“When I went to Stavros Niarchos, I told him I need a $40 000 ship repair deal done for $15 000,” Bruno Wengrowski, incumbent professor of contracting at the US Defence Acquisition University (DAU), recalled of his late 1970s encounter with the brother-in-law of Aristotle Onassis and owner of Greece’s  largest ship repair company, Hellenic Shipyards.

A sleepless night in Skaramagas, Greece, produced the offer of a captain who was short of budget and in need of an urgent repair. The transaction handshake did take place as the trade-off was a letter of gratitude for the best repair ever done for the US  military.

On returning to the shipyard the year after, Wengrowski saw the letter featuring in the Hellenic Shipyard brochure. The $25 000 trade-off emerged to have acted as a marketing tool that generated a million dollar mark-up in turnover, he was told.

“And don’t be deluded. Reputational gains in reputation go hand in hand with a realistic price in 98 per cent of the cases,” he said, alluding to the fact that a US military contract at a lower-than-realistic price is rather an exception than a rule.

Hellenic Shipyards is just one of tens of thousands of non-US companies doing business with the US military. Its order backlog sees repairs of more than 130 US navy ships that have racked up billions of dollars in corporate revenues.

And the US military, with bases sprinkled worldwide, has a steady co-operation record with businesses in each point of presence. This fiscal year alone, the US military spent $425 billion on contracts for goods and services worldwide. Spending of paramount scale is scheduled for the coming fiscal year, according to Mark J Lumer, the principal assistant responsible for the US Army Space and Missile Defence Command (SMDC) and responsible for $12 billion in active contracts, who was speaking to participants in a conference entitled Doing Business with the US Government – Contracting Procedures and Opportunities.

He, alongside Wengrowski and a host of other lecturers, took the floor in Bulgaria’s second-largest city Plovdiv to explain the rigorous, yet standardised, process of establishing and conducting business with the US army.

The event, co-hosted by the Defence Acquisition University (DAU), the American Chamber of Commerce in Bulgaria and the US embassy in Bulgaria, was a follow-up to groundbreaking training sessions in Sofia and Yambol last year that took place in the run-up of the first deployment of US troops in Bulgaria.

On April 28 2006, the governments of the US and Bulgaria signed a defence co-operation agreement, which allowed US soldiers to conduct military exercises and humanitarian projects on Bulgarian soil. Though sites remain under Bulgarian command, a permanent complement of 2500 US soldiers, either coming from or departing to hotspots such as Iraq and Afghanistan, are staying in the Bezmer, Novo Selo and Graf Ignatievo air bases.

The lecturers, coming from all walks of US military contracting authorities, arrived to give businesses hands-on experience on ways to service US soldiers locally.

Results from first encounter with Bulgarian business are already at hand. According to the Bulgarian Defence Ministry, 520 companies have already procured a DUNS number, one of a set of procedural prerequisites for business doing with the US army. Of the total, a couple of dozen have already struck contracts.

With plans for larger US army presence and larger budget for local business contractors, the conference in Plovdiv guided business people through the processes of fact-finding about US army procurement, the set of eligibility and qualification criteria, US military contracting regulations, techniques for application, preparation for and conducting negotiations with the US army, invoicing, among others. A key message of the conference was one has to know the entire process to take advantage of it.

For whom the bell tolls
Cheaper transportation costs, together with knowledge of local business environment, have been the competitive advantages that have prompted the US army contracting officers in non-US locations to seek out local business partners.

The same goes for Bulgaria. And there is business for many a company. Although Lumer said the US army does not allocate rigid budget numbers to a country, it does assign a tentative ceiling. The US embassy in Bulgaria published figures of the European Central Command (EUCOM) for years 2008 and 2009. The US army is due to spend $40-50 million on construction of premises, $5-10 million on road and adjoining infrastructure, an annual $600-800 000 on road maintenance and $300-500 000 on tertiary roads and areas maintenance.

No budget is available for contingency or food and beverages. Monika Schoeller, the supervisory contract office at European office the Defence Logistics Agency, told The Sofia Echo that spending is geared to the immediate needs of US army. In such cases, Schoeller said, Bulgarian contractors will be urged to sign the so-called blanket purchase agreements, which is a non-binding agreement that testifies of a contractor’s aptness to deliver a certain quantity for a certain price within a certain delivery period.

The door is also open for businesses offering janitorial, chemical toilets, refuse removal services, Major Todd Cundy of the 409th Contracting Support Brigade (CSB) said.

Cundy said that his office will be contracting with local businesses on a project basis because the US army, unlike in Romania, has no permanent base in Bulgaria. For this reason, contracts are to be tailored according to immediate needs and tasks of US troops here in Bulgaria.

Over the past year, he said, US troops have carried out three projects locally. One was a tactical exercise at Novo Selo air base and another two were humanitarian projects, renovations of a senior citizen home in the town of Sliven and of a kindergarten in the village of Mokren near Sliven. He said the budget for projects in Bulgaria is due to increase.

The benefits
To name just a few:
* All companies working for the US army are tax-exempt as a partner of a US governmental institution.
* There always lies the opportunity to build a long-term relationship. The US army tends to grant a firm that has granted the best value for money under a US military procurement project the option to extend the contract for three times the original term.
* Companies get discounts if they are an employer of ethnic minorities or are subcontracting such firms or small and medium enterprises.
* All contract-related paperwork, solicitations (tender offers), application forms alongside invoicing, is available and submitted online.

Aligning to standards
To take advantage of the benefits, though, a company needs to align to requirements first.

“Most companies in foreign nations are allowed to compete for US contracts provided (1) their country is an eligible country under the Trade Agreements Act; and (2) they have fully registered under US procurement rules,” Lumer said in an interview with The Sofia Echo.

