Posted: July 15, 2009
Stalking the stimulus
Minority businesses that already work with the government have a better shot at securing a slice of the billions in new federal contracts than companies starting from scratchBy Jane Hoback
Billions of dollars in federal stimulus money for a dizzying array of projects must seem like manna from heaven to minority-owned businesses in Colorado laid low by the recession. And for some, that’s virtually what it is.
Companies with all the requirements in place that already do work for the government have a good chance of winning stimulus project contracts. Their businesses are likely to flourish.
From left: Mariano Delle Donne, Ding Hsu, Don Kelin, Lisa Buckley and Richard Valdez. Photography by Rob Hammer
But because of a complicated and time-consuming certification process required for government contractors coupled with tight deadlines to get the projects going, Colorado government and business leaders worry many minority-owned businesses could be shut out if they aren’t prepared.
“These stimulus projects represent excellent opportunities for minority business owners to keep their doors open and build their capacity,” says Eric Lee, president and CEO of the Colorado Black Chamber of Commerce. “But they also represent a lot of challenges. I’m not sure if the opportunity will broaden the number of bidders. It’s like building an airplane in the air.”
Of the $787 billion provided in the American Recovery and Reinvestment Act to create jobs, aid people in need and invest in infrastructure and new industries, Colorado expects to receive about $3 billion in direct funding, benefits and services.
Here’s what’s included in Colorado’s funding (according to a 32-page state report titled “What it means for Colorado”):
• $500 million for transportation projects.
• $103 million for transit projects.
• $37.3 million for work at six airports.
• $49.2 million for energy efficiency and conservation projects.
• $79.5 million for a low-income weatherization program.
• $66 million for water projects.
• Up to $30 million for Superfund site cleanups.
• $68 million for a variety of housing programs, including construction of affordable housing.
Some of the money will pay for contracts that already have been awarded but were shelved because of lack of funds.
“We’ve received several million dollars in work for contracts we had won previously,” says Ding Hsu, co-founder and president of Wheat Ridge-based Pacific Western Technologies. The company provides environmental, information technology, geospatial and facility support services for the Environmental Protection Agency, Department of Energy, General Services Administration, Federal Highway Administration, Department of Interior, Department of Homeland Security, Geological Survey and the Army and Air Force.
The company won an EPA contract three years ago for work on Superfund sites but couldn’t start until now because of funding problems, Hsu says. The company also has a contract for work at a data center at the Western Area Power Administration’s corporate offices in Lakewood.
“Our work has more than doubled,” Hsu says. She expects Pacific Western Technologies revenue to increase at least 30 percent to 40 percent this year. “We have to gear up quickly for the work,” Hsu says. “The time period is very short. Once (the government agencies) get the money, they have to obligate it within six months. It usually takes six months just to get the contract in place.”
Many Colorado Department of Transportation projects, for example, were well under way in the spring, shortly after funding was dispersed.
American Automation Building Solutions, based in Denver, is bidding on projects in Iowa as well as Colorado, President Lisa Buckley says. The company does government contract work in security, information technology support, technical services, building automation and energy management for the Department of Defense, Homeland Security, Army, Air Force and the city and county of Denver.
Lisa Buckley, president of American Automation Building Solutions
The stimulus money will add work to existing contracts Buckley’s company has. “And we are definitely going after a variety of (stimulus) projects, some different than what we’ve been doing,” Buckley says.
She predicts explosive growth for the company this year. “Depending on how things shake out, we could very easily double our business,” she says. The majority of 9-year-old American Automation Building Solutions’ business is contract work with the federal government, Buckley says. “But the requirements are stringent. And these projects have to be done quickly. It’s challenging to do business with the government. If you’re a new company trying to break in, it’s tough.”
INCREASING MARKET SHARE
Don Kelin, president and CEO of CADDO Solutions
Denver-based office products company Caddo Solutions also aims to go after stimulus projects, and President and CEO Don Kelin sees the recession as an “excellent opportunity” for the company to increase its market share.
“A lot of companies are downsizing, but we’re being very aggressive,” says Kelin, who is a member of the Oklahoma-based Caddo Nation. Kelin says about one-third of the company’s work is a General Services Administration schedule, which government agencies can check to select the products they want to buy. Caddo, which has been in business 19 years and has about 25 employees, does a third of its business with tribal nations and another third with corporations.
