GSA Schedules are considered a great opportunity because selling to the government pays well. Or does it? Is GSA all benefits, or there are drawbacks too? Let’s find out.
What is GSA?
General Services Administration or simply GSA is an agency that governs federal procurements helping various local, state and federal level agencies to fulfill their needs: from buying toilet paper to deploying a 300+ nodes network infrastructure.
A vehicle GSA uses to purchase required products and services is called GSA Schedules – contracts between the government and commercial companies.
Can my company sell to the federal government?
Currently, thousands of small businesses hold GSA Schedules and successfully sell to the government. And there’s a place for your company too! If you want to find out, how to become a GSA contractor, please refer to the following article.
But now let’s consider the entire opportunity: is it worth trying to apply for a GSA contract? What are pros and cons of being a government contractor?
Benefits of GSA
GSA offers a well-developed infrastructure both for sellers, commercial vendors, and for buyers, various federal agencies. Let’s review some of the GSA benefits it offers to businesses.
$30+ billion market
Yes, the government market is that huge. Overall annual spending across all GSA schedules exceeds $30 billions. Not only the market is extra large, it is also quite diverse. Whether you sell machinery, firearms, portable electronics or paper towels – the federal authorities needs that and will leave a request for proposal in the GSA procurement system. The need for services is constant and multifaceted too.
Only GSA certified offerors can sell to the government. Hence, GSA Certification is a bottle-neck that cuts off the majority of competitors once you manage to win an award. Where in the commercial market you have to compete with hundreds if not thousands of vendors, the GSA limited market almost guarantees you contracts.
Apply once, sell for years
Once you secured your GSA Schedule you can submit proposals for multiple requests, for the entire period of performance. This minimizes paperwork and makes time frames shorter. Simply put: you get contracts and payments faster and with less administrative effort compared to other federal contracts.
No price negotiation past approval
When you apply for a GSA Schedule you provide a price proposal. Then, as soon as the price is finalized, you are guaranteed to sell at that price, no matter what. This is an awesome advantage: even if the market fluctuates, you still receive your contract money, because the price has already been stated as fair and competitive.
High or no ceiling
The maximum order size for most Schedules is very high. For instance, the maximum order size for IT Schedule 70 is $1,000,000. Even if you cannot (or don’t want to) sell that much now, there is nothing wrong with having a place to grow your business with the government. Provided the competition is low, and it is.
With one-time apply-time approval and almost no past-approval contracting issues, the usual selling process becomes fast and simple. Moreover, once a Schedule is awarded, you can sell to any other federal agencies freely using the same GSA Schedule vehicle.
Confidence of federal buyers
Every GSA Schedule holder is listed in GSA Advantage! and GSA e-Buy libraries, where government buyers can easily find a contractor for their needs. It works this way: if you are already approved by GSA, you can be trusted. No further checks are required.
Save money on marketing
GSA e-Buy and GSA Advantage! are preferred procurement tools for contracting officers, so you can greatly reduce costs on finding new opportunities to sell your products to the government.
Drawbacks of GSA
While obtaining a GSA contract can be extremely beneficial for your business, there are certainly some disadvantages you should consider too or your GSA experience may end up not very satisfying.
Cost of obtaining a schedule
You can’t just hop onto a GSA contract without some serious preparation. That takes both time and money. Hiring an agency to help you become a government contractor saves you time, but the money remains the issue. In extreme, the expense of obtaining a GSA schedule may easily exceed potential profits you will be receiving from the contract within its first years!
Lower profits compared to the commercial marketplace
GSA puts you in a position where the government is youк most favored customer. Literally, you are forced to offer lower prices to government than you would offer to many commercial clients. This means lower profits.
Price marketing is limited
Once you have started government contracting, you cannot freely use discounts for marketing anymore. You see, whenever you offer discounts on the commercial market, you are instantly obliged to sell at the same or lower price to the government or risk cancelling the GSA contract.
There is a fee
You pay 0.75% funding fee to GSA. Often overlooked among other pros and cons of government contracting, this can reduce your profits too albeit seemingly to a very slight degree.
Personal contacts is vital
Winning an award is not an automatic sell. You should not underestimate the importance of personal contacts with government clients. Convincing the clients, talking and listening to them are still important.
Sales are not guaranteed
Like on the conventional market, you still need to market your products and services. Over 60% of GSA Schedule holders do not generate sales. Ever. Yes, you are on a boat, but now get the oars down or federal agencies will never happen to know about your products. Also, you must generate at least $25,000 in first two years or the government contract is cancelled.
Some agencies do not use schedules
A key benefit of GSA is that it is readily available for many federal agencies. But not all of them.
Many industries are not covered by schedules
Architecture, engineering, construction to name a few. This means you will have to either limit the scope of your cooperation with the government, or avoid using GSA schedules completely.
Overall, GSA benefits are well overweighs its drawbacks if you are prepared for them and know what to do. And even if don’t know what to do right now, you can always ask a professional for consultation and hence mitigate disadvantages of GSA contracts completely.