The Chicken or the Egg of Past Performance
Stuck in the past performance loop? You can't get federal contracts without past performance, but you can't get past performance because you can't get federal contracts.
How do you break into this cycle?
The first part is understanding why past performance is so important in federal contracting:
Past performance demonstrates competency
Past performance shows contracting officials that your company is capable of performing the work it says it can perform. The best predictor of future success is past success. The government is looking for past performance that is relevant to the project that is up for bid. That means similar work at a similar scope. So for example, they not only want to know that you can provide facilities maintenance services; they also want to know that you can provide facilities maintenance services throughout the state, or region. Similar work at a similar scope. Past performance here assures that contracting officer that you will be able to complete their project.
Past performance demonstrates that you can handle the administrative burden of federal contracting
The federal government is a demanding customer. From pricing, to timelines, and of course paperwork, the government is going to ask a lot from you. Past performance shows them that your business can handle the administrative burden of a federal contract. This includes having adequate accounting systems, being able to keep up with the documentation requirements, understanding how to work with CORs (Contracting Officer Representatives), and other administrative processes. Past performance here assures the contracting officer that you understand the processes and they will not need to put forth the extra effort of teaching you.
So what can you do? Two levers you can focus on to establish past performance are Subcontracting and State & Local Contracting.
As we’ve established, jumping right into federal prime contracting without past performance is difficult. One way to ease into this is to compete for a piece of a prime federal contract. As requirements grow and the federal government moves more towards contracts of larger scope, there is an increasing opportunity for small businesses to perform specialized parts of larger contracts. In some cases it’s a specific technical aspect, in others, it’s covering a part of a larger geographic region that a contract covers.
Let’s look at the case of Suzanne:
Suzanne runs a small electrical contracting company and has no established past performance with the federal government. Suzanne knows what she’s doing and is good at what she does, but the market in her area is cluttered, and she’s not sure how to convince the federal government that she can make it as a prime.
What Suzanne did, was start marketing herself to the prime contractors that were competing for larger-scale electrical and general construction work. She identified projects that needed the skills she provided. She connected with the players in the field and demonstrated her knowledge of the market by referring to specific bids and job sites and that she knew were coming up. Slowly but surely Suzanne made her way onto these federal jobs - not as a prime contractor, but as a sub-contractor, still benefiting from this government work. These federal projects could now be included as part of their past performance. While not direct federal work, their work on federal projects demonstrates that they understand how these types of projects flow.
Leveraged in the right way, past performance through subcontracting work can be a great stepping stone to move up into a prime contractor role. For more information about how to become a subcontractor, check out this blog: http://blog.streetshares.com/how-to-become-a-subcontractor-to-a-prime-government-contractor
State and Local Contracting
While it’s ideal to have federal past performance to compete for federal contracts, there are substitutes that come close to that level of credibility. State and local-level contracting are two of those substitutes. In these markets, it’s often easier for a small businesses to gain recognition and credibility. Work in these areas offers a similar experience to working with the federal government in the level of scrutiny and documentation needed, which makes past performance here valuable.
After years of trying to break through into the federal government as a prime contractor, MJ, a local small business owner, found his success through county government set-asides. With less competition and more of a chance to get to know the county officials, he developed the relationships necessary to gain past performance. Through this process, MJ learned how to navigate the regulated world of government work. He fine-tuned his ability to submit winning proposals.. He learned how to plan his cash flow to manage the time between initial contract performance and initial payments. He updated his internal systems and processes. As his operations became more effective and efficient, his project size increased. MJ’s successful performance of his county contracts demonstrated the past performance necessary for him to win a small prime federal contract, getting the ball rolling on his federal past performance.
The challenge of establishing past performance for federal contracts can seem daunting at first. Knowing which levers to focus on will help raise your competitiveness. When leveraged properly, subcontracting opportunities and state and local contracting can be exactly what a small business needs to establish past performance and break into federal contracting as a prime contractor.