With some $400 billion to spend, the federal government is a customer with deep pockets. That’s why a lot of businesses, large and small, get into the government contracting game.
“Regardless of what the economy is doing, that business is always out there,” says Patrick Malyszek, president of the M3 Federal Contract Practice Group, a New York consulting firm that works with government contractors. “It’s a considerable resource provided that you approach it right and are doing everything appropriately.”
And thanks to the “Prompt Payment” rule, the federal government can’t drag its heels when it comes time to pay the bills, like some commercial customers might. The rule states that the government must pay its vendors in a timely manner or else suffer interest penalties. “The federal government is a great customer,” says Pamela J. Mazza, managing partner with
Getting into government contracting isn’t easy. Businesses must follow strict bidding policies and procedures, and it’s sometimes hard for a first-timer to win a contract. And once it does, the business has to live up to its end of the bargain or pay the price, which could be termination of the contract or a ban from any further participation in the federal contracting program. “Understanding the entire system is critical for any new contractor to actually succeed,” says Malyszek.
Businesses also need to make sure the price they’ve set for their goods or services is one with which they can actually work. “Margins on government contracts aren’t what they are in the private sector,” says Mazza. “So you do need to know what you’re doing when you put your proposal together, because [if not] you can lose money.”
Among the various federal government agencies, the Defense Department is a big spender. In FY2007, it issued more than three million contracts worth some $316 billion, about 70 percent of total contract dollars awarded that year. So it’s no surprise that many companies want to tap into this market.
Ken Sanborn used a beat-up white Suburban to convince the military to buy his cameras to combat roadside bombs.
Since then, Department of Defense contracts have skyrocketed Sarasota-based Gyrocam Systems’ revenue from $5 million in 2006 to more than $500 million this year. Boosting that figure: a $302 million contract the company won in May to supply the U.S. Army 500 with more camera systems for use in Iraq and Afghanistan.
“It’s a wonderful way for us to grow our business and to do something that really makes a difference and helps not only save soldiers, but helps future Iraqi citizens,” Sanborn says.
More than 90 percent of Gyrocam’s revenue comes from Department of Defense contracts. The company, which has 114 employees, wasn’t even concentrating on the military until the start of the Iraq War.
After Sanborn heard reports about deadly explosions, he thought his camera—previously used for aerial photography for commercial clients—could be used to detect roadside bombs. He learned from a Gyrocam consultant that the military was interested in his airborne system. But he was determined to show them something different—a camera attached to a vehicle. He had been tinkering around with mounting the camera on the 1997 Suburban he used for running errands.
Sanborn thinks his staff probably thought, “Oh man, Sanborn’s lost his mind,” he says. “Nobody is going to buy a camera that costs $300,000 and is mounted on a truck.”
Sanborn “cobbled up” a mast mount to attach the camera to a trailer hitch. The gyroscope helps the camera show a clear picture, even as a vehicle moves, allowing soldiers to see potential danger over bridges, buildings and sand dunes from their heavily armored vehicles. “It’s like having a bionic eye,” he says.
After demonstrating the system to military officials, a few cameras were purchased to be tested by the Marines and Army in Iraq. He earned his first large contract in May 2006, to produce 27 cameras in 30 days for the Marines. Sanborn notes that he won the contract without any political pull or congressional pressure. “What it does show is that you can have a good idea, and if you can get it to the right people…you can become a huge contractor,” he says.
The only way Sanborn says Gyrocam filled that order was his decision to buy enough inventory to build 200 systems, even before receiving the first DoD contract. “It cost almost $15 million to $18 million that had to be paid out with no contract. If we had not won the $43 million contract, I’d be working at the 7-11 now,” he says.
Rather than a gamble, Sanborn considered it a strategic move. “People always ask, ‘What is your key to success with this business?’ And I often think that it’s being resourceful enough to make sure you have the inventory.”
Gyrocam Systems has provided about 300 cameras—each costing between $375,000 and $400,000—for the military.
Two new Suburbans are now used as demonstration vehicles, but Sanborn still tests every camera system the company produces with the old SUV. “I couldn’t bear to get rid of it because it has sentimental value,” he says.
In this post-Sept. 11 world, the ability to communicate with citizens in the event of a disaster is paramount to local, state and federal governments. That’s why Cooper Industries established a new division, Cooper Notification, to address this need in the marketplace.
In 2007, Cooper acquired Sarasota-based MadahCom for its notification division and maintains the firm’s location here as one of its three offices. MadahCom’s WAVES (Wireless Audio Visual Emergency System) product has now become part of Cooper Notification’s platform, which includes the SAFEPATH emergency voice evacuation system and the Roam Secure emergency text alerting system.