Nevertheless, the US government procurement system is very fair, mechanical and transparent, he continued, and once in, it gets easy.

There are several registration procedures a company needs to pass to become an eligible US contractor, lecturers said. The several musts testify of a company’s reliability in terms of quality of product, production and personnel aptness, financial strength, conformity to environmental and veterinary/sanitary standards.

Conformity to the above is proven through obtaining a set of army agencies’ numbers. The first is the Data Universal Numbering System (DUNS) Number, the number granted by Dun & Bradstreet and testifying of the company’s existence as a legal entity.

Next, a company needs to obtain a Commercial and Government Entity (CAGE) code, the number which the US army contracting office – Defence Logistics Administration –  assigns to all companies eligible to do business with the military.

A company must also do the Central Contractor Registration (CCR), which is necessary for all companies willing to enter into contractual relations with the US Department of Defence.

Finally, a company needs a registration with  the Online Representations and Certifications Application (ORCA), an e-government initiative storing all relevant certificates and credentials of a company.

Additional requirements in contract award procedures may be tailored by the various US contracting offices within the army structure.

Apart from divergencies stemming from essence of contract and offeror (the agency within the US army asking for a service or product), requirements may vary because of size of contract and duration.

A company also needs to show a record of successfully completed projects of similar scale and purpose, as well as ability to perform in a timely fashion.

Where the opps are
Once fully compliant, a company applies for contracts through the solicitations featuring in the so-called 52 tender schedules, issued by individual US contracting agencies. They are also available on the Federal Acquisition Regulation (FAR), FedBizzOpps, nations’ Departments of Defence websites, alongside others.

“To have the schedule is – for a foreign and a US company alike – the best entryway into federal contracting because what it does is that it puts you on a worldwide system of information for GSA contracting,” Wengrowski said.

“With Bulgaria, whose main resources are shoes, chemicals, machinery, there’s always demand for those kinds of items. And although the GSA Schedule does not guarantee business, companies that enter the schedule can use GSA Schedule presence for marketing purposes because customers can choose their quality, their style, colour, design based on the fact that GSA Schedule is testimony of good quality of all the abovementioned.”

The obstacles
God is in the details and they matter when complying with standards as there is not only the administrative part to get to know but also the purely technical one.

In an interview with The Sofia Echo, Schoeller said that often companies need to align production capacity and train staff thereof to US army standards.

Being responsible for food and beverages’ deliveries, she gave milk as an example. Milk had to be delivered in truckloads, have the US-specific fat content, vitamins A and D, the packaging and metrics on labels that are typical for the US And these are all different from those in the EU, she said.

The same goes for Pepsi Cola, which has to come strictly in cans, as is the custom in the US.

Furthermore, such production geared strictly to US standards precludes the possibility for sale of excess quantities on the local or other EU countries’ markets, Schoeller admitted. This exacts precise calculation of production quantities or else co-operation with the US army might end up as a loss-making enterprise.

Naturally, this makes production more expensive, as is, for example, the transportation of eggs (only in refrigerated trucks), the dispatch of maintenance staff to facilities in case of machines’ breakage, Schoeller said. Therefore a cost-benefit analysis before taking to a US contract is a must.

Yet Schoeller noted that the most problematic points in US army-local business co-operation were miscommunication and lack of procedures’ awareness. Companies tend not to know what a CAGE code, for example, stands for, she said. And generally they tend not to know what to do, she added. For this reason, she was yet to sign her first contract with a Romanian company.

“I use a Bulgarian company to deliver Pepsi Cola to Romania, as I use Pain d’Or for bread and croissant deliveries,” she said.

No pain no gain: Training online
Transforming an existing opportunity into a working contract needs the effort, Wengrowski said, adding that those who spent the time to get acquainted with the US army contracting procedures had already won a contract.

“There was a lady from a Bourgas-based transportation company,” Wengrowski said. “She passed through the available pre-contract online training available at DAU. She  took one acquisition class, one purchasing class and three contracting classes, which gave her much deeper knowledge of the contracting process and good information on how to prepare and then how to perform the contract. The end result was that she procured a transportation movement contract for her company.”

Hopefuls can obtain free online training by going to www.dau.mil and signing up for courses available in the “I need training” section.

Side effects of co-operation
Doing the effort seems a worthwhile undertaking for any business, Wengrowski said. And if preparing well, businesses can earn a profit not only through US contracts but also through positioning sales points in immediate proximity to sites of US soldiers’ presence. Because US troops tend to pour money there, Wengrowski said.

“US soldiers go out from the military base,” Wengrowski said. “They go to town, they shop, go to restaurants and that’s how they spur sales and generate local economic growth.”

He admitted, though, that with Bulgaria the effect was not to be as tangible as say, in Romania both in terms of side benefits and in terms of contracts earned. “The major difference [between Bulgaria and Romania] is that contracts in Romania tend to be of greater length and duration whereas in Bulgaria they will be shorter depending on what the particular military exercise will be. Sometimes they can go to two or three months, sometimes longer.”

Nevertheless, Wengrowski noted that even if on ad-hoc basis, presence of US troops can leave tangible – though one-off – effects on the economy. He exemplified this with a case from Singapore, while he served for the US navy.

“A US aircraft carrier would come now and then for a five-day stay. They calculated the impact of this arrival and it was half a million US dollars. The reason is that sailors would not accost for months, they accumulate their pay as while sailing they have nothing to spend it on. They go to the liberty, go to restaurants, night clubs. They buy gifts for their family and friends and so forth so there’s a big positive impact that can take place.”

With or without the side effects, the US army is here to stay and business are invited to learn how to approach it, lecturers said.