Doing Business with the U.S. Federal Government: A Survey of Small Businesses on Guam

INTRODUCTION Doing business with the U.S. Federal Government, hereafter referred to as "Federal Contracting" is considered to be an attractive opportunity for many businesses. This is particularly true for businesses on Guam, a U.S. territory in the Western Pacific region. Guam is a small island economy that is undiversified and relies heavily on three sectors: tourism, military and the local economy. Like in many other economies, the majority of businesses on Guam are small businesses, defined by the U.S. Small Business Administration as "one that is independently owned and operated, not dominant in its field, which also meets the employment or sales standards developed by the Small Business Administration based on the Standard Industrial Classification (SIC) Codes for businesses. In general, the SBA in determining if a concern qualifies as a small business uses the following criteria: WHOLESALE--not more than 100 employees RETAIL or SERVICE--Average (3 year) annual sales or receipts of not more than $5.0 to $21.0 million, depending on business type MANUFACTURING--Basically not more than 500 employees, but in some cases to 1,500 CONSTRUCTION--Average (3 Year) annual sales or receipts of not more than $7.0 to $17.0 million, depending on business type" Table 1 shows the magnitude of business opportunities created by the U.S. Federal Government. In the aggregate, the amount of contracts awarded by the U.S. Federal Government ranged from $258 billion in fiscal year 2002 to $528 billion in fiscal year 2008. Of these amounts, 0.12% on average was spent on projects on Guam, a figure that is so small and perhaps seemingly insignificant from the U.S. Federal Government's perspective. However, the view is different from the perspective of a small economy like Guam whose local businesses and community seek opportunities for renewed economic growth and sustainable and participatory development. U.S. Federal contracts for work performed on projects on Guam make up an equivalent of an economic sector or industry that is between 6% to 9% of the Guam economy, depending on which year the local economy is measured. Annual surveys by the Guam Small Business Development Center (SBDC) have shown that small businesses on Guam are interested in Federal Contracting. In the 2008 survey, 46.3% of the 60 respondents identified "Government Contracting" as an area of counseling interest. From the same survey, 48.2% of the 60 respondents identified "Federal Contracting" as a workshop topic that they would be most interested in. Despite the level of interest suggested by the above survey, only a minority of Guam small businesses have actually pursued Federal Contracting opportunities as primary or sub-contractors. Relatedly, in a recent Naval Facilities Engineering Command (NAVFAC) Marianas survey of Guam small businesses, only a very small number of these businesses responded to the survey. In this regard, Table 2 is telling as it gives a breakdown of U.S. Federal contracts on projects on Guam that are awarded to local businesses and non-local (i.e., non-Guam) businesses. On average during the period 2002-2008, local businesses received little more than half of all U.S. Federal contracts awarded for projects on Guam. This figure can also be viewed as a measure of how much business with the U.S. Federal Government is "lost" by local businesses. Of course, the figure does not show the extent to which local businesses pursued (e.g., submitted a proposal) these "lost" businesses but simply did not win the awards. Hence, the figure represents a mix of opportunities to do business with the U.S. Federal Government which were pursued, though unsuccessfully, by local businesses, as well as those that were not pursued or remained untapped. In the first case, it will be interesting to know why local small businesses' attempt at Federal Contracting was unsuccessful and to explore measures that will improve their success in future attempts. …