Realities of Government

Contracting

By Richard White
 Should your company enter the government?

•!Yes, if you are ready to sell

•!No, if you want to sit back, take orders and not execute a
sales program

The phrases government market and federal market are

used interchangeably in this eBook because selling to state
and local agencies sales is fundamentally the same as selling
to federal agencies.

1
Government and Commercial Sales, the Same
Yet Different

Government sales are fundamentally the same as commercial sales, yet different after the
relationship is established. The initial sale is made in the same way as it is made in the com-
mercial sector; a relationship is established with the buyer and the value of the solution is
communicated to the buyer, ideally resulting in a sole source or limited competition pur-
chase.

The differences in selling in the government market occur after the customer (end user)
has been sold.

1.! The government market is huge with hundreds of thousands of buyers so finding buy-
ers is difficult and expensive

2.! There are alternatives to using the public bid process to close a sale. The closing
methods vary depending on the size and type of purchase and must, according to public
purchasing regulation include a degree of competition (or at a minimum the appearance of
competition)

3.! Government buyer can be resistant to newcomers. Buyer resistance can be offset by
(1) purchasing preferences set up by Congress for small businesses, (2) a distinguishing
sales message, and (3) a referral from an entrenched contractor. Just stating your qualifica-
tions in an email or telephone call is usually not good enough to get in the door.

4.! Unique or limited source products and services allow a company to get through the
thicket of competitors. The narrower the offering the better.

5.! Unlike the commercial sector federal buyers are happy to make referrals to other fed-
eral buyers. Market insiders use their customers to help them sell to other federal custom-
ers.

2
It’s a Double Edged Sword
Some newcomers fear the mystery of the market and the red tape of contract compliance
requirements. Red tape is primarily a procedural matter and it becomes routine quickly,
don’t let the red tape deter you from entering the government market.

Competition in the government market is intense, particularly from insiders that already
have built-in relationships with buyers. Newcomers think that federal agencies want new
suppliers and that aggressive sales efforts are not necessary. In fact, federal buyers are resis-
tant to change and don’t necessarily welcome newcomers with open arms.

But once a company manages to get in the market, the federal customers tend to be risk-
averse and will come back to a solid performer over and over. A single contract can result
is a series of add-on contract modifications and new contracts within the customer agency.
And agency customers will assist in introducing you to their counterparts in other agen-
cies.

Our message about insiders and competition in the market may be discouraging in many
respects. But it only takes one win to become an insider and insiders use their government
customers to help them sell to other government customers. So execute and get your hook
in by landing a direct federal contract and then using the contract as a basis for selling and
growth.

Once you crack the federal market you can parlay customer risk-aversion and loyalty into a
prosperous, stable, and growing business. And contrary to popular opinion, federal agen-
cies pay quickly once you learn to master the payment procedures.

3
Preselling and Best Value
Most federal purchases are made under “best value” rules. Best value rules say that buyers
do not have to award to the low priced bidder. Rather, they can consider subjective value
considerations like scoring of solution presentation in a proposal, warranties, deliver
terms, etc. in awarding a contract at a higher price than the low bidder.

A best value award decision must be documented in the award file (the “file” as its know in
the inner circles). The file and what it contains is a major factor in the sales and contract
award process. The file is the way buyers justify higher priced awards to companies that
have convinced the buyers of their value. The file must pass a government audit and de-
fend a protested award decision from losing bidders.

As discussed earlier, pre-selling to buyers early in the procurement process is encouraged

in federal purchasing rules. Most pre-selling is based on relationships, personal trust con-
siderations, reputations, experience, and tailored solutions to the buyer problems. All of
these factors are subjective yet important factors in making a buying decision. The subjec-
tivity of buying decisions is the primary reason why aggressive per-selling is necessary in
government contracting.

Stated simply, federal buyers have the latitude to buy from the company that has made the
most convincing argument that they offer a low risk solution to their problem. For a reoc-
curring contract award the favored pre-seller usually is the incumbent contractor. Incum-
bent contractors work with government decision makers every day so what better way to
establish a relationship.

4
Are You in a Competition, Maybe?
The appearance of competition in the federal market is as important as actual competi-
tion. A lot of the competition that newcomers encounter is not real competition but
rather the appearance of competition.

Government buyers may have someone in mind but

you just don’t know it. They are forced to use competi-
tive purchasing methods even though they may already
have someone in mind. They will not tell you what is
really happening, i.e., who they have met with and who
they know or might prefer.

