Public versus private
Another important factor for businesses to understand—whether gaining new contracts or managing the renewal of existing contracts—is the amount of resources available to them.
“Something that small businesses don’t do that large corporations do, is they leverage their congressional leaders,” said Lourdes Martin-Rosa, Advisor on Government Contracting for American Express OPEN. “When a bill or a requirement is passed, it needs to be approved by Congress. So Congress will always know ahead of time what opportunities are coming up within their congressional areas. Small businesses need to go and speak to their congressional leaders and tell them ‘I am here in your district, I am growing my business, these are my capabilities, I am seeking government contracts. What can you tell me?’”
In fact, the government spent $500 billion on private contracts in 2010—about 23 percent which were awarded to small companies. Online tools such as Data.gov and FBO.gov encourage access to data and business opportunities at the federal level. In addition, organizations such as American Express OPEN help businesses identify whether government contracting is the right model for their business. At its “Grow Your Business through Government Contracting" event in Dallas last month, the company recognized three small business owners—Lebolo Construction Management, The Hester Group and Managed Care Advisors Inc.—for their achievements in government contracting with the second annual Victory in Procurement (VIP) Awards.
But the impact that a company’s business development has on the economy perhaps plays a larger role in the amount of contracts a company gains.
“Federal government and other government agencies realizee that small businesses are really the engines driving increasing economic development within their area,” said Martin-Rosa. “There has been a greater increase in contract awards to small businesses and they will have to employ more people locally versus the larger corporations that may employ people outside of the U.S. In looking at the 2013 procurement forecast of the federal government, almost everything that is under $10 million dollars is being awarded to small businesses—and that’s fantastic. So there are a lot of opportunities going on out there for small businesses—and they can’t be scared. They’ve got to jump in, they have to pick up the phone and introduce themselves. If you’re not out there marketing your business and networking and talking about how good your company is—no one is going to listen.”
While issues affecting the types of contracts differ—public contracts have a more targeted focus on transparency issues while the majority of private contracts rely on relationship building—the bottom line for a business comes down to the protection of its company.
“At the end of the day, it’s about mitigating risk,” said North Rizza. “With the old contracting methods, it was just mitigating your own risk. Today, if your supplier is part of the supply chain and he’s going to help you deliver those goods, you need to mitigate risk throughout the supply chain. So it’s at what level and where do you want that risk. Do you want all the risk on the suppliers’ shoulders? Or is the risk on both of your shoulders?”
While automation may seem like the best solution in effective contract management, businesses need to deploy an all-encompassing way that will target effective management of their partnerships moving forward.
This can include a combination of manual processes—such as digitized electronic documentation; software utilization that provides alert mechanisms when a contract needs to be renewed or reevaluated; and risk management strategies—to identify potential liabilities throughout your supply chain, initiate accurate clauses and sub-clauses related to third-party agreements and ensure products or services are provided as necessary as a result of the contracted agreement.