Cooper Notification has sold some $30 million in goods and services to the Defense Department, both through contracts and direct sales. Its products can now be found in Iraq and other combat zones as well as on U.S. military bases, and the military’s use of Cooper’s systems definitely gives them a big stamp of approval.
“It speaks to the capability of the products,” says Tyler Johnston, director of market development. “We use taglines and marketing terms like ‘battlefield tested,’ ‘military approved,’ that kind of thing. It’s certainly something we’re proud of.”
But though its products seem a natural fit for the Defense Department, it doesn’t make the contracting process any easier. “Any government contract, whether military or otherwise, has fairly strict guidelines and processes to go through,” says Johnston, who works out of Cooper Notification’s Sarasota office. “It’s worth having someone experienced in the contracting process with the government on staff. It’s not something you want to just do as a hobby.
“It’s a highly competitive environment,” he continues, “especially once we moved from MadahCom, a small company, to Cooper Industries, a big company, because some of the protections in place for small businesses went away.”
Hyatt Survey Services
Hyatt Survey Services has been on the map at the Defense Department since 2005. That’s when the Bradenton-based firm won a five-year contract with the U.S. Army Corps of Engineers Jacksonville district to provide surveying and mapping services worth up to $1 million a year. The work has taken them all over Florida, where they’ve worked on projects from beach renourishment to harbor dredging to the restoration of the Kissimmee River.
Founded in 2002, the firm is headed by the husband-and-wife team of Pamela and Russell Hyatt. They decided to try for a government contract after the experience Russell had while president of another company. “[For that contract], I spent five years in the marketing process, keeping our name in front of the Corps people who make decisions, ” says Russell. “Once I got in [to the Defense Department] with that other company, when I came on board with Pam it took us, I guess, two years to get a contract.”
The Corps contract provides them with a steady volume of work from a customer that pays its bills on time, in a time when private development is lagging. And it certainly doesn’t hurt for the company to point to its Corps experience when bidding on other contracts in the public and private sectors. “We’re a small business doing really big work, which makes a difference in getting those other contracts, for sure,” says Russell. “We’re able to adapt very quickly to changing situations. With the federal government, they could call us tomorrow and need us to have three crews on a job over in Miami the next day. And I would have to react to that. That makes our company very adaptable to the private sector.”
Hyatt Survey Services has already begun preparing for future bids on government contracts, and staying involved in that realm helps to diversify the firm’s workload. “We’re one of a handful of companies in the state that do hydrographic surveying,” says Russell. “To do that work and be profitable, you have to do it for the federal government, because there’s not enough work on the private side to sustain that effort.”
Medical Education Technologies
Medical Education Technologies (METI) was founded in 1996 with just five employees. Today, it has grown to more than 200, and its products are used all over the world.
It has the U.S. Defense Department to thank for some of that growth. Since its inception, METI has garnered some $30 million in defense contracts, both orders for specific products and research and development funds. “We were a small business when we started out, and those contracts helped fund us to develop products that we could commercialize, and to get costs down so everyone could afford them,” says Catherine Strayhorn, METI’s director of government systems. “It’s a great process.”
METI has three active contracts with the Defense Department. The biggest, worth $5.8 million, is to supply Army medical training centers with its high-tech human patient simulators. “The Army is setting up 18 centers around the world to train medics and combat lifesavers,” says Strayhorn. “We’ve seen throughout history that medics and other military medical personnel trained using simulators are able to save a lot more lives.”
Under the second contract, worth $1.4 million, METI is researching and developing training tools to simulate the look, feel, smell and intensity of severe traumas. “We’re looking at developing wounds that you can put on simulators or even people to give people the initial shock needed,” says Strayhorn. “When you see the wound for the first time it’s in a nonthreatening environment, so when you do come face-to-face with it [in real life] you get past the shock and just treat the soldier and save a life.”
The firm’s final current contract is to develop curriculum and educational training packages for the Air Force Special Operations Command. And it will likely land another contract for its new wireless patient simulator, iStan. “That was developed under a U.S. Army requirement for a stand-alone patient simulator,” says Strayhorn. “We’re trying to make things more mobile so medics can train the way they fight. When a soldier is injured, he or she is moved out of harm’s way to a secure area and treated. But previously, simulators have been so tethered they couldn’t be moved.”
METI’s innovative thinking, cutting-edge products and past performance have certainly all been factors in its continued success in government contracting. “I think you have to prove yourself, and then these agencies will come back to you,” says Strayhorn.