We sat down with our resident experts, Joe Humphries, Market Executive (pictured left) and Mike O’Grady, Senior Vice President (pictured right) to better understand the unique nuances and complexities of the government contracting industry. Both Joe and Mike have each been serving the unique financial needs of the U.S. Federal Government Services companies for over 30 years. They’ve been in this space long enough to know the ins and outs of almost everything.
What’s unique about the Government Contracting industry?
Mike: I tend to tell people that government contracting industry is a lot like banking. There’s a lot of competition and regulation. The industry even has its own set of buzzwords and acronyms. One day you might have two contractors competing against each other, and the next they might be teaming together because their skillsets complement each other when securing a specific contract or opportunity.
Joe: Put it this way, the U.S. government is the biggest purchaser in the world. They can’t just buy at will. There are a slew of rules such as the Federal Acquisition Regulations that govern the way our government purchases and pays for things. It’s a complicated process.
Mike: Years ago it was about buying ships, bullets, and tanks.
Joe: It still is to a degree. The threat factors have changed though. It used to be land, sea, and air. Now, it’s land, sea, air, and cyber.
Over the years, how has the economy affected the industry?
Mike: The number of federal employees has been diminishing over time. But, the government still has high areas of need so they outsource. Sure, they might do work with large companies like Lockheed or Northrop Grumman, but there are many middle market businesses that are needed to provide services also. Many of those are the companies we can help.
What keeps clients up at night?
Joe: Compliance and Cybersecurity. Also, crossing the chasm - how do I get from a sheltered market – like small business - to the “full and open” market?
What would you tell a business who was looking to get into this space?
Mike: You can’t just go out and say I want to contract with the government. You need to have a past performance history that will be evaluated as part of the process. It’s very challenging. So most new businesses need to start as a sub-contractor to gain that past performance, then move on to small business contract opportunities. The space is very competitive, and there are some really big players out there. We try to be that conduit of information for those who are looking to grow their business. How do go from small business to being able to play in a “full and open” world? It’s not easy.
Joe: The “full and open” world is where the highest enterprise value resides. One of the challenges is navigating from small to other than small. It is a journey. The pool of competitors is much larger when you get there.
It’s not impossible for a small business to get a contract. There are several programs out there like “small business set-asides” that can help small businesses compete and there are many different designations of these “set-asides.” There are lots of rules, regulations, and designations in general that we help break down. For example, you need a strategy that you can execute to get from the “set-aside” world to the “full and open” world.
We’re dedicated to the success of the GovCon industry - over $1B in commitments and 100+ years dedicated to the GovCon industry.
If you’re looking for a capable, knowledgeable financial partner that can provide consistent access to capital for growth, acquisitions or recapitalizations call us at 571.405.2661 to start the conversation. We have 15 people dedicated to banking successful companies in the government services industry.