By Thomas Gerbe, Defense Information Analyst, BidLink.net
We compared the top 10 companies from the Fab 40 against our database of defense contracts and made a surprising discovery. Most of the companies fabricate for the Government, but very few of them had any direct sales to the Defense Department. Many companies had a registered CAGE code, which is required to sell to the Government, but quite a few were expired. It is apparent that these companies must be selling through a third party, possibly a prime contractor instead of selling directly to the Department of Defense (DOD). Is it possible that these companies tried to find defense contracts, but were unsuccessful?
So we asked ourselves why, and begun to speculate. Could it be that these companies simply have no experience in dealing directly with the Government? Are they lacking the required personnel to navigate the murky waters of defense contracting? Is it simply easier to sell to a prime contractor, who then has to deal with the extensive documentation, government inspections, packaging requirements and other inconveniences? Is it possible that companies have tried to find defense contracts, but were unsuccessful?
As with many industries that we analyze, the bulk of the defense contracts are awarded to a handful of large companies, who then subcontract to smaller companies. This is the opposite of what the Defense Department is trying to encourage, which is greater competition. In February of 2010, the Defense Department issued an interim rule to increase competition in major defense acquisition programs, in an effort to trim defense spending. As a result, prime contractors are required to provide technical data packages that were once considered proprietary information, making it easier for smaller companies to produce the same goods. This is part of an ongoing initiative at the Defense Department to increase competition for hard to find items.
At BidLink, we speak with thousands of companies who are looking to do business with the Government, and have found some distinct patterns. Unless the company has experience with Government sales, we often find that they are not classified correctly, or simply using the wrong terminology to search for Government bids. When searching for defense contracts, one has to think the way the Government thinks, which is not always intuitive to civilian contractors.
Buying agencies provide different information when submitting a Request for Quotation (RFQ), which can vary greatly from center to center. Although the Fab 40 was based on companies who produce items under the NAICS subclass 332, not every agency includes a NAICS code in their solicitations. Some reference Federal Supply Classes (FSC), military specifications or particular keywords to describe the requirement. For example, NAICS 332116 has the title “Metal Stamping”, but contracts for this category can also be found under FSCs 9905, J038, 3445, 6625, 9640, 3426, 6160, 9910, 3442, 5335, 1560, 5365, 8140, 5340, 8115, 2510, 9520, 2590 and 5975. A combination search for this FSC list and the keyword “Washer” or “Shim” would yield more accurate results.
The NAICS Classification System is an industry classification system, not a product classification system and therefore neither intended nor well suited for this purpose. It was originally developed by the Office of Management and Budget (OMB) as the standard for use by Federal statistical agencies in classifying business establishments for the collection, tabulation, presentation, and analysis of statistical data describing the U.S. economy. The current classification system is the 2007 NAICS. The initial classification system was a 4-digit code known as the Standard Industrial Classification (SIC) system and was replaced by the 6-digit code the NAICS in 1997. Although NAICS is not perfect, it is an improvement over SIC.
The product classification system which the DOD utilizes is called the Federal Catalog Program and was established in 1952. This system which is currently in use by the Army, Navy, Air Force, Marine Corps, other DOD activities, civil agencies and foreign governments. The most important fact to remember is that the government buys things, they don’t buy manufacturing processes. It classifies items of supply based on the characteristics of the item, answering the simple question, “What is it?” How it is manufactured is irrelevant.
BOEING P/N 30-2922
Within the technical characteristics, aluminum alloy 2024 is listed as the material. This item could be something that a fabricator is capable of machining or welding and could possibly produce. Solicitations do not list in the bid how the item is to manufactured (the process of manufacture) using words such as welding, machining or laser cutting. They list the basics such as the Item Name, part number and quantity. Searching the technical characteristics is the key to finding bids like this.
A BETTER WAY
- Set up bid searches using Federal Cataloging codes and terminology describing the item and not how it is manufactured. For example, use the word “PLATE” instead of “welding”, or “stamping”.
- When viewing the open bids quickly glance at the technical characteristics, and item name.
- Look at past procurement pricing history / number of buys / quantities sold per order.
- View the number of sources for a single item.
Once this data is reviewed you can decide to continue if certain criteria are met by your own checklist. If you see that an item is repeatedly purchased or has only one supplier, then it may be worth investigating. If you can compete, submit a bid and possibly win the business.
Although there are better ways to find Government business, the Fab 40 was based on NAICS, so we examined sales to the Defense Department for three NAICS codes under the 332 group for the first half of 2011. What is interesting is that although some of the Fab 40 companies supply goods to the Government, none of them appear in this list.
332116 – Metal Stamping
332510 – Hardware Manufacturing
332992 – Small Arms Ammunition Manufacturing
The chart below is an analysis of suppliers of the above NAICS codes to the Defense Department.
Is it possible that business is being lost because fabricators are too focused on the NAICS classification system?
BidLink.net is a provider of defense industry information for contractors worldwide. This data includes millions of defense contracts, procurement history, part numbers and vendor details. This unique combination of resources allows BidLink to monitor and extract important information for the defense contracting industry. BidLink.net, based in Washington, D.C., provides bid consolidation, searching and notification services, as well as part number (NSN) lookup to many military activities and thousands of private companies around the world.
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