Every year, billions of dollars in government contracts are secured through the General Services Administration, or GSA. The GSA administers these procurements through its GSA Schedule program, in which the GSA contracts with suppliers for goods and services at a set price for specific time periods. Many companies rely solely on the GSA Schedule as a source of sales revenue, but there are drawbacks to that approach:
- Compared to other contracts, GSA contracts often have lower profit margins due to how services are priced and an increased level of competition.
- You will still need to market your products or services. Even if you have secured GSA contracts in the past, agencies won’t necessarily know about your services or contact you for new contracts.
- GSA contracts are very specific on prices.
- The initial setup of GSA contracts is very expensive. Many companies hire consultants for assistance, which can cost thousands of dollars.
- There are only a certain number of vendors allowed per GSA Schedule product or service.
- Not every government agency can buy from the GSA Schedule.
For government vendors without GSA Schedule status, there are three other simple ways to compete in government contracting.
Contract direct as a prime contractor
GSA Contracts can be a big time saver for commodity purchases and some types of ongoing services, but when agencies need specialized services or a small one-time order of a unique product, they often put the project out to bid. You, as a vendor, can bid on that project and become a prime contractor. Simply put, the Prime Contractor is the contractor who has the direct relationship with the agency. As a prime, you can choose to subcontract out portions of the contract to other vendors or hire and complete the full project using your own resources. Each day, thousands of projects are submitted by tens of thousands of government agencies across the nation seeking prime contractors to provide them goods and services.
Apply for a multi-vendor term contract
Term contracts share some similar attributes with GSA contracts. Term contracts are often awarded to one or more vendors for ongoing service agreements. Where the GSA allows an agency to purchase a physical product or relatively common service without putting the purchase out for bid, active term contracts give agencies the ability to purchase more specific services with vendors without putting the project out for bid each time they need the services of the vendor. Usually term contracts specify an agreed-upon hourly rate for services or a pre-approved price for a scope of services for a fixed length of time. Term contracts are common for pure ongoing service-related agreements, but can also cover comprehensive operations and maintenance contracts that may require a mix of vendor hours, goods purchases (for parts, supplies or equipment) and engineering and development work associated with construction or complex technical projects. Many term contracts are awarded to multiple vendors. It is not uncommon for a state to issue a term contract to multiple vendors for IT services for example. The example IT services contract may set a pre-approved pay rate to a selection of vendors for a period of 2-5 years, giving the agency the freedom to hire those vendors within the contract period for the agreed upon rate without requiring each individual project be put out to bid. Term contracts often aren't awarded for a guaranteed amount of money, instead often having only a maximum budget associated with the contract. Earning awarded vendor status on a term contract can present the opportunity and upside of working for the government while avoiding some of the risks associated with a fixed-bid as the term contract often allows you to bill at your agreed upon hourly rate.
Subcontract through an existing prime contractor
A third way to participate in government contracting without the time investment or expense associated with GSA is to seek out subcontracting relationships with prime contractors. Working as a subcontractor has its pros and cons. One advantage of subcontracting is that vendors generally don't have to be a named participant in the actual contract for goods and services which can save significant time and resources for your company as seeking bids, submitting proposals and earning the contract win can be a lengthy process and put significant strain on small vendors. The downside of being a subcontractor is that your relationship is directly with the prime contractor, generally without assurances of payment by the agency. You can negotiate your contract with the prime to ensure payment for services even if the prime's contract with the agency terminates early, but the relative security and reliability of a contract direct with an agency doesn't exist in a prime/subcontractor relationship. The concept of contract privity is what defines the relationships between the agency, the prime and the subcontractors, learn more about it on our government contract privity resources page.
Many vendors starting out in government contracting look to GSA Schedule agreements as a means to fast-track their government contracting business but, for many, winning a GSA Schedule contract is just the first step in the process of growing a successful government line of business. For those in the services space, consider term contracts as a possible alternative to GSA for your business. For other vendors who aren't confident the GSA application and approval process is right for them given the stage and scope of their business, seek out prime relationships direct with agencies on an individual bid basis or look for teaming and subcontracting opportunities with existing prime contractors who already have awarded contracts in hand or are actively bidding on upcoming projects.