working to survive her first three years, she knocked on every door she could find, handling event production for internal meetings at Verizon, Nextel, and Enterprise Rent-a-Car, as well as doing video work for large advertising and public-relations agencies. "We are the kind of company that could be hired by anybody," says Emerson.

After gaining traction, Emerson decided to pursue the healthcare market. She signed up clients like GlaxoSmithKline and branched into medical outreach for nonprofits such as the Robert Wood Johnson Foundation. Despite having quickly built up an impressive client list, one door remains shut–the federal one.

In 2002, after completing six months of paperwork, she finally qualified as a disadvantaged small business, entitling her company to special consideration for federal contracts. Each federal agency is required to send out a certain percentage of its contract awards to businesses designated as 8(a) by the Small Business Administration. Getting the 8(a) credential, which lasts nine years, is supposed to make it easier for agencies to do business with a minority- or woman-owned business.

Emerson paid for booths at conferences in places like Upper Marlboro, Md., that were designed to hook up agency buyers with small businesses. She met with other vendors to get advice on how to navigate the process. She partnered with Sonalysts, a large Navy contractor, under the SBA's mentor protégé program so she would have help in crafting bids. With her proximity to the Navy base in Philadelphia, along with her museum exhibition work, Emerson figured her company would be a shoo-in for Defense Department or Smithsonian contracts. Nothing doing.

Both the insular world of inside-the-beltway politics and government bureaucracy (she calls the certification process a "nightmare") are huge obstacles for small businesses that want to bid on contracts, Emerson says. Each bid is separate and requires a whole new marketing pitch. It's vastly different from Emerson's experience pitching private players. "That's no crystal stair either," says Emerson. "It took me three years to get a meeting at Glaxo, and they are in my backyard. But to be honest, I would take my chances with the corporate sector any day over fooling with government contracts."

There's so much money at stake with federal budgets that small businesses are desperate to get their share, says Martin. The biggest problem is untying those first few knots. Once businesses pry those loose, the government purse strings magically open, and the firms win contracts regularly. Even though agencies are required to hire minority-owned businesses, Martin says the regulations aren't strongly enforced. While small businesses may not always be qualified to do work as primary contractors, she says, government agencies should do more to help minority businesses win subcontracts. "I hope that the government would create a level playing field," says Martin.

Despite the battle scars, Emerson says she hasn't come this far to give up now. She plans to bid only on pitches she thinks her company has a shot at rather than spread resources thin. Even though she has yet to win a contract, she counsels fledgling businesses based on her experience. She tells other business owners to learn the system before filling out the paperwork. Not doing so means a business owner will waste two or three years of the nine-year eligibility, she says. "And it's a shame to waste it," Emerson says, "when you don't have a prayer."