The Pros and Cons of Federal Contract Work
Trademasters’ CEO discusses potential hitches and semi-hidden opportunities
Dave Kyle rattled off some of the project types and applications his company has been involved with for the federal government over the years:
“Steam decentralization, historic locations, geothermal … helicopter and aircraft hangers … a chiller for a cyclotron, cleanrooms, retrofits for R&D labs …”
And yet, as became clear in the conversation with the president/CEO of Trademasters in Lorton, Virginia, one thing the average contractor might find surprising is how much federal contract work of a less esoteric sort awaits far away from the Beltway.
“Almost any midsize city has a Social Security office,” Kyle pointed out.
Federal courthouses — of which there are many across the country — need service and repair. The list of possible customers goes on: national parks, the National Guard, anything to do with the military. Many of these spaces go unseen in civilians’ daily routines, yet they are operating, with HVAC systems and people relying on them every day.
Whether the work is in North Dakota or the U.S. Capitol itself, federal agencies manage contracts in a specific way (and, it should be noted, they always pay their bills). Kyle took the time to discuss how Trademasters has succeeded in a space where almost a quarter of $37 billion in contracts each year are earmarked for small businesses.
ACHR NEWS: First, some context. How old is your business? When did you get involved with federal contracts? If you were in business well before that, what proportion of your business is in this sector now?
Kyle: Trademasters is 29 years old. We got involved with federal contracts about 25 years ago. Federal contracts make up 60 percent of our business, and we have seen continuous growth year after year.
ACHR NEWS: How did you first get started with federal contracts?
Kyle: Trademasters is located in the Washington metro area, an area packed with many federal agencies and contractors, which allows for a substantial number of opportunities. At the start, we had two main avenues into the federal space. The first was completing projects in commercial spaces leased to federal agencies, and the second was working for prime contractors with government contracts.
In our case, proximity was key to our jumping-off point, but later, as we attended multiple General Services Administration (GSA) events, we discovered that the government does provide many access points for companies looking to jump into federal contracts all over the country, making it more accessible to companies in other, less advantageous areas.
The GSA is very good at providing events that not only teach you how to work for them but also allow for networking, which is paramount for growing your business.
ACHR NEWS: What was the tipping point that convinced you this was the right move to make?
Kyle: As with many other companies, a major business move is often precipitated by a significant economic event. For us, it was the 2009 recession. With the market plummeting and residential clients holding fast to their hard-earned money, Trademasters’ growth halted.
However, our team rallied and took an offensive position, hitting the accelerator hard and developing an entirely new business strategy. Trademasters learned that government agencies have a small business (“small” means revenues below $15 million a year) utilization goal of 23 percent for our industry. Developing this new business strategy proved to be a launch pad for growth.
ACHR NEWS: Could you talk about your initial investment in terms of staffing/education/training, or anything else required to establish the proper infrastructure within your company beyond what you already had?
Kyle: Where other companies pour their capital into marketing, we chose to invest in training to learn how to bid on and win contracts that encompassed all aspects of the trade for local and federal government. Because many federal agencies provide low-cost or free training, and there was little additional staffing required, the initial investment into infrastructure beyond what existed was minimal.
ACHR NEWS: Tell us about your initial phase as a federal contractor — things you wish you’d known, your first project, or how your growth of scope of work happened early on.
Kyle: If there is one thing I wish I could tell my former self, it’s this: read everything. And always be sure to meet or exceed requirements.
Federal agencies are very contract centered. They want to make sure that every clause has been met, and it is very easy to miss a minor clause if you skim over a contract. Like any other customer, they want to make sure they are getting the best bang for their buck. Failure to do so can result in fines or negative reviews that can severely impact future work.
ACHR NEWS: Which agencies do you work with? I’m interested in whether you tend to have the same contact people, whether the experience is different based on which agency, etc.
Kyle: We work with most of the major federal agencies, such as the Department of Defense, Department of Agriculture, Department of Labor, Federal Aviation Administration, Transportation Security Administration, and Environmental Protection Agency. Also the U.S. Coast Guard, Army, Navy, Marines, Air Force, and the GSA. The experience is similar in many ways. Each agency has a required documentation and submittal process; they mirror each other but are often in different portals. All of the agencies listed are very proactive in seeking small businesses for future work, and they provide information on their websites showing you how to get started.
ACHR NEWS: Was there a point at which you had to make another transition in terms of in-house resources as you moved from doing a little government work to making it a more substantial part of the business?
Kyle: The next transition point came when we moved from short-term to long-term contracts, such as facilities management and operations contracts.
These types of contracts often require more oversight and accounting work, which in turn requires additional staffing. That said, our technology implementations have streamlined many of our processes, reducing the amount of positions needed to provide oversight to these contracts.
ACHR NEWS: Are there any pros or cons in federal contract work regarding the pricing, accounting, billing, or receivables side of things?
Kyle: I’ve found that if you build your accounting department correctly from the ground up and encourage your employees to follow all in-house and client billing procedures exactly, there is little in the way of cons.
From a residential HVAC company of two to a successful HVAC company working in the residential, commercial, and government sectors with 160 people, we have only ever needed one person to run our accounting department. It’s a feat we are incredibly proud of.
ACHR NEWS: About the work itself — do you see any differences in doing typical HVAC work in government settings versus other environments?
Kyle: There are many. Often, the HVAC equipment used on federal sites is built to a much larger scale, both in size and number, and requires more frequent maintenance.
There is the matter of security clearances that are often required to access the buildings and can take a significant amount of time to gain. We also find that much of our work requires approval on a case-by-case basis before moving forward.
All in all, working in a government setting can be a lengthy and time-consuming process, but the tradeoff is the chance to work in historical locations for important federal agencies and missions — and the continued opportunities for work.
ACHR NEWS: As a more established vendor in this area, is your work still concentrated in your own geographical area, or do you bid on work elsewhere? Do federal entities even pursue out-of-area contractors?
Kyle: Our past experience and positive performance reviews have given us a reputation that has allowed us to expand our bidding area nationwide.
Some federal office government contracting vehicles do cover entire sections of the United States, not just one metro area. For example, we bid on and won a spot on the GSA BMO schedule, Zones 1–6. This allows us to view and bid on certain solicitations from multiple federal agencies that are released across the majority of the nation. We are currently working on a United States Coast Guard contract that we won via this vehicle.
ACHR NEWS: Are there particular areas of HVAC or types of work within the profession that are most frequently or profitably in demand? Any trends in that area?
Kyle: Retrofit replacement and turnkey design-build are often frequently requested and very profitable. They also provide the contractor with a chance to look at new technologies and build on past performance.
ACHR NEWS: If I’m a mechanical contractor out there today who has never done federal work, what are some signs that maybe I’d be a good candidate?
Kyle: If a contractor meets the requirements of any set-aside categories — e.g., small businesses, disabled- or veteran-owned small businesses, businesses in historically underutilized business (HUB) zones — and they are looking for long-term clients and repeat business, then they are good candidates.
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