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Why Can't Startups Get US Government Contracts? (vice.com)
77 points by callum85 on Sept 25, 2015 | hide | past | web | favorite | 69 comments

Apologies for brevity (posting from a plane):

Small businesses can absolutely get government contracts, but becoming very adept at doing this is a skill, comparable in execution difficulty to, I don't know, SEO or cold calling. There exist many businesses in your town which, month in and month out, respond to RFPs for government services in the five figure or six figure range.

If there is any interest, I'll share Appointment Reminder's (unsuccessful) bid for a government contract in Hawaii. That's not ordinarily a huge portion of our business, but I became aware of the opportunity and it felt like a lay-up. It wasn't, as I failed to discover a key piece of information (namely, that an enterprise competitor had won the contract the year prior on a bid that was half of the minimum that I'd contemplate), but the process was not extraordinarily oppressive by the standards of An Adult Who Occasionally Plays Like This Is A Real Business.

Long story short: the white-hot competition to deliver 100k phone calls a year produced exactly two responsive bids, for $30k and $15k. The competitor, who won, won with a one-pager that said "Details substantially same as last year; if you don't have our old brochure on file let me know and I'll re-fax. Signed, an employee whose only job is to file 250 bids for $15k a year and probably gets a gift certificate if more than 50 turn into sales."

My model for that bid, by the way, was "$5k of AR services, $10k budget for extra Twilio calls, $10k for software customization, $5k for anticipated hassle." That's an internal model: Hawaii only cared about the final number. (I can buy my competitor having economics which made their bid profitable at $15k, particularly if they amortize engineering costs over multiple years of anticipated renewals and/or they do enough similar business to amortize customizations over multiple accounts.)

The cost of the process for us:

Two hours of reading accessible online documentation of vendor qualification requirements for Hawaii, written at a 5th grade reading level.

One hour to understand the bid requirements.

Four hours writing a proposal which, like all proposals responsive to government RFPs, is basically "The system will be capable of Copy Paste Language From RFP Here. One sentence of elaboration."

Two hours of pushing faxes around to supplement the data collected by Hawaii's (fairly painless!) online vendor qualification process.

One hour responding to a general excise tax audit occasioned by a filing of Hawaii state business registration mandated by the process. (Result: we do not owe it, as anticipated.)

$60 in out-of-pocket costs for various regulatory fees.

Plenty of companies do this stuff week in and week out, for everything from "dig up a military statue and transport and replant it to a new location without causing structural damage; $40k" to "400 orange jumpsuits; must not contain any structural element capable of causing suffocation; remove all elastic; shipping included; $8k." It's like any other sales process: you win some, you lose some, you build processes such that your win rate costs you a percentage low enough to allow you to still make money on the business.

You lost me at faxes.

In seriousness, though, I don't think it's fair to downplay the complexity of government procurement. Having worked as a subcontractor of a subcontractor of a contractor for a U.S.G.S. program, I've had some exposure to that world. It's not pretty, and much of the complexity is needless.

Some of it is genuinely important, like accessibility and privacy requirements. The vast majority, though, seems mostly to be the product of two centuries worth of increasing bureaucracy.

This is not a problem that can't be solved, though. I don't think the gentleman at the end of the article is correct in his assertion that this way of doing things "is timeless." We just have to figure out how to pare down bureaucracy a little bit at a time.

This is an area that I'm doing a bit of work in right now, and there does seem to be a certain level of difference between US federal govt, state govts, and local municipalities. It's not that local govts are necessarily more lax, and the ones I'm talking to still have regulations to follow, but they're sometimes seem to be a bit easier to deal with.

Startups can and do get government contracts, but the government isn't going to come court you. You (the startup) have to figure it out yourself.

Selling to the government is very similar to selling to any other industry/company: you (the seller or maker) have to understand the customer's acquisition process. The big difference is that the federal government is the largest customer--millions of people and trillions of dollars. Therefore, they have a lot of rules and they all attempt to ensure "fairness" when the government tries to acquire something.

How do you do begin to understand that behemoth? Here are some tips:

-You invest some (a lot) of time understanding the Federal Acquisition Regulations (FAR) https://www.acquisition.gov. There are training classes available online and in person.

-Speak with acquisition specialists or contracting officers to understand the regulations specific to your product/industry.

-Learn about the specific rules/advantages that may apply to your company. There are many many preferences for small business, veteran-owned companies, disabled-owned companies, women-owned companies, etc.

