If my title got your attention and you are a small business concern doing business with federal agencies or even a federal agency doing business with small business concerns, thanks for stopping by. This entry is especially intended to provide a quick but thorough education about how federal agencies use purchase orders and the impact this award type has on small business.
First, thanks to the many current and retired civilian and defense contracting professionals who provided me great and valuable insight over the past few months on this subject. Now here's a little about purchase orders, functionally speaking.
Purchase orders are a unilateral instrument used by government agencies to procure a variety of goods and services. A unique characteristic of purchase orders is that they are offers and not contracts until the recipient/vendor accepts the offer by signing the document after it is issued or by executing a substantial amount of the work being requested in the order.
Buys made by federal agencies using instruments such as delivery and task orders and definitive contracts are mutually binding when issued and require the vendor to perform the work, and the Government to pay for the work performed/goods delivered. Additionally, responses to an RFQ (Request for Quote) which is how solicitations for many purchase orders are issued, are not considered offers and cannot be accepted by the Government to create a binding contract. Conversely, responses to a Request for Proposal (RFP) become a binding contract when accepted by the Government.
Here's a look at purchase orders by the numbers:
- Based on government wide obligations reported to FPDS-NG as of 28DEC13, FY13 dollars awarded to small business ($89B) account for nearly twenty percent of total FY13 spending ($454B).
- If all FY13 purchase order obligations ($14B) were awarded to small business, they would account for sixteen percent of total dollars awarded to small business in FY13.
- Actual FY13 purchase order obligations to small business in FY13 ($8B) represent nine percent of government wide dollars awarded to small business.
Here's food for thought. Most purchase order buys are competed using Simplified Acquisition Procedures (SAP) that have an inherent preference for small businesses. Agencies are required to observe the "rule of two" for these buys unless they leverage the exception that allows awards over the Simplified Acquisition Threshold of $150,000 (something that should be changed in my opinion). For this preference alone, small federal contractors should market the heck out of the organizations making these buys (which is very easy to determine) to minimize the possibility an agency can not identify at least two viable small businesses for a given requirement. Keep in mind the majority of purchase order dollars obligated year-over-year are: Competed Under Simplified Acquisition Procedures; Competed Full and Open, and; Competed Full and Open After Exclusion of Sources. Don't hope and wait for agencies to find you, these opportunities are fair game for anyone paying attention.
Now let's discuss up-front investment.
To engage federal agencies, boards and commissions on buys made via a BPA, GSA Schedule, GWAC or other Indefinite Delivery Contract (IDC), you must first identify, qualify, pursue and capture the contract vehicle that gives you access to the "hunt" for ensuing opportunities. In other words, you compete in order to compete. This is a completely viable course of action considering half of what agencies obligated in FY13 was executed in this way.
Yes, I did say half.
This must mean the other half was awarded in a way that does not require the same initial investment of finding and winning a "license to hunt" as is the case otherwise. It does, and purchase order buys account for $14B of that spend. For more information on how the Government spent another $217B of its contract dollars in FY13, check out No Contract Vehicles Required™ or listen to my Open Market Report™ weekdays on CBS Radio DC, All News 99.1 (WNEW).
Back to the subject at-hand.
Generally speaking, pursuing requirements issued via purchase order takes the same amount of effort to identify, qualify, pursue and capture, with one important difference. The result is not a license to hunt for business, but actual business! Before the naysayers chime in about how small these buys are and that they are probably for goods and services in a limited domain, the largest single buy made using a purchase order in FY13 was for millions of dollars, and more than one-thousand different NAICS Codes were referenced on the way to $14 billion.
By the way, purchase orders are also easier to execute than several other acquisition methods, for Government and Industry. The reduced 'administrative burden' is one of the factors that drove creation of the Simplified Acquisition Procedures. Then there was the part about improving opportunities for small and small disadvantaged business concerns.
While purchase order buys only account for 3.2 percent of reported government wide obligations in FY13, that $14B being awarded entirely to small business concerns would represent more than 15 percent of the current small business spend and most likely achievement of agency small business contracting goals, with room to spare. Hey Congress, can you hear me now?
Seeing small businesses more PO'd than they are now sounds like a win-win to me.
Peace.The Chief Visionary
"The person who says it cannot be done should not interrupt the person doing it."