This aspect of the government market tends to confound newcomers. Oh, the opportu-
nity is published at the government public bid site so it must be open to all. Yes, it is open,
open for an expensive proposal but not necessarily an award. Remember, pre-selling in
front of a pubic bid is encouraged under the rules. You can be reasonably sure that some-
one has already met with the customer when a public bid is published.

Tell your revenue hungry CEO to slow down when he or she utters “lets take a shot at this,
we are infinitely qualified to solve their problem”. Most CEOs do not have to work on
weekends on losing proposals.

5
How do they limit competition?
Federal purchasing rules allow limited competition because full and open competition is
much too costly and requires six or more months of elapsed time from need to delivery.

The government would grind to a halt if everything were

purchased with full and open competition.

As discussed earlier, how the documentation of a purchase (the file) reads about competi-
tion and the value of the product or services is critical. It’s all about the contract file and
what it says about vendor selection. The file protects the buyer and his or her reputation
in the bureaucracy, and the reputation of the contractor. The file needs to say that the
buyer followed the rules for competition.

6
Purchasing Mechanisms: The Key to
Narrowing Competition
Ask yourself how does my company make purchases or how do I make purchasing deci-
sions personally. Buying complex products and services is almost always done through rela-
tionships so you know what you are buying and how it will solve your problem. It is no dif-
ferent with federal buyers.

Federal sales are made after buyers learn from companies the possible solutions to their
needs. Buyers then informally select one or more of the favored companies with solutions.
Now the hooker: “how does the buyer narrow the competition to one company and con-
tract with the favored company quickly without many months of elapsed time and a moun-
tain of red tape?”

Federal buyers contract with their preferred vendors through “closing or purchasing
mechanisms”. Closing mechanisms are difficult to understand because they may be:

•!A purchasing rule (a rule about simplified purchasing procedures for small dollar amount
buys).

•!A preference programs set up to buy from small businesses

•!A Multiple Award Contract (MAC) with pre-approved vendors

•!A public bid

The answer is in the in Appendix A.

As indicated in Appendix A, purchasing mechanisms are designed to limit competition

(supposedly fairly) because open competition with all vendors is impractical except in vey
large and publicly visible purchases (military weapons and systems, border fences, etc.).

One of the purchasing mechanisms shown above is used to close a relationship-based fed-
eral sale. Sometimes competitors other than the favored company could receive the award
depending on the method used.

7
Small Business Preference Programs
Small business preference programs include small business set-asides, disadvantaged busi-
ness programs, programs for veterans, women owned business programs, and a HUB-Zone
program. Certification requirements for the small business programs are varied and range
in complexity from self-certification to complex applications that must be approved by
the Small Business Administration (SBA).

In short, small business programs have been

catalysts that allowed small business owners to
grow exceptionally fast and acquire significant
assets. Ideally, the assets were acquired before
the small businesses turned into large
businesses and lost their preference status.

The subject of small business preference programs is sufficiently complex to be the subject
of a companion eBook.

For further explanation about these programs contact the author, Richard White at
301.908.0546.

8
Distinguish Yourself
Most companies think their competitors are worthless and that they alone have the best
product or service known to man. Government buyers have heard "we are the best" so
many times that it makes them scream when they hear it. Buyers want to hear simple facts
backed with evidence. They have hundreds of vendors barraging them with messages. To
get through the flack you need a sales pitch, which distinguishes you from the pack.

Distinguish yourself through your initial message to the customer. Ideally, buyers want to
talk to only the companies that sell precisely what they need so they do the best they can
to narrow down the field to best value companies. To counter the competition, you need a
distinguishing message to get through the glass wall encountered by all sales people, gov-
ernment or commercial.

Your message should not be delivered via a link to a web site or a glossy brochure. Such tac-
tics don't work in today's market. Both give the immediate impression that you don't want
to take the time to determine what the federal purchaser needs.

The message must cut to the heart of the customer's problem. The sales pitch must be in-
dividually tailored to the federal buyer's specific needs. Otherwise, it will be quickly cast
aside or dismissed. And it needs to be best value based.

9
The Critical Market Entry Questions

Federal agencies buy almost everything in large quantities across the United States at mili-
tary bases all over the world. The big questions for newcomers to answer are:

1.! Can we afford the investment to overcome the learning curve and inherent insider
bias and find federal buyers to sell to?

2.! Do I have the right marketing and sales people to find the opportunities and the te-
nacity and patience to sell against competition?

Like any critical question in business there are no easy answers. The decision boils down
to confidence in your company, available investment dollars, and indicators of market size.