-Understand what "fair" means to the federal government in the context of acquisition. It doesn't mean "the best solution". It doesn't always mean "the cheapest solution".

-Learn how to navigate the government's Request for Proposal (RFP) and Request for Information (RFI) processes so that you can be a part of delivering answers/solutions to the problems that the government has determined they have. The big government contractors have this stuff figured out. They know how to read an RFP and respond, even if they don't have the solution themselves.

-Understand the concept of "prime contractor" and "sub contractors". Prime contractors often win large government contracts but decide to/have to "sub" some of the work out. There are often regulations on how and what types of companies they must sub work out to. For example, AT&T may win a large networking contract but sub the work out to 10-15 other smaller companies to execute.

" The federal government's Small Business Administration (SBA) attempts to help companies with fewer than 1,500 employees win government contracts. The SBA's goal was to award 23 percent of all federal prime contracts, and 38 percent of all federal subcontracts, to these kinds of businesses. But Holman says they have "failed miserably in getting anywhere near that goal.""

As a former employee of an SBA favored, minority woman owned business, let me make something very clear: The entire SBA small business process is itself gamed and owned by former employees (and their still employed buddies) of the big government contractors.

Case in point: My particular "start-up" was "owned" by my COO's wife. She was CEO in name only, but had 51% ownership because she was of Fillipino descent, and therefore qualified as a minority-woman. My COO was a white male who was truly the CEO. His wife was a stay-at-home mom, but on the company's pay roll. Since the other SBA stipulation was that there was a maximum profit limit for the company, the COO and his other buddy both had their wives listed as employees to pay them each the maximium allowed salary of $300,000 a year.

Think that was ugly? Then there was the other peace:

My company would bid on contracts, and when we won them, would simply sub out large portions of the work to the same giant defense contractors. This is not the exception, but the norm.

It is a rigged system with numerous bureaucratic rules which are exploited by the people who know the rules best. Whether or not your company actually knows how to do work is separate from the true qualifier for winning work, which is knowing the system and gaming it.

Fuck all of that. I'm so happy to be in the private sector now.

The phrase "fills me with the urge to defecate" come to mind.

We run a data/dev shop inside a non-profit 400 person company that is mostly gov contracting. _We_ will come courting. Most of our contracts require us to satisfy some percentage from five to 20% small business/woman/minority-owned. This could be services, consulting, pencils, you name it.

We. Cannot. Find. You.

The small businesses we know and love are not suitably registered with the fed/state certifications. We routinely have to document what we did to try and find adequate set asides. We'd love to be doing more business with small businesses, but yes, the paperwork is a hassle. But if you sub contract, you can negate 90% of the problem, let the prime contractor deal with it.

I have a good friend who has run his own 2-5 person shop for years and lately he says that they're often excluded by decree because the contracts stipulate some sort of minimum size of business that is acceptable.

Do you have any suggestions I might pass on?

Follow the RFPs he would like to work on, see who wins them, call them, pitch product/service. Bring along certification of small business and make the small business vehicle the pitch, not the product/service.

Let's say I need data analysis. Thousands of companies can service this need. Very few have the specific certification for the fed agency/state/municipal requirements du jour. I have no solid way of searching all holders of all these certifications by service line.

So, I search online, I call peers, I dredge for vendors. Vendors who approach me and can quickly communicate their contract value with small business/minority-owned/women-owned whatever, and can demonstrate their knowledge of the particular market the RFP is for means they know and are ready to be added to a larger RFP and can document their claims.

For me, this saves me time and money, and brings value.

The concept of "fairness" that I talked about in my previous post applies here. If two companies submit proposals in response to an RFP seeking to acquire 1,000 Widgets and Company A responds with a price of $10,000 while Company B responds with a price of $20,000, the government is required to chose Company A because they are cheaper. However, if Company B is a small business/minority-owned business/service-disabled-veteran-owned-business/etc, the contracting officer can choose Company B because it fulfills other requirements to support those types of businesses.

I could see some small cases where the government would restrict the size of the company responding to an RFP, but there are also ways around that. The small business can contact the contracting office and protest saying they were unfairly considered for that acquisition and usually will win.

The key to the Federal Acquisition Regulations (FAR) is that they try in earnest to support and encourage fairness when awarding contracts. Furthermore, the government goes out of its way to give the "underdog" a better-than-equal chance at winning the contract.

