Many government contractors approach the market with dreams of multi-million dollar contracts, and in the process miss out on valuable opportunities that exist below the government’s simplified acquisition threshold.
It is easy to fantasize about the one big contract that can change your life, but unless you have something truly unique and differentiated the chances of landing one in your first year are slim to none. For new entrants, getting in position for that first big deal requires successful performance on smaller deals awarded using simplified acquisition procedures.
It’s not just about revenue. Scoring these “smaller” dollar contracts (the SAT is currently $250,000, so “small” is a relative term here) gives them valuable past performance and a chance to “get in the room” with other govcon pros to form valuable relationships. So where do you go to find these opportunities, and what strategies should you deploy to take advantage of simplified acquisition procedures? Read on to learn everything you need to know about simplified acquisitions and how to win these crucial business opportunities.
What is the Simplified Acquisition Threshold?
The simplified acquisition threshold (SAT) is a dollar amount in federal acquisition represented by the anticipated award amount of a contract, under which contracting officers are directed to use simplified procedures to solicit and award the resulting contracts. In plain language, the SAT essentially divides complex, formal contracts from their less expensive, under-the-radar cousins.
As noted above, the SAT is currently $250,000, but it increases to $7.5 million for commercial items. By policy, many contractual needs with an anticipated dollar value that does not exceed the SAT are “reserved exclusively for small businesses and shall be set aside” for socioeconomically disadvantaged businesses, per the policy at FAR Section 13.0003.
If you are eligible for small business set asides, this is a big opportunity to grow your business. Not only will you be competing in a smaller competitive pool, contracts awarded under the SAT cost less to bid and are subject to fewer laws and regulations than higher dollar acquisitions. Simplified acquisition procedures, which we will discuss next, permit government buyers to use more efficient methods of procurement like credit cards, electronic payments, and even oral solicitations. The upshot for your business is a faster time to award, less costs associated with preparing your bid, and reduced costs of compliance with the resultant contract.
Now let’s break down simplified acquisition procedures and the flexibilities they afford so you can appreciate how small deals can supercharge your government opportunity pipeline.
What are Simplified Acquisition Procedures?
Simplified acquisition procedures (SAP) permit contracting officers to use simple, innovative and informal methods to streamline the traditional acquisition process. Unencumbered by formal evaluation plans, competitive ranges, and strict source selection procedures, contracting officers may:
- Solicit quotations outside of the official governmentwide point of entry (beta.SAM.gov), for example by calling three local companies and asking them for quotes or offers;
- Reduce the time to award by combining the synopsis of the opportunity with the solicitation of offers;
- Make a sole source determination to procure directly from a single source, without other competition;
- Create evaluation procedures without complex price or cost analysis, making it easier and more affordable for small businesses to submit compliant bid packages;
- Avoid the need for formal past performance checks through FAPIIS, thereby permitting your past experience in any sectors, or even as a subcontractor, to support your company’s qualification for award; and
- Streamline the award process using innovative procedures like comparative evaluations, downselections, and even oral solicitations.
It pays to understand how these flexibilities can be used. As your business development efforts mature and you establish relationships with government contracting professionals, they might ask you if your business can accept a purchase card. They might even ask you for suggestions on how to create the acquisition strategy. If you qualify as a small business or hold a socioeconomic certification, suggesting the use of SAP is a pro move that can create near-term opportunities for your business.
What is the Micro-Purchase Threshold (MPT)?
Micro-purchases are a specific simplified acquisition procedure, and are worth special mention even though they are awarded at amounts lower than the SAT. If you are able to offer a product or service that costs less than $10k, you can transact with the government with little administrative effort and they can pay you on the spot using their government purchase card (or p-card, for short).
Now you might think nobody can build a business just by winning a few deals at or below the MPT. But you would be wrong. In fact, our friends at Skylight, a HUBZone digital government consultancy, created a whole line of business around microservices, short engagements they could offer interested agencies for less than $10k. Not only did they add up over time, but they created opportunities for Skylight to give their staff valuable and direct experience working on digital services projects while they pursued longer term deals.
If you are new to government contracting, consider whether you can provide a microservice to interested agencies. If you have a willing customer on the agency side and your business can accept electronic payments, you could be delivering outcomes for them in a matter of days.
Learn more about how Skylight used the MPT to build a microconsulting services line of business.
What Types of Contracts Can Be Used with Simplified Acquisition Procedures?
When it comes to buying commercial items below the SAT, contracting professionals have an array of contract types to choose from. They are encouraged to be creative and flexible to keep administration costs low, and get goods and services onto contract faster.
