Will that be VISA or MasterCard?
Wednesday, May 10, 2006
for acquisitions totaling less than $2500, GSA SmartPay and
Micropurchases can be a dynamic duo for Microbusiness and Small
Business companies pursuing federal business
By Guy Timberlake, The American Small Business Coalition
Access to Information and Relationships
will always be trump cards for success in Federal Contracting, but
often overlooked is a basic understanding of the acquisition methods
employed by government agencies and how your business can participate
in those procurement actions. In this article, we’ll help build a base
of knowledge regarding micropurchases and the GSA SmartPay program.
major concern to many newcomers and even some experienced companies
pursuing business opportunities with government agencies, is the risk
factor of a lengthy payment cycle. Although there are cases where
vendor payments are delayed, there is a substantial amount of business
to be done where remittance occurs in as little as 48 hours of the
Welcome to the GSA SmartPay Program
a March 2004 report by the General Accounting Office (now the
Government Accountability Office as of July 2004) the opening states, “The
introduction of government purchase cards fundamentally changed the way
agencies make small, routine purchases of goods and services. The vast
majority of purchase card transactions are micropurchases, purchases in
amounts not greater than $2,500. Purchase card use has increased
significantly over the past decade—from less than $1 billion in fiscal
year 1994 to more than $16 billion in fiscal year 2003.”
like this are everywhere in the industry, as well as other supporting
tidbits to whet your appetite, as it should. In 1997, while in the
early days of owning my government reseller business, most of my
customers either had government purchase cards or had access to someone
in their group that could pay for the orders they placed. In its first
five months, I processed more than $400k in orders with the Navy, Air
Force, Marine Corps, GSA and other agencies around the country. It was
easy, for them and for me. Many of the orders were micropurchases and
all but one was paid by government purchase card. That “paper” order
was valued at just under $100k and was paid within fifteen days of
submitting the invoice. During those first few months my average time
to receive payment from the government was NET 2.2 Days. Not
too shabby, right? Did also I mention that I already had established
relationships in place and a pretty good working knowledge of the
system? I’m not saying it can’t happen like that for you, but there is
some preparation that needs to happen first.
in 1989, the government purchase card program was designed to expedite
the acquisition of supplies and services, streamline payment procedures
and to reduce administrative costs associated with traditional
paper-based payment methods. The General Services Administration
consolidated the government purchase, fleet and travel charge card
programs into the SmartPay Program in 1998. Today, there are more than
395,000 cards issued to federal employees purchasing more than $24B in
goods and services through the program.
opportunities exist and are available to you if you’re willing to
engage in some basic market research. It’s important to understand whom
you need to market to, but it’s just as important to understand what
they buy and how your product or service offering fulfills a need or
solves a problem for them. A great resource for learning the basics is
a book written by Mark Amtower called Government Marketing Best Practices (www.governmentmarketingbestpractices.com).Here are some historical numbers; the Federal Procurement Data System (www.fpds.gov)
reports the Department of Health and Human Services (DHHS) using the
government purchase card to pay for over 29,000 procurement actions
totaling more than $7.8B during FY2004. Of those purchases, the
National Institutes of Health (NIH) alone did more than 12,000
transactions valued at more than $4B. On the other side of the program
is the benefit realized by the government. GSA reported over 26.5 million purchase transactions in FY2004 with an
estimated administrative savings of $53.77 per transaction over
traditional paper-based purchasing. The estimated annual administrative
savings with the card totaled over $1.4 billion.
Here are some current numbers; according to the GSA FY2006
Purchase Card Sales Transactions and Cardholder Data report, federal
agencies have already procured more than $5B in goods and services
since October 2005.
So, what does it take to become a business that accepts the GSA SmartPay Purchase Card?
Ask me at an upcoming Micro-Mondaysä event. If you’re not local, an Individual or Business Membership with us will provide access to this information on our web portal at http://mms.theasbc.org.
don’t currently have the data available to articulate how much
government spending is done at the micropurchase level annually, but it
is substantial. Not all micropurchases will be readily available to
you, however, many of them are purchased from the GSA Federal Supply
Schedule, agency-specific Blanket Purchase Agreements, current
Government-Wide Acquisition Contract vehicles and other sources based
on the policies of the individual agencies. This is part of the
research I referred to earlier. You’ll need to position yourself in a
way that allows you to participate in the different procurement methods
used by the government based on your goals and objectives and how those
methods play into achieving your goals.
means an acquisition of supplies or services in which the aggregate
amount does not exceed $2,500 ($7,500 for the Department of Homeland
purchasing method you’ll want to be aware of is the simplified
acquisition threshold, which is for purchases that do not exceed
$100,000, but that’s for another article.
Now that I’ve given you some of the background, here’s some icing for your cake. The
Federal Acquisition Regulation (FAR) has designated the government
purchase card as the preferred method of making micropurchases. In
doing this, the government has shifted authority for small purchases
from procurement offices to individual cardholders allowing federal
agencies to dramatically improve their ability to acquire items needed
for day-to-day operations quickly and easily and reduce associated
For many agencies, micropurchases represent more than half of their annual purchase card spending.Although
the FAR does not require agencies to set-aside micropurchases for small
businesses, they often represent low-risk opportunities for agencies to
diversify their vendor base. This doesn’t mean that the government is
handing out micropurchase orders to whomever comes along, but if you
consider the risk associated with a prospective or newer customer
awarding a micropurchase requirement to you versus a larger one, it’s
more likely that you’ll have a better shot of getting your “first
opportunity” in the form of a micropurchase. This won’t be the case for
companies pursuing program business, but then if you understand program
business, you likely have a reasonable understanding of the environment
in which you operate.
Finding the Opportunity
is the case in every other aspect of doing business with the
government, there are tricks of the trade and nuances of the industry
that you need to learn. Participating in relevant
industry groups and associations and educational seminars can
facilitate some of that learning while the rest is acquired experience.
Market intelligence is plentiful in this business; you just have to be
able to extrapolate what is relevant to you and what is not.
information about procedures, contacts and statistics is available from
resources such as the GSA website, the Federal Procurement Data System
and the other government agency websites. Procurement Technical
Assistance Centers (PTAC) and Small Business Development Centers (SBDC)
are additional information sources.
The ASBC offers an ongoing, free source of related information called Micro-Mondaysä, a
forum for companies new to doing business with the Federal Government
as well as those already involved. It’s designed to help them learn how
to capture business opportunities in the government Micropurchase,
Simplified Acquisition and SmartPay programs.
For more information, visit www.micro-mondays.com.
About The American Small Business Coalition
American Small Business Coalition is a private membership organization
that provides access to information and relationships essential to
doing business with the United States Government and Government
Contractors. In addition to advisory-based practical and technical
support, matchmaking activities and education opportunities, The ASBC
facilitates qualified collaborations with Government and Industry
intended to enhance the ability of The ASBC Members to capture and
utilize business intelligence and business relationships.
Chief Executive and Chief Visionary Officer of The American Small
Business Coalition has nearly twenty years experience in the government
contracting arena working for and leading small businesses. He is a
committed entrepreneur and is also committed to serving the federal
contracting community to promote good business between government and
industry. More information can be found at http://guytimberlake.theasbc.org.