Author Topic: Contracting with the government....  (Read 1782 times)

Mavenger

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Contracting with the government....
« on: December 09, 2015, 08:30:16 PM »
Hi everyone! Long time listener, first time caller, and all that.

So.

I'm getting out of the military in about a year, and I'm looking at my prospects on the outside. I'm a Chinese linguist, fluent in Mandarin. There are some good opportunities out there working for the government or contracting companies, but I'm really, very tired of expending energy to make other people money, and I want to finally be my own boss.

Long story short, I've discovered that contracting directly with the government has the potential to be worth a metric pantload of money, in my field and related ones. I want a piece of that, and I have some big plans about how to fill the contracts, how to bid, etc, but the biggest issue I'm running into is that I'm not sure what initial steps to take.

My situation:
The initial company will be just me, although I might have a partner. I have zero assets - renting all the time because of constant military moving from location to location - and a hell of a lot of liabilities - mostly paid off dumb debt from before I grew a mustache and my wife's student loans, all together totaling $50k, and three children that eat a lot.

Business situation:
1. The company consists of just me, or me and one other person. There is very little to zero overhead, I don't need to rent any office space or buy any equipment. I already own a nice suit for conducting important business. I'd be contracting myself out, and these contracts, to the best of my knowledge, are done on a one year basis, with an option to re-up if the position still exists and it was filled satisfactorily.
2. Expenses are few, although about $50-75k is needed once every five years per employee, to pay for security clearance investigations and polygraphs - I just had all of my stuff redone in 2014, so I won't be running into that until 2018-2019. And my potential partner is the same.
3. Income is unknown. I know for certain that market rate salary for linguists at contracting companies is $90k +/- $10k for demonstrated ability/experience/education. I don't know exact dollar amounts for payouts to the contracting companies, but I have good reason to believe that it is right around $250k/12 month contract. A friend of mine just got hired by a contracting company for a similar analyst job that pays $104k to him; the contract pays $350k to the company. As well, I have plenty of bodies to fill contracts, if they are plentiful, and profits from contracted employees will also go to me/the company.

I think an LLC is probably my best option for this venture, but I'm going off of a combination of friendly advice and self study at this point, and I don't know how to organize everything. What legal loopholes are there? Do any of you have experience doing gov't contracting? Are there any pitfalls I need to watch out for? Should I abort, eject, get out now?


Basically, I need advice!

john c

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Re: Contracting with the government....
« Reply #1 on: December 10, 2015, 02:44:26 AM »
Do you have a personal contact in the agency that will be letting out the contract?  My indirect experience in contracting to the Federal government is that the contracting rules are so arcane that it serves as a huge barrier to entry.  Also, usually the contracting agency has a relationship with the company they want to work with.  Don't think for a minute that you can fill out the bid paperwork and get the job.  There are so many hoops to jump through, it's not even funny.

If you already have an agency lined up, and they want you, then maybe you can work this out.

My general rule for starting a business is that you will make NO money for the first TWO years.  Every dime you find in the couch cushions will go toward funding your net working capital.  If you make it into year 3, you will start to make SOME money, I mean like $10-40k total for all of those 70 hour weeks you put in.  Then, by year 6 or so, you'll have enough of a customer base that you'll get a lot of referrals and start making decent money.  It's a lot like when people remodel an old Victorian house.  It's so much work and money, it's unbelievable.  Once it's over, the owners will say, "if I knew then what I know now, I'd have never started.  But I'm really glad I did it!"

In truth, you seem under capitalized to start a business.  What are you going to live on until the first payments come through?  How many months will that be?  The government likely pays on at least 90 day terms, if not more.  Does your wife have a really good job, or do either of you have a military retirement to pay the bills while you get started?

In terms of incorporating, I recommend you become an S-corp once your take home profit rises above $50k per year.  At that point, the tax savings will offset the cost of getting the return prepped.  There are a LOT of tax strategies for S-corps, if you look.

Good luck!

Gondolin

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Re: Contracting with the government....
« Reply #2 on: December 10, 2015, 09:22:34 AM »
I'm not sure I see the value proposition of your company. You are going to be a one or two man linguistics analysis shop that serves, presumably, the IC. These agencies can hire their own analysts or turn to any number of established contractors to provide services. Why is any agency going to give you the full management wrap rate that the established players bid just to buy the services of 1 or 2 guys?