“We compete against the big guys – Office Depot, Staples, Office Max, companies that have up to 15,000 employees,” he says.
Adventos, a business technology advisory firm, does the majority of its work with federal, state and local government, says CEO Mariano Delle Donne. Among the 4-year-old Denver company’s customers are the Department of Transportation, FDIC, IRS, Treasury Department and state of Colorado. “We designed our company to serve niches in the government,” Delle Donne says.
Adventos has experienced significant growth year over year since the company’s inception. Despite the current economic climate, Adventos expects to grow and be profitable again this year. Delle Donne says the company doesn’t plan to go after stimulus funding this time around.
Denver Hispanic Chamber of Commerce President and CEO Jeff Campos points out that many of the organization’s most successful members are those who do government contract work. They are certain to benefit from stimulus projects, he says. Of the chamber’s Latino Council, a small group of successful business leaders who mentor up-and-coming businesses, “I would say half are government contractors.”
Lakewood-based RMC Consultants, a professional services consulting company that provides technical support in environmental science, information technology and facilities security, does the majority of its business with the government. The 18-year-old company, which employs 45 people, has contracts with the Bureau of Land Management, Army Corps of Engineers and the departments of Interior, Agriculture, Defense and Homeland Security as well as the Colorado Department of Transportation.
RMC President and CEO Richard Valdez says the company is working on a subcontract to a contractor that has a stimulus project contract and plans to go after additional work.
Richard Valdez, president and CEO, RMC Consultants, Inc.
The stimulus package does not contain set-asides for minority businesses. But most government agencies are required to award a certain percentage of contracts – usually between 25 percent and 30 percent — to small businesses. The government’s Disadvantaged Business Enterprise (DBE) program is intended to ensure nondiscrimination in the award of government contracts. And state agencies and other groups are providing help aimed at making sure that happens.
“We believe this is a huge opportunity for business in general,” says Don Elliman, executive director of the Governor’s Office of Economic Development and International Trade and chairman of the Colorado Economic Recovery and Accountability Board, which oversees the stimulus package for the state. “We want to make sure we provide the assistance to allow small businesses to participate. We think we need extra effort to do that.”
In June, Maranda Pleau, the former manager of small business at Hensel Phelps Construction Co., was hired as the minority outreach coordinator for the Governor’s Economic Recovery Team.
At Hensel Phelps, Pleau designed and implemented specific Minority and Women Small Business Enterprise programs and compliance plans for Denver projects. Pleau’s assignments included the Mayor Wellington E. Webb Municipal Office Building, Colorado Convention Center expansion, Denver Hyatt Convention Center Hotel, Denver Newspaper Agency building and most recently the Denver Justice Center Courthouse and Detention Facility.
Pleau will help set goals for state agencies to follow for outreach to minority communities and contracting with minority-owned businesses for Recovery Act projects. She’ll also do outreach to minority communities and the business community to help them get involved.
“The ultimate measure of success is the percentage of dollars contracted to DBEs,” Elliman says.
It’s a concern shared by business leaders and government officials alike.
“We have to be concerned about the level of participation,” says Andre Pettigrew, executive director of Denver’s Office of Economic Development. “The goal is to kick-start the economy. If that’s going to work, we have to measure it by the size and number of contracts women- and minority-owned small businesses get, the number of jobs they create.”
The Colorado black chamber’s Lee has his doubts. “Making sure the money is being utilized as intended is impossible under this timeline.” Pettigrew also points out that the process is further complicated “because of the transparency and accountability (that are required in the stimulus package). There’s going to be more scrutiny.”
CONTRACTS IN THE FAST LANE
Partly because of timing constraints, there are likely to be few opportunities for businesses that haven’t registered with the government and met all the requirements, including certification, a process Jeff Campos of the Denver Hispanic Chamber calls “intimidating. It’s not like getting a license. We’ve offered training, but some people don’t follow through.”
Larger companies that already have government contracts through competitive bids are likely to get the contracts, shutting out small businesses that might be able to do the work cheaper, Valdez says, adding “it’s hard to get work if you can’t show former work.”
Valdez says he and other minority businesses owners are “relying on advocacy groups like minority chambers of commerce to rabble rouse with Congress” to improve the process.
Says Hsu: “If you’re just starting now, forget it. The time frame is so short, you can’t just jump right in.”
Lee calls the stimulus package “a double-edged sword. Businesses that are already in the pipeline, already certified, will do well.