As another poster said, the small business can't lose out on other reasons (i.e. certifications, financials, etc). It could be that they're losing contracts for very different reasons.

Here are some links for reference:

SBA size standards: https://www.sba.gov/content/small-business-size-standards

GSA Small businesses: http://www.gsa.gov/portal/content/202261

Small business set asides: https://www.acquisition.gov/?q=browse/far/19/5&searchTerms=s...

Protests: https://www.acquisition.gov/sites/default/files/current/far/...

> If two companies submit proposals in response to an RFP seeking to acquire 1,000 Widgets and Company A responds with a price of $10,000 while Company B responds with a price of $20,000, the government is required to chose Company A because they are cheaper.

They aren't required, but not doing so will necessitate a good justification. The Small Disadvantaged Business (SDB) designation is basically an automatic justification, but not the only one. Contractor past performance, the reasonableness of the bid, and other considerations can drive the government to actually choose a higher bidder. It also matters whether Widget is off-the-shelf or bespoke; the contracting officer tends to get more discretion in the latter case.

This is a good point on a number of fronts. A key take away with this is that startups need to understand how to properly register their businesses to get maximum traction. SEO isn't everything. Things like Dunn & Bradstreet are often requirements to prove legitimacy, but overlooked simply because founders don't know what they don't know.

Very interesting. I'm going to be in "next gig mode" next year and am a Vet. Was thinking about what kind of company to start. Would you be available for a short chat? My email in my profile.

There's also the fact that your business needs to be built to handle long term contemplative projects. Stereotypical Silicon Valley startups are built for fast, reckless growth which cannot and will not happen with a government contract.

Stereotypical Silicon Valley startups are built for fast, reckless growth which cannot and will not happen with a government contract.

FWIW, there are plenty of us here who aren't in Silicon Valley and who aren't interested in building a "stereotypical silicon valley startup that is built for fast, reckless growth".

I don't disagree with your point, just wanted to point out that the audience here is broader than just SV people.

What you describe takes CONSIDERABLE time and money on the front end that start-ups don't have. Ok, but lets assume they do and they land a contract.

The FAR isn't just some document that you read and understand - there is an entire additional process for diligence and documentation that goes along with it.

Now you need 60 days of deliverables until you get paid from the government.

CACI and the rest of the major Prime contractors have hundreds of contract officers that work and maintain these contracts - often outnumbering the actual developers of whatever the products are.

What needs to change is the FAR and the budgeting process. Until then we will continue to ignore the government.

I think another key point is that often the government tags a much higher cost on "risk of failure" when evaluating proposals.

Startups are fast, but they aren't always reliable. At least for values of reliable that == being able to throw money at {Large_Technology_Contractor} to have them parachute in an additional team of engineers to solve unexpected problem X. Or being around 10 years from now for support.

But agreed, there are all levels of involvement. Consider the prime contractor's cut off the top the price of getting bid into the game and contact with the right people, then do your best to work your way up!

My understanding is that it's entirely possibly for just the contract pursuit process to overrun a project before one jot of work is expended on actual fulfillment.

That's less likely than in transactions with private companies - although for IT projects...

I once had a 60 day contract take a year and a half to get signed after I won it. We had to be ready each and every day of that year and a half to start the work...

Some friends of mine will probably never actually execute on a contract that's been in the works since 2009. It's not a trifling system, either. And it's done. All that's left is the deployment and whatever paperwork needs to be done after.

one of the guys just soldiered on because he wanted to understand the technology.A few dozen weeks, but still.

They got paid what they could show in time and materials, but that's not the full award.

Like others have mentioned, in my experience small startups can and do win Government contracts.

Most founders have intimate knowledge of the contract process and a large network from previously working at a large DoD contractor. Once they have this information and rolodex, they normally have an easy time running a small defense contracting firm as a sub on large contracts and winning their own through contract vehicles like SBIR.

This is also the story of how all those mega-mansions in Great Falls and McClean VA came to exist.

> Most founders have intimate knowledge of the contract process and a large network from previously working at a large DoD contractor.

That's precisely part of the problem. Without a clearance, prior past performance or any other form of insider access, it's incredibly difficult and needlessly complex to navigate your small business through the maze of the procurement process.