Also, what contact vehicles would you be pursuing? Your friend's experience where some agency paid $350k for an analyst seems too small for a competitive proposal. I suspect it was a task order on an IDIQ, which is a contract vehicle that as a small business you probably won't have access to. Unless it's some DoD Small Business Initiative contract that's been earmarked for small business.

Your best bet is likely to try to join the subcontractor teams of one of the bigger primes as they go after a big award. That way you don't have to shoulder the entire burden of submitting proposals by yourself. Still, this will likely require a pre-existing relationship with a contractor who offers language services.

Finally +1 to John c's comment of "don't expect to just respond to an RFP and win". The contracting world is very complex and the services segment is particularly cut throat.

Tl:dr hard to judge your chances of success unless we know more about your relationships within the services, IC or contracting community. This CAN be lucrative but, it's usually not service members starting companies after separation. It's usually guys who spent 10 years in the Air force, 10 years contracting or consulting and then decide to spin off from their contracting career to make bank or pursue tech angles their company won't fund.

Final caveat - most of my experience is with larger contracts with major firms. Not all of the above may apply too small business pursuits.
« Last Edit: December 10, 2015, 09:29:44 AM by Gondolin »

Ricksun

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Re: Contracting with the government....
« Reply #3 on: December 10, 2015, 09:55:38 AM »

Agree with the previous posters.

If you do not have any "leads" from your former agency which could lend itself to a independent contract based on your unique expertise (usually capped at GS-15 salary levels for many agencies), you're likely going to run into brick walls.  Agencies are not likely to release RFPs for 1-2 FTE due to the administrative burden.  If they do, they release the requirement to a set of vendors who have already won IDIQ contracts.   The administration of single FTE contracts is too burdensome.  In addition, each and every contract awarded needs to have a responsibility determination which should look at the technical and financial viability of the company to ensure that it would be able to perform the work.  With your current plan, I wouldn't see you making it past this step.  The SBA does help small companies in this regard, so I would coordinate with them.
 
The federal Government levies a TON of requirements unto its contractors to facilitate whatever special interest Congress deems worthwhile.  Included in there are certifications and registrations on numerous databases.  Most of this involves tedious and laborious amounts of paperwork.  Much of the discrepancy you note between the salaries and what the Government pays is not profit, but overhead costs/fringe benefits/G&A, etc...  If you were to receive a direct contract - you'd now be responsible to perform the same functions that companies have entire divisions dedicated to. 

On a positive note in your plan, typically, the individual companies do not pay for their own security clearances.  The agencies usually validate the need and then pay the costs associated with them.  However, this can turn into a catch-22 because you need the cleared resources to bid and win contracts, but you also need the contract to justify clearing people.  Yet another barrier to small businesses.

I wish you luck in your endeavor.  If you're firm in your resolve, I suggest you start your company, but also look into subcontracting opportunities.  Many of the prime contractors who win the contracts have mandated small business subcontracting goals.  In this way, you might get a larger "chunk" of the pie that you think you're leaving on the table, but also leave a lot of the large bureaucratic reporting to the larger company that's more fit to handle it.


Ricksun


Mavenger

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Re: Contracting with the government....
« Reply #4 on: December 10, 2015, 06:10:53 PM »
Thank you guys for the insights! Definitely looking into subcontracting as well. There are mandated percentages (I believe that number is 25%) of contracts that are set aside to be filled by small businesses, and there are some seminars I'll be attending scheduled over this next year hosted by my agency about obtaining/fulfilling contracts with them.

Yes, they hire their own people, but the sad truth is that most of them don't meet the minimum requirements set by the agency in linguistics, as measured by a set of standardized tests, to fill the linguist positions. I've surpassed the standard by a large margin, and I've got a willing pool of similarly skilled linguists to fill any contracts I can get my hands on.

The other area is consultation; namely, outside the government, there have got to be lots of companies looking to expand operations, sales or manufacturing, into China, that are running into a language barrier. Would it be feasible to do both at the same time? Corporate and government? It do you think that the mountain of paperwork and juggling of responsibilities would do me in?

I'm super motivated to get this thing (or something similar) going, I just don't want to go off half cocked.