Doing Business with Local Government

Your local governmental institutions may represent a sales opportunity that you haven’t previously considered.  Before you get started, there are a number of aspects of working with local government with which you may want to be familiar.

As you might expect, there are a wide range of ways that public sector organizations structure their procurement processes.  That said, there some common elements that may be helpful in deciding if approaching a specific agency is likely to be successful for your specific company.  Some key considerations are:

  • Procurement Structures – Local governments typically arrange their purchasing in centralized, decentralized and mixed approaches to satisfy the needs of their organization.  From the business perspective, a centralized procurement system is likely to be faster since the number of contacts you need to evaluate a prospect is just one.  A decentralized procurement system provides a lot of potential clients but each transaction is likely to be smaller and you may be working with people who don’t understand their purchasing procedures well.
  • Solicitation Methods – Upcoming opportunities are generally formal and typically fall into the following categories: Invitation for Bid (price determine who wins); Request for Proposals (price is only a factor to determine who wins); and Request for Qualifications (RFQs; may only determine best qualified not price).  The process is sometimes less formal if the amount of money is small and the level of public interest limited.  For formal responses companies must carefully follow instructions to avoid their submission being ignored.  In some cases RFQs may be used to establish pre-qualified lists which may only be renewed every few years.
  • Agreement Types – Purchase Orders (single transaction), Open Purchase Orders (ongoing transactions) and Contracts (complex transactions) are typical agreements.  OPOs and contracts may extend for years.
  • Preference ProgramsLocal Preference, Small Business Enterprise, and Disadvantaged Business Enterprise programs are among some of the preference programs available.  Companies benefiting from preference programs may receive a competitive advantage on points or on price when responses are evaluated or there may be targets set for target company participation.  Qualification and the certification paperwork for these programs vary and should be considered by companies seeking to benefit.
    • City of San Jose Local Business Enterprise (LBE):
      • Suppliers must have a current San José Business Tax Certificate Number and have an office in Santa Clara County with at least one employee.
      • If the basis of award is price determinative (awarded to the low bidder) then the amount of the preference shall be 2.5% of cost.
      • If the basis of ward is points determinative (“best value”) then the amount of the preference shall be 5% of total points.
    • City of San Jose Small Business Enterprise (SBE):
      • In order to claim the additional SBE Preference Suppliers must first qualify as an LBE and have a total number of employees of 35 or less (regardless of where they are located).  Note:  The SBE preference may not be claimed if the supplier does not meet the LBE requirements.
      • If the basis of award is price determinative (awarded to the low bidder) then the amount of the preference shall be an additional 2.5% of cost. 
      • If the basis of award is points determinative (“best value”) then the amount of the preference shall be an additional 5% of total points.
  • Bonding and Insurance – To protect themselves from liability, agencies may require that their contractors have significant levels of insurance coverage and be able to guarantee that the project will be completed through bonding.  The cost of this coverage is generally the responsibility of the business.  In some cases, governmental organizations may have special programs in place to lower the cost of these requirements.
  • Wage Requirements – Living and Prevailing wage requirements are quite common among local governments.  As wages are a significant component of the cost of many service agreements, businesses should be aware of whether these requirements are a factor on any solicitations on which the company will bid.  As the reporting requirements can be complicated, smaller businesses should also investigate what procedural modifications might need to be put in place to accommodate providing accurate information to the local government.  In the State of California, all publicly funded construction projects are required to pay prevailing wages.
  • Other Considerations – An  organization’s budget (fiscal) year as well of its use of special funds and grants are important because they often determine the timing of solicitations and which departments have money in down cycles.

You may also be interested in the following set of On-line resources:

Bid Postings:

Business Owner Space Partners with Procurement Assistance:

  • Minority Business Development Agency – The MBEC provides minority owned business enterprises with assistance in accessing capital, procurement opportunities, small/minority/disadvantage business certification, and different business functions, such as strategy, marketing, managerial finance and operations. 
  • Silicon Valley Small Business Development Center – The Silicon Valley Small Business Development Center provides free, confidential, one-on-one business counseling and low-cost entrepreneurial training to small businesses in Santa Clara and Southern San Mateo Counties.  These services include government contracting.