I've never seriously pursued it, but at SLCC, there is a guy whose specific job is to help little companies break into government contracting. You can meet with him and he'll tell you where to register your company and how to get the ball rolling on becoming eligible for contracts. He'll help you bid on specific contracts afaik.

You don't necessarily have to navigate the "incredibly difficult and needlessly complex" infrastructure without help.

Yup, there's an entire cottage industry that has developed just to help companies through the procurement process. I get spammed by them every day.

The single largest weight in SBIR award evaluation is previous success in commercializing SBIR funded technology. It's a blatantly ridiculous catch-22.

In my own experience working in defense, there are tons of small businesses working on contracts, the government is forced to spend so much money on small business that they often simply throw away money. I worked on R&D for a military system which I 100% knew the gov't didn't care about and threw in the garbage.

All the big projects force the big guys to subcontract to smaller companies

The problem is actually completely different:

There is no way for a "little guy" to become a midsized company b/c the government is completely incompetent and relies on the huge defense contractors for guidance. The gov't has VERY little internal expertise - so if you have a brilliant new idea that is perfect for a midsized company to execute (which will often have to be on an existing platform built by one of the big companies) they have to go to the big companies to see if it's feasible. The big companies ofcourse say it's impossible and then (if it actually was a good idea) they steal the idea and implement it themselves.

So unless you can go from doing SBIRs (ie. under 200 employees) to build a whole tank on your own - you're fucked

"the government is completely incompetent and relies on the huge defense contractors for guidance"

This is the catch 22 of any business. If you don't know something, either you hire people with that knowledge or you contract it out. If you can't properly supervise the work/project/acquisition because you don't have enough depth of knowledge, then it's very hard to get a good solution. In the end, the government is at the mercy of private industry because the government can't be the best at everything.

I don't really see the catch 22. The gov't could have the best if they payed appropriately (which they don't, and they end up with a lot of lazy people that are there for the retirement benefits)

The governement ultimately does have experts, but there are too few and they're spread too thin. They end up not having enough knowledge to make unilateral decisions

They also are often in semi-indepedent roles competing again the small businesses. Think of the JPL or all the "Labs" (Lincoln, Lawrence etc.) or the teams at MIT. They have their own agendas which doesn't hold technology acquisition as it's focus ( it's more about supporting the funding of their lil corner)

Its true, but as long as you aren't chasing the next billion and you have a solid product, SBIRs aren't a bad deal and you can win sub contracts from the larger companies and agencies.

Of sure. And small businesses keep chugging away and can make their millions.

But I think the implicit goal was to have a certain mobility in the market where new more nimble player can float to the top and crusty old companies can sink. And the system doesn't accomplish that. If it did, maybe it would justify all the incredible waste involved

The other problem with SBIRs is that products and sales are usually not deliverables for the money that the government gives via SBIR grants. So it is hard to scale up without other investment.

Yep, and because all the projects are done with zero enthusiasm and only because they have a small business budget to blow, they often have no inclination to consider a Phase II or III

These good government groups complain about this stuff, but they are the reason we have this ridiculous situation. Google "New York State Appendix A" for a good example of standard contract terms that you need to comply with to do business with that state government. Examples include:

- You must certify that you don't use certain tropical hardwoods.

- You must report on minority and female employees in some circumstances. You must meet goals for hiring subcontractors owned by the same.

- You need to certify that you've divested assets in Iran

- You must certify that you don't discriminate against Catholics in Northern Ireland.

Understanding how to navigate this stuff and not get in trouble requires "fixers" (ie. lobbyists, congressmen, etc) and domain expertise to stay compliant with everything. Competitors have to meet these too, and will submit grievances to screw up your contract awards. For a startup, that's death, as you'll hire people and buy stuff, and not get paid.

Is it really "ridiculous" to not use endangered tropical woods, or to report minority or female employee statistics?

I understand it's a headache, but these seem pretty logical.

Here is the link: http://ogs.ny.gov/About/appendixa.asp

Yes, certifying against every possible negative that some arbitrary entity had the wherewithal to lobby for is silly.

You make laws and prosecute the offenders, you don't make everyone you do business with pay money to prove that they don't engage in every possible negative activity.

It's not ridiculous, but it can be costly to document and certify in a non-standard method that upsets your routine workflow. In a larger entity, you can soak the hit and assign it to someone to deal with who maybe has some spare time or a pool of time spread across a few staff, in a smaller start-up, you may not have this flexibility. Legal adds up pretty quickly too, if they're dealing with compliance issues.

