On January 20, 2009, America will have a historic day — historic for many different reasons for people around the globe. Like many of you, I’ve signed up for the CNN-Facebook viewing party (work productivity may hit lows only matched by the first round games of the NCAA men’s basketball tourney on Thursday and Friday). As much as we can be excited about the inauguration — what comes next may be of real interest.
$1 Trillion Dollars…
Incoming President Barack Obama
And while this date will have substantial cultural significances, the Obama administration has promised a full-frontal attack on kick-starting the economy. Estimates for the dollar value of the kick-start are huge — between $700 billion and $1 trillion. (The Democratic House proposal floated a number of $825 billion). Numbers that size are hard to get your brain around… and so for most of us it is simply a number that is supposed to make capital start flowing again, stop the bloodletting of employees and get people excited about our economy again.
But, the reality is the Obama administration is planning substantial programs and tax relief that could reach startups and other technology companies here in Seattle (at least we all certainly hope so.) Once the speeches end and DC begins to take down the grandstands, you’ll be hearing plenty about the American Recovery and Reinvestment Bill of 2009. The Obama White House believes this bill will create an additional 3 to 4 million jobs, get the credit markets moving, stabilize the housing market, and make transformational changes to our economy — with $275 billion in economic recovery tax cuts and $550 billion in targeted priority investments.
How does a startup get access to $550 billion?
Good question. $550 billion is a big number and, given the slowdowns in the economy, expect a government gold rush. Many experts have predicted that there will be uptick in activity to solicit government agencies directly, to submit proposals to RFP requests, and to get access to various government loan programs. Whenever the government launches a program or a series of programs of this scope, there is always concern that unless you “know people” your business may never know these potential projects exist. And, while that may be the case for some projects, in other cases there is a great deal of information available.
The first action for a small business or startup is to familiarize yourself with the government contracting system. I previously posted some information on various government programs for startups and small businesses — and that should be a helpful place to start out hunting for resources. The net is full of resources out there — some of which come with a fee and help guiding you through the process. Others are purely informative. But the important thing to note is that the process isn’t simple (think about how frustrating you’ve heard it is to submit an iPhone app to the AppStore, and then double or triple it — that could be what you are dealing with here). So understanding the ins and outs is crucial. And, if you aren’t a prime candidate for a direct contract with the government, remember that subcontracts can be just as valuable (and perhaps slightly less onerous… but only slightly).
What we don’t know is when these proposed projects from the Obama team will be posted or be available (obviously, until legislation is passed, these new programs won’t be available). The incoming administration has been clear that the American public can expect heightened accountability for these new dollars — hard to know exactly what that means, but look for more direct oversight, reporting and more “strings” to be attached to the government dollars.
While we wait to see what will get funded and what will get cut in the Congressional process (which could take as little as a couple weeks or much longer depending on how nice everyone plays together), be prepared to hear lots of buzz words about the bill and its components. In the meantime, if you think your business could be a good fit, figure out the sandbox you’ll need to play in to submit a proposal.
Here are couple sites to look to in order to understand the process:
There are many more places for you to find education about these projects that should be coming soon. Remember, the time to submit such proposals can be substantial.
Where will we see these dollars spent and what might ‘trickle down’?
To the extent your business can meet an RFP put out for a government entity, small businesses can and will be given priority for certain deals. And, to the extent small businesses can’t meet the RFPs on their own, there are opportunities for subcontracting — with Seattle in a prime position to help with key IT, biotech and other resources.
Direct Funds. Let’s begin with the obvious — a substantial amount of that $550 billion is probably not going to ever make its way down to small- or medium-sized technology companies. But, don’t be fooled — the Federal Government has actually put its money where its mouth is on the issue of promoting small businesses. In 2006, small firms won $77 billion, or 22.8 percent, of a total of $340 billion in federal government contracts eligible for small business competition.
In addition, some of these funds may be directed to state or other types of organizations who will be responsible for handling the distribution and management of the projects. Obama and his team are thinking creatively about getting this money into the economy in a hurry — so don’t be surprised to see state governments in action or other sources handling management of the projects.
Subcontracting. Many of the programs and projects will require subcontracts — and oftentimes these subcontracts are terrific opportunities for small businesses. The SBA has a wealth of information on how priority can be given to small businesses.
Tax Relief and Loan Programs. The Obama administration has spoken about a number of programs designed to lower taxes on certain Americans and direct new low-interest loans. This is probably one of the areas to expect the most wrangling over the coming weeks and days… but be aware that Obama and his team continue to state that this next amount of money isn’t going to the folks on Wall Street — it is going to Main Street. Now if we only knew where Main Street was?
Next Post: Specific Spending Proposals in the ARR Bill of 2009
The next post on this subject will look more specifically at the areas the Obama team is targeting in its draft of the American Recovery and Reinvestment Bill of 2009. In early drafts, the Obama team has laid out the following priorities:
- Clean, Efficient, American Energy
- Transforming our Economy with Science and Technology
- Modernizing Roads, Bridges, Transit and Waterways
- Education for the 21st Century
- Tax Cuts to Make Work Pay and Create Jobs
- Lowering Healthcare Costs
- Helping Workers Hurt by the Economy
- Saving Public Sector Jobs and Protect Vital Services
These all seem like interesting areas and may well have some applicability to Seattle-based businesses. Even more interesting is that the Obama team has price tags on some specific projects which may help identify opportunities that could shortly be arriving.
I’ll lay out some of the key discussion points for each of these priorities and where money may be available for Seattle startups. We have some details to help give us some insights. Obviously, it is all speculative at this point, but it gives us a helpful idea of where to expect this nearly half a trillion dollars to be heading. And hopefuly, that will make its way to the small businesses and startups… as long as they know where to find it.
Raleigh was far-and-away the winner based on the scoring — with a top ten showing in four of the six categories (growth rates for small businesses and population, and one- and five-year increases in employment).