“There may be some changes, some flexible timelines,” Lee says. “Businesses that are not certified now will be on the back end of whatever is left over for sub-subcontractors.”
Lee emphasizes businesses also must already have the financial resources, staff and equipment in place to be able to follow through on a project. Timing is everything in government contract work. Buckley says it may take two or three years to crack into government contracting work, “but once you do, you can be very successful.”
Government contract work “is good business,” says Patricia Barela Rivera, who retired recently after 11 years as the Colorado district director of the Small Business Administration for Colorado. “You can hire more employees, pay your loans, grow.”
Successful government contractors say they spend time building relationships with the agencies they want to work for. They know where and when to look for bidding opportunities. They develop partnerships with other companies that might have experience and expertise in areas they don’t. They know what to bid on as well as where not to waste their time. They narrow their focus to their strengths.
That’s a particularly important point for Delle Donne of Adventos. “There’s an art and a science to the procurement process,” he says. “You have to focus on picking a niche and targeting it. The government is a sophisticated buyer. You have to offer something of value. You have to be passionate about serving that market. We focus on what we know how to do well.”
Marino Delle Donne, CEO of Adventos
Hsu says 100 percent of Pacific Western Technologies’ work is with the federal government. She spends time marketing the company to the various agencies the company works with and making sure she maintains relationships with them. She knows what subcontractors she can hire quickly. Just as government agencies must get bids from minority contractors, so must Pacific Western Technologies get bids from minority contractors for its work with the EPA, for example.
“We have to provide the best value. We’re putting out (requests for proposals) now,” Hsu says. “Opportunity always comes to people who are ready. Be prepared. Lay the groundwork. Do your homework.”
Ding Hsu, co-founder and president of Pacific Western Technologies
Barela Rivera advises companies with their eye on government contracts to “have a very focused, strategic plan. Entrepreneurs are very creative and very passionate. But they can also be very scattered. There’s all this stimulus money for all these different areas. A business can look at all of them and try to find too many things to bid on. Focus on areas where you are strong or where you can partner and zero in on those.”
Mel Gravely, head of the Institute for Entrepreneurial Thinking in Cincinnati, advises “caution, not desperation.”
Government contracts are “a way forward for minority businesses,” Gravely says. “There will be a lot of money spent. But if you don’t know what you’re doing, you could tank. It could drain your resources. Less experienced businesses are likely to make mistakes. Don’t get yourself in a situation where you can’t win.”
Valdez says consistency and solid performance are key. “It can’t be understated: The devil is in the details,” he says. “The barrier to entry is pretty significant. You have to show strength and quality.”
Caddo’s Kelin emphasizes that the perception that minority businesses get government set-asides is a “wives’ tale. You have to give good service. You have to understand your market. You have to make sure you dot your i’s and cross your t’s. Have a good banking relationship.”
Buckley sees the stimulus funding as an opportunity for American Automation Building Solutions to branch out into new areas, though not always on its own. It might partner with companies that have skills and experience it doesn’t have and offer qualifications other companies lack.
“We’re looking at partnering with another company on a construction project,” Buckley says. “And because we have top-secret clearance as well as other qualifications, we’re able to be in a competitive situation.”
In addition, she said, because government agencies are required to award a certain percentage of contracts to small businesses, large companies often reach out to their smaller counterparts to partner or hire them as subcontractors.
Barela Rivera also advises businesses to check out the government websites, and to do so “every day,” including the federal government’s recovery.gov, fbo.gov, esrs.gov, ccr.gov, and the state’s recovery website colorado.gov/recovery, to name a few. Government contracts vary by agency.
Resources, many free, abound. The SBA and Denver Metro Small Business Development Center offer a variety of help for everything from navigating the certification and registration process to finding and winning contracts.
“I’ve never seen so many panels and workshops,” Buckley says. “There’s something going on all the time. Take advantage of it. Get enlightened and engaged.”
Business groups encourage their members to take advantage of the support they offer. Lee says the Colorado black chamber is “working hard to make sure we help our members find the opportunities that are out there.”
The Hispanic Chamber has offered certification training. The chamber’s real estate and construction committee is available to help businesses in those project areas. It has hosted panels on stimulus funding with the state, SBA and CDOT.
“We’re concerned that only a small group will take advantage of the stimulus funding,” Campos says. “But this is going to be a wake-up call. You weren’t prepared this time. Now is the time to get prepared for next time.”