Edit: and that's just one part of a larger process for one state. I just had to have an independent contractor working in the UK apply to be registered as a valid sub contractor in NYS, and certify that he (a sole proprietor) carries adequate worker's comp... Multiply by 50 for states, throw in municipalities (I'm looking at you SF/NYC) and the feds and then add in different agencies, everyone has their own idiosyncracies. Unless you target one state, one agency, you're in for a world of pain on compliance.

The ridiculous situation isn't using endangered wood, it's doing business with the government entity as a startup. And if you want to do business in Delaware, or Chicago, or the DoD, or Vermont, you need to figure out 50 other things.

Here's the thing -- all of these things are at some level logical. Companies shouldn't discriminate against people and cut down rain forests. But the proposition asked by this article and thread is "Why can't startups get government contracts?"

End of the day, to do business with big government entities, you need to spend many dollars on attorneys and lobbyists before you make a cent. And after closing the sale, you need to maintain staff to be SMEs on all of the various compliance regimes that you need to comply with. You need to be big to swim in those waters.

> Is it really "ridiculous" to not use endangered tropical woods

Let's say that I buy an antique desk. I might have an endangered tropical hardwood, but it was cut LONG before the law even existed!

Or what if I buy reclaimed teak from an old steamship deck and turn that into a lovely couch. It was harvested 150 years ago, perhaps even before the US civil war. But I wouldn't be able to certify, would I? How is that reasonable?

The point isn't that it's crazy to expect people to behave like good citizens, it's that there are a ton of corner cases that the requirements don't address because they were written as "feel good" not as "this is actually good"

Yes, it is ridiculous. I can not imagine how the choice to use tropical woods, or the number of minority employees would impact the final result of a business contract. The government should be concerned with the end result, not the minutia.

This sort of detail-peddling is why only massive corporations can attain government contracts. Regulatory capture is the inevitable end result.

The government is concerned with the shape of the society it represents as well as the end result. Accepting some inefficiency for social good is a feature, not a bug. Even when it makes you mad.

And, as described numerous times elsewhere in this thread, it's not that hard for small companies to get governmental work. But the process is different, for reasons that are not themselves unreasonable, and most don't really want to play with stuff like FAR. (Which is part of why many large governmental contracts require subcontracting to small companies--itself but the most efficient process, but a good one for growing those small companies.)

The government is concerned with the shape of the society it represents as well as the end result.

No it isn't, it's concerned with perpetuating itself and its bureaucracy and maintaining whatever hold on power it and its people have established... and with grabbing more power when and where possible. Any social good the government does is just a happy accident / side effect.

The federal government is not a for-profit corporation intent on profit. Consider it more as a social service mission driven non-profit. Federal contracting is mission-driven by specific regulation, whether it be defense or health or transportation or whatever. The US govt. is not about end results, it's about process which hopefully leads to end results. The US, as a people, through the voice of the elected federal government, has determined that taxpayer dollars should not fund tropical hardwoods but should fund the growth of minority-owned businesses. Agree or disagree on the goals, that is the mission of those tax dollars.

As a contractor seeking to spend those tax dollars, you are effectively signing up to help execute on the US population's stated goals as a people, not achieve the best business result for a government agency. Until you understand this, government contracting is not for you.

As for disruptive start-ups, in my 15 years working on state and federal contracts, every single agency that has requested "innovation", "disruptive change", "modern technologies" in fact means "please do this 95% of the way we did it last time, but add some shiny magic so we can feel good about progress".

As with any customer, your goal should be to give the customer what they want, while educating them about what they need. At the end of the day, you need to make your customer happy, and for a federal agency that often means don't fail, don't get their name in the paper. Which generally comes from doing it in a predictable fashion with incremental change.

The federal government is not a for-profit corporation intent on profit.

Not on paper, no. In practice, it's a massive mechanism to transfer wealth to the rich, connected, insiders and the sycophants who hover around them and suck at their teat.

As with any customer, your goal should be to give the customer what they want, while educating them about what they need. At the end of the day, you need to make your customer happy, and for a federal agency that often means don't fail, don't get their name in the paper. Which generally comes from doing it in a predictable fashion with incremental change.

So very true. "Not getting their name in the paper" is probably a good idea for most customers.

