Is your firm interested in entering the federal government market? In an uncertain economy, the federal government can be a reliable source of revenues, often with good margins. A terrible economy, ironically, might be about the best time to try, due to a confluence of events - an unending spate of bailout and stimulus initiatives, coupled with the new administration's strong demands for transparency and accountability.Just administering the programs will require the Treasury Department and other branches of the government to use thousands of additional auditors and other accounting professionals. The requirement for extra hands on deck will be compounded by what the chairman of the House Appropriations Committee called an "unprecedented level of accountability" that will be part of the bailout and stimulus programs going forward.

To break into the federal market, many firms win a spot on a roster approved by the General Services Administration. Another approach is to participate as a subcontractor in agency-specific requests for proposal.

GSA CONTRACTS

A centralized service provider to other government agencies, the GSA maintains a stable of accounting firms under its "Financial and Business Advisory Services" program. These firms range from small niche shops to some of the nation's largest. A few examples include Grant Thornton, Ernst & Young, PricewaterhouseCoopers, Deloitte, Meyners + Co., and SB & Co.

Each of these firms has negotiated a contract with the GSA with a set of approved hourly rates, which escalate over time, and a five-year initial period of performance, with options for 15 more. Any federal agency can order services from them, with no dollar limit on any individual project or group of projects.

While federal agencies are free to use a wide variety of acquisition methods, they are increasingly issuing task orders to GSA contractors, rather than developing their own RFPs, principally because the GSA approach offers:

* Speed. Agencies can select a firm, issue a task order, and have the firm begin work within a few weeks. This is a dramatic reduction in the lead-time required to start projects. (It is not uncommon for a federal agency to take a year or more to put a traditional contract in place.)

* Choice. Federal departments and agencies can choose from many different ADR firms. The GSA does not insert itself into this selection process.

* Simplicity. Federal agencies can skip many of the tedious steps often involved in federal procurements, because the GSA already has satisfied key legal requirements - such as certifying each firm's "price reasonableness."

The numbers reflect these advantages. Firms that have won GSA FABS contracts commanded more than $960 million per year in federal billings in the most recent year for which complete data is available (federal fiscal year 2007).

To obtain a spot on the GSA's roster, firms have to respond to an RFP. There is no time limit: Firms can submit their proposals at any time, and if the proposal is complete in all respects, the GSA typically will award a contract within about four months.

Responding to the RFP can be moderately difficult. While some sections are relatively easy - for example, providing corporate qualifications - others can be tricky. For example, while the GSA allows for commercial-style billing rates, responding to the pricing instructions should be done only with expert advice. Strategic errors can have negative repercussions for the subsequent contract. With the help of an experienced consultant, most firms can prepare a proposal within about four weeks.

After winning a contract award, a firm is free to market its services to all federal agencies and departments. Firms that qualify as "small" can have extra advantages in seeking task orders, because all federal agencies try to meet ambitious goals for awarding a certain amount of their contracting dollars to firms that are small, or small and disadvantaged.

Firms have to shoulder certain administrative requirements. For example, a firm must report changes to its commercial hourly rates if they were relevant to the prices it quoted to the GSA in its original proposal. In addition, each participating firm is required to periodically remit an "Industrial Funding Fee" to the GSA, equal to 0.75 percent of the firm's gross sales under the contract. The good news is that the GSA's contractors can include the markup on top of their approved rates. Some firms also are required to make good-faith attempts to make subcontracting opportunities available to small and disadvantaged vendors.

In sum, many firms find GSA contracts to be excellent sources of revenues and profits. Winning a GSA contract can be moderately difficult, but any firm interested in providing services for federal agencies should consider taking this step.

TRADITIONAL PROCUREMENT

Firms interested in breaking into the federal market for accounting services also should learn about other ways in which federal agencies procure services. Federal agencies can procure such services by issuing traditional RFPs.

In some cases, a federal agency will issue a sole-source contract - i.e., a contract issued without competition - to a unique service provider.

SUBCONTRACTING

Another way to enter the federal market is to participate as a subcontractor team member in contracts that include accounting in their scope of services. Many firms thrive in the federal market through subcontracting. Among other advantages, subcontracts can offer more attractive rates, and fewer administrative and compliance burdens.

David Alexander of Lincoln Strategies LLC (www.lincolnstrategies.com) helps professional services firms enter or expand in government markets. Reach him at dave.alexander@lincolnstrategies.com or (978) 369-1140.

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