10
Top Down Market Indicators

Federal market statistics are notoriously confusing, incomplete, and difficult to find and
analyze.

GSA schedules are the biggest and widest multiple award contracts. GSA schedule sales
are reasonably accurate; around $ 40 billion annually for all schedules, and represent about
20% of new contract awards. They can be used as a measure of the federal market for
most products and services.

A rough estimate of the annual market for what you sell is five (5) times GSA schedule
sales. This is a gross measure and should be considered as a guideline only. But the measure
is better than other contact award statistics published by the federal government.

Top down market analyses (government-wide or at an agency level) will only tell you that
federal agencies buy what you sell in gross amounts. They don’t tell you what specific prod-
ucts and services were bought or who bought them.

11
Bottom-up Market Research
The following types of questions are difficult but not impossible to answer. Bottom-up
market analysis is circular and frustrating because the data sources are inadequate federal
procurement databases that hide end user data and specific requirement information.

1.! What specific products and service are they buying within an industry sector?

2.! Where are they buying your product or service?

3.! How often are they buying it and in what amounts?

4.! Who are they buying it from?

5.! What procurement mechanisms are they using to buy it?

The primary databases used for bottom-up research are Google, USA.gov, FPDC.gov and
FBO.gov.

Bottom-up market analysis can help answer the question: can we afford the investment to
overcome the learning curve in federal sales and the inherent bias to contract insiders?
And more importantly, can we find federal buyers to sell to?

Bottom-up market analysis is difficult but doable if a company has the time, desire, and fo-
cus to do Internet research and cold calling to prospective buyers. Some bottom-up re-
search may be required to make a market entry decision. The research methods and depth
depend on the industry, the amount of federal contacts a company has (if any), the known
competitors in the market, and the products and services offered by the company.

An example of how an information technology services company located outside Washing-

ton, DC would do bottom-up research is described in the steps below.

1.! Use the Internet and business network contacts to determine what business the com-
pany’s competitors are doing in the company’s geographic area. Knowledge of what your
competitor is doing in the government market is worth its weight in gold.

2.! Use the Internet to find the military bases, federal offices, and other federal facilities
within a hundred miles radius of the company’s office.

12
3.! Find the contracting office contact listings within the home pages federal facilities
(where available).

4.! Supplement your Internet research with telephone research to find contact informa-
tion for contracting officers and information technology end users within the facilities.

5.! Make calls to any contacts the company may know at the federal facilities including
reference information collected from commercial customers, business network contacts,
the company’s employees, friends, etc.

6.! Meet with contracting officers to determine what they have bought in the past, from
whom, how often, and ask for the names and contact information for decision makers
(end users). Also ask which procurement mechanisms are used to make purchases, e.g.,
GSA.

7.! Make warm and cold calls to prospective buyers, arrange for personal meeting and
telephone sales calls, and perform sales 101.

A product company that ships anywhere would use the same Internet and contact sources
but focus nationwide and more heavily on what competitors are selling to federal agencies.

13
It’s Sales 101 and Time and Money
Intense focus, time and money are required to enter the government market; not to men-
tion fortitude and patience. Patience is not a virtue of CEOs and even less so for CEOs
losing commercial revenue. But leads times of 6 months to more than a year may be re-
quired to make a first government sale.

For small businesses a rough guess of the investment required to enter the federal market
ranges from $ 20,000 to $ 50,000 and probably 5 to 20 times these amounts or greater for
a large business.

14
Multiple Award Contracts: The Wave of the
Future
Federal agencies are experiencing more and more difficulty in awarding contracts to a sin-
gle company to meet a specific requirement. Public bids for single requirements are too ex-
pensive and take unrealistic amounts of time.

As a result, the purchasing procedure of choice in the federal market is gradually becom-
ing blanket contracts awarded to more than one company. These types of contracts are
called Multiple Award Contracts (MACs) or Indefinite Delivery /Indefinite Quantity
(IDIQ) contracts.

MACs and IDIQ contracts are designed to meet future requirements on an order-by-
order basis. In the simplest terms, IDIQs are three- to five-year contracts that are
awarded to several large and small businesses based primarily on experience and pre-
negotiated pricing, with no funding or orders until a specific need arises. Orders are com-
peted among the winning companies (awardees) only, when the need for the product or
service occurs.

In the commercial sector MACs and IDIQs might be call blanket or general purchasing
agreements.