As mentioned above, the government purchase card can be used to make micro-purchases, but it can also be used to place task or delivery orders against an existing simplified acquisition vehicle like a basic ordering agreement (BOA) or a blanket purchase agreement (BPA). BPAs are great if you can get them; they are used for recurrent needs for either supplies or services using simple payment methods. Agencies will set these up when they cannot specify the exact items, quantities, or delivery requirements in advance of the purchase, but know the need will extend beyond a single order. BPAs may be awarded to multiple contractors to promote competition or a single contractor at the discretion of the contracting officer.
Purchase orders are a simplified acquisition method used to provide products or services to the government. These are generally fixed price deals for supplies or services with a simple scope statement that specifies the quantity of supplies or services offered, a date of delivery or performance, and a simple inspection of what is delivered to confirm acceptance.
Definitive contracts are similar to purchase orders but are generally used for longer periods of performance or ongoing service delivery. A definitive contract is awarded to a single contractor and will include traditional contracting elements like a statement of work, deliverables, invoicing schedules, and standard terms and conditions.
As you research and discover opportunities below the SAT, you will see any of these methods used so it is good to be familiar with them. But as always, it is crucial that you carefully read a government solicitation before you put in a bid.
Three Ways To Leverage the Simplified Acquisition Threshold
Now that you have an idea of how simplified acquisitions are used and how useful they actually are, let’s look at how you can put the SAT and SAP to work for your business.
Keep Opportunities Below the SAT for Automatic Set-Aside
Like we said at the beginning of this blog, big deals are great but small dollars add up fast and can sustain your business while you prospect for larger opportunities. If you do have an opportunity to shape a future contract, consider limiting the scope to keep it under the SAT.
Federal agencies set aside 23% of contracting dollars for small businesses, and they are very motivated to meet these spending goals. That’s one reason why opportunities below the SAT are generally set-aside for small businesses. This is particularly important if you are a socioeconomically disadvantaged firm; you can be in position to get set-aside contracts on a sole source basis without competition from other companies.
You’ll need to ensure your value proposition is appropriately differentiated and a compelling reason exists for the sole source set aside, so review Federal Acquisition Regulation Subpart 6.3 to get familiar with how contracting officers must document these decisions. Having a firm understanding of the rules will help you and your government customer make the contracting officer’s job easier by suggesting a business case for sole source award that is consistent with the FAR.
Look for discrete, time-bound opportunities to support a customer
Once you begin to develop relationships with prospective agency customers, you will run into a common challenge: they may recognize you or your company can help them, say they want to do business with you, but cannot figure out “how to make it happen.” While they can tell you about upcoming opportunities that aren’t out for bid yet, creating a specific opportunity from scratch is a difficult matter.
That’s where SAP techniques come in. Presuming you follow the guidance above and keep the scope and dollar amount low, you may be able to propose a short term project or a small delivery of items for testing and development. If you can scope this to be less than the MPT, you’ll have a better chance of getting it done quickly. Other opportunities include helping them conduct things like market research or producing a report on an upcoming program or big requirement that can support their requirements development.
Just be mindful of conflicts of interest; if you get deep into helping an agency scope out future work or develop a requirements document, you may be ineligible to bid on the eventual work under organizational conflict of interest rules. But if that upcoming work wasn’t realistic for you anyways, it may be an appropriate business decision and a way for you to get your first government contract.
Search for Simplified Opportunities by Product Service Code
Many new entrants to government contracting are sole proprietors. Their brand is their business, and they may have specific expertise gained during a career in government service or working in an industrial sector. If you have a specific skill set the government needs, there’s a chance you can find an agency who is looking for your services. But only if you know the right places to look.
To find opportunities like this, visit GovShop’s government opportunity page and search by commodity codes that match these types of services. For instance, the product service code R499 for Other Professional Services is used by agencies to solicit specific professional services. A query for this PSC code on our opportunity database returned 42 individual opportunities. While not all of them will be under the SAT, finding a few of these will provide you with some low-effort opportunities to add to the top of your business pipeline.
Even though the opportunities we’ve described in this blog are simplified, they aren’t going to fall in your lap. You still need to register your company in SAM.gov, you’ll still want to market yourself to agencies with a clear and compelling capability statement, and you’ll still need to know the basics of reviewing solicitations.
But that’s all part of the process and journey to government contracting. If you need some help getting started, sign up for our free 10-week bootcamp. We’ll take you through all the steps you need to make your GovCon dreams a reality, and deliver valuable lessons straight to your inbox! You have nothing to lose and everything to gain, so get started today.