There are startups that in fact ONLY have government contracts. There are mechanisms that allow small startups to be awarded contracts without the need to compete with larger companies. The advantage in this approach is that founders don't need to go find venture funding, allowing them to retain more ownership of their company. This gives them the ability to have more to offer to new and talented employees. The disadvantage... well the government work slowly (which is counter to the silicon valley culture of rapid development, growth, and sell).

I think they can, but a lot of it comes down to your willingness to play "the game". An example of what "the game" can look like is illustrated in this email we received from In-Q-Tel:

    Hi Phillip,

    I am with the investment team at In-Q-Tel
    (www.iqt.org), which is the strategic 
    investing arm of the CIA and other US 
    intelligence agencies. We invest in 
    innovative companies that are building 
    cutting edge commercial technologies that 
    may enable the agencies we work with to 
    rapidly develop and deploy new capabilities. 
    In addition to investing, we also in almost 
    all cases purchase some amount of product 
    and services from these companies. 
    Our customer agencies then frequently 
    make follow on purchases directly 
    with the companies.

    I recently came across some news 
    coverage of your company. I am contacting 
    you because your social collaboration 
    technology might be of interest to the 
    agencies we work with. Would you be 
    interested in having an exploratory conversation?

    Please let me know if you have some 
    time over the next couple of weeks to talk further.

So in this particular case, I think the implications are pretty clear - "take money from us, and become a puppet of the military-industrial-defense-espionage complex (MIDEC), and we'll help make sure the MIDEC buys lots of your product".

Possibly a good deal for people who are into that sort of thing, but we chose not to pursue it, as I don't have any interest in supporting the CIA/NSA/DIA/DHS/FBI/ETC.

After I got out of the Air Force, I worked briefly for a guy making running lights for F-16s. They had maybe 5 regular workers and would take on temps like me to help with the workload. Doesn't get any smaller than that.

Should we really be surprised that the market for rocket launches into space is somewhat more difficult to get into?

Because the incentives are set up such that it is more rational for governments to have a predilection for predictability over risk - even if the predictability means it will take much longer and cost much more.

That, I think, is the key observation that the article essentially ignores in favor of trivial sidebar issues (like acronyms for procurement systems that haven't been used in three years). Governments are structured as large, top-down bureaucratic entities; their projects, unsurprisingly, tend to be structured as large, top-down bureaucratic endeavors. Some of this is due to structural concerns (fund-based accounting imposes limitations on how you procure and encumber expenditures) and some due to substantive concerns (agencies do not have the space to "pivot" their operations; when you're responsible for public safety and welfare, incremental iteration can be a pretty risky play); in either case, it certainly, as you point out, biases governmental organizations to caution, trading money and time for predictability.

Unfortunately, as we know, in project management unameliorated risk is a compounding factor, and iteration and hypothesis testing are some of the few risk sinks we know about in practice. Squaring that particular circle is the holy grail for practitioners inside the government and out.

"According to a report released by Public Citizen last May, the contracts the government counted toward its small business targets in 2013 "included some held by the largest companies with which the government does business."

The reason the above happens is because people start small businesses and then when they win lucrative contracts the large companies buy them. The article is a good overview of a dysfunctional system though.

Yep. It's all about the contract vehicle. An existing contract with the government is worth it's weight in gold because it's easier to extend a contract than to get one.

If a company has an existing contract with the USG then they could get bought just for the contract.

I think this is really only true for big-ticket military contracts, which are designed to siphon money from the tax payers into the wallets of specific crony contracting firms in the first place.

If you're a small startup, there are dozens of ways to get into government contracting. Start looking at your city level. My home town even has an open-access procurement website where I can sign up, register my credentials, fill out my tax paperwork in advance, and configure email alerts for different keywords on procurement contracts that they post. If I had 5 employees--instead of my company being just a loose conglomeration of three consultants working on three completely different projects but sharing our billing--then I'd be able to even bid on some of these GIS software contracts.

I know my state has a similar site, I just haven't gone through it yet. I'm pretty sure federal has such a system that a number of the different bureaus use.

> "the Federal Acquisition Regulation, which is 1,895 pages long."

> "We're passing laws within an election cycle, and when administrations change, our tendency is to layer in more laws instead of reforming the ones we already have"

The problem is that our laws are simply too complex. If I was President, I would refuse to sign a law that didn't (1) expire if not explicitly renewed in 20 years, (2) fit on 10 pages (with standard font size, margins and line spacing), and (3) result in a net reduction in the size of the legal code (by repealing old laws of greater length than any new text introduced).