There are currently thousands of MACS and most are agency specific rather than govern-
ment wide - 20 to 30 new MACs are published daily at FBO.gov.

Individual agencies issue within agency MACs and in special cases government wide
MACs. The General Services Administration (GSA) and the Defense Logistics Agency
(DLA) issue most MACs. DLA MACs are used by the Department of Defense agencies
and GSA MACs are used by all federal agencies (DOD and civilian).

15
GSA Schedule Contracts
Companies deciding to enter the federal market entry should assume that obtaining a
GSA schedule contract is a perquisite (there are exceptions like construction services) for
winning federal contracts for the following reasons.

1.! GSA schedules are government wide MACs used by any federal agency and in some
cases state and local governments.

2.! GSA schedules cover almost all commercial products and service.

3.! Annual contract awards using GSA schedules total about 20 % of all new contract
awards. (See Appendix B)

4.! GSA schedules are unique in that they are always open for an offer from a company to
obtain a contract award. This makes GSA schedules an ideal way for newcomers to the
market to obtain a closing mechanism (a multiple award contract).

5.! MACs (other than GSA schedules) have a set bidding period (usually 60 – 90 days).
Companies have to elect to submit a proposal during the bidding period and then be se-
lected as one of the awardees to participate in the market covered by the MAC (the con-
tracts often add up to billions over the course of the 5 year contract). Only awardees par-
ticipate in the market cover by the MAC and all other any other companies are shut out
of the market.

Companies with federal customers should ask if GSA schedule contracts are used by their
Contracting Office to make buys.

Newcomers to the federal market should submit a proposal for a GSA schedule contract
when they are confident that they are going to enter the market. The proposal should be
submitted as soon as possible because the lead-time to obtain a schedule can exceed six
months. Waiting can cause a sale to be lost because the buyer cannot wait for the seller to
obtain a closing vehicle.

A buyer can accelerate evaluation of a GSA schedule proposal with a telephone call or
email to GSA if the availability of a schedule is instrumental to the buyer in awarding a
contract.

16
 Do You Qualify for a GSA schedule contract?

Select the Schedule and Special Item

Number (SIN) (part of a schedule) that
applies to your company.

Click Here

Call 888.661.4094, Ext. 2, if you are un-

sure of schedule or SIN and one of our
specialists will assist you in making a selec-
tion.

Find GSA schedule sales by:

•!Click Here to Find Competitor GSA Sales
•!Click Here to Find Sales by Schedule and SIN

17
 The Keys to Winning Federal Contracts

Newcomers Need Customers as a Basis for Federal

Simplistic as it may seem, the secret to success is sell to your federal customers or use your
customers to help you sell to other federal customers. The problem for most newcomers is
that they don’t have federal customers to use as the basis for their sales program.

The real obstacle to market entry is not the mysterious procurement process but rather
finding and then selling to buyers who have both the money available and the need for
what you sell. Real buyers are buried in the bureaucracy and hard to find. When found, ag-
gressive, one-on-one sales are required to win contracts because everyone is knocking on
their doors.

Professional and other technical services (including technology-based products of all

types) have to be sold by the company itself and there is little anyone outside the company
can do for you. Not lobbyists, ex-generals, Congresspersons, or small business specialists.
And knowledge-based and technology companies must have a distinguishing message that
sets them apart from the intense competition in this world—like competing against IBM.
Just saying you have the experts and have done it for others is not enough.

18
Start Sma! and Grow "om Within
Newcomers should use any means they can to land a small deal to get their hooks into the
market. That could include cold-calling (ugh), pitching to anyone you know in the federal
government or anyone who likes you and knows someone in the government, begging a
prime contractor for a subcontract, or begging a federal contracting officer to introduce
you to an end-user.

Getting the first one is tough. Use any means you can and dig into your street smarts to
land something, and the customer will help you sell if you perform for them. The new reve-
nue possibilities include:

• Extensions to your first, small contract

• New contracts to meet the customer’s future requirements

• Introductions to end-users with money in their agency

• Introductions to end-users in other agencies who manage a similar type of program that
your customer manages

19
About
Fedmarket
Fedmarket assists companies in obtaining federal contracts by providing training and con-
sulting services and online market intelligence services.

Please call me at personally at 301.908.0546 if you would like to discuss any aspect of fed-
eral sales, or call Fedmarket’s sales team at 888-661-4094, Ext. 2.

Richard White

Fedmarket

301.908.0546

rwhite@fedmarket.com

Visit us on Facebook and Twitter

Books available from Fedmarket:

Federal Sales Book