Government Contracts and Small Business Set-Asides: A Cost-Benefit Analysis of Petoskey Plastics' Success in the Governmental Market

Abstract

In 1949 President Harry Truman created the General Services Administration (GSA) that consolidated several administrative government agencies. Today the GSA is responsible for administering supplies, providing workplaces for federal employees and acquiring goods and services for government agencies. In an effort to increase domestic spending by the government, the GSA created what is today an online catalogue of American based businesses. This catalogue streamlines the buying process and makes it easy and efficient for government agencies to buy products from these businesses and support the American economy. The government then additionally appropriates money in the budgets of all federal agencies to be used to purchase goods and services from small % businesses. The Small Business Administration (SBA) works with the GSA by overseeing and aiding American small businesses in becoming certified for these set-asides which include: veteran and service disabled veteran owned, women owned, economically disadvantaged, and Historically Underutilized Business (HUB) zone small businesses. Petoskey Plastics is a small, veteran owned, and HUB zone small business located in northern Michigan that produces blown plastic film products in a variety of markets. They are headquartered in Petoskey, MI with a sales office in Birmingham, MI and three plants located in Petoskey, MI, Hartford City, IN, and Morristown, TN. Petoskey Plastics recently finished their first fiscal year in the GSA catalogue and as an intern for them, some of my tasks at the company involved rewriting their GSA schedule and collaborating on the work required for this process. The author investigates the costs and benefits of these programs as they pertain to Petoskey Plastics and attempts to determine whether or not they should continue in this venture. The costs of this process included: the extra time and work contributed by two Petoskey Plastics employees, the cost of hiring two consultants specializing in government sales, and the costs of being in the GSA catalogue such as quarterly and yearly fees and a mandatory decreased sale price. The benefits included: $3,000 worth of sales, and the recognition both by current clients and in the community for their certifications as a veteran owned and HUB zone small business. The author concludes that selling goods to the government is not economically beneficial to Petoskey Plastics.