Not to side on the side of onerous regulations, but this is a little naive. There is good reason that many of these laws are as long as they are. Things have to be explicitly laid out in legal language.

Still, laws must be written before they can be enforced. Some adjustment should be expected. I've occasionally wondered if it would be possible to have a "Deletionist Party" who's sole political aim is simplification of the legal code.

I think they would quickly find out why there are the nuances carved out in the legal code. Writing laws for millions of people, let alone 300+ million, is insanely complex.

A relative of mine worked in contracts while he was in the USAF. He hated to deal with small companies, because you could never count on them to deliver. On more than one occasion while he was there the Air Force took delivery of a half-finished doo-dad (satellite or sensor or whatever) because the company that won the contract went out of business before they could finish. Picture the shell of a satellite with wires hanging out next to a big stack of documentation of questionable value.

And then there were the companies that couldn't deliver on time but hadn't gone out of business yet.

"What do we do here? We could fine them a bunch of money for being late, but if we do they'll go out of business and we'll never get the thing they're supposed to be making for us. I guess in theory there's a chance they could still deliver if they're still around."

There's a ton of startups that get U.S. government contracts. It's not hard and in fact the government specifically sets aside something like 30% of contract awards to small businesses and other disadvantaged businesses. There's an entire industry of forming startups that only chase after small business set asides, then sub in a major government contractor to perform the work -- acting as a pass through. Startups that are very good at this end up "owning" lots of large contracts and then end up being acquired as a division of a larger defense contractor so they can squeeze the last few percent out of the contracts the startup holds.

Rinse, recycle and repeat. There's lots of very wealthy Beltway residents who's career is just spinning up businesses to do this. It's a kind of a parallel system to what goes on in the Valley.

Oddly Khanna's paper, while referenced, is not linked. Here is the original if anyone is interested: http://lincolnlabs.com/innovation_report

Thanks for sharing - I don't know why they wouldn't link it.

I personally executed several first-time transactions with multiple government agencies (mostly IC) while our start-up was still less than 100 people. It's not fundamentally different from typical enterprise sales, just involving different tactical obstacles.

The follow-on transactions, however, were much more challenging as the Beltway Bandits (prime contractors) dramatically increased the friction for us to be able to expand our footprint. We still succeeded, mostly because our technology was superior and we had the right agency (not contractor) advocacy.

In the Ocean/Marine Engineering field tons of smaller businesses are government funded. A lot of the times though, they are sub contracted by a company like Lockheed Martin or General Dynamics

Pretty sure they can via SBIR program, if it's still around.

edit https://www.sbir.gov/

Because 20 year olds may not have the extensive government contacts required to land big money contracts.

Two things:

1 - Regulatory capture.

2 - Startups might be efficient because they're lean on things that might be important to government. Like a small IT firm handling a presidential candidate's e-mail server.

#2 feeds #1 because lobbyists suggest important rules and regulations that can be justified by government which increase the barrier of entry to startups. Oh, you don't have certification that you do this? Oh you haven't submitted for these checks? Oh you haven't been reporting on this? If you haven't done all of these things, then you aren't eligible to win this contract.

Individually these points can be logically argued and make sense on a case by case basis. It's just that the enterprises that are in bed with the government already put themselves in a position where they are compliant with the new regulations that they're going to make, and then lobby to make those regulations to force competition to scramble for compliance at the last minute.

For us, the biggest problem was the sales cycle. For a $30k project we were looking at a ~10 month sales cycle. With normal clients, we could have closed a $30k sale in six weeks.

'Why Can't Startups Get US Government Contracts?'

Simple: startups represent market disruption, and bureaucracy by definition can't deal with disruption.

I've worked for a company that had a handful of relatively lucrative defense contacts (not multi-million $ deals, but significant cashflows, especially considering how low-maintenance they were from a support perspective).

It was a husband-wife owned startup, but I believe actually incorporated under the wife (the CFO), which gave a leg up in certain DOD bidding processes, through various woman-owned-business grants and policies.

Invest money in buying politicians (lobbying) and you'll get a ton of government contracts. What's that? Startups don't have money to waste buying politicians? Gee, I wonder why they can't get these big contracts that constantly go to unqualified companies (healthcare.gov anyone?) and pay orders of magnitude above the actual cost of building a product ... yeah, it's a total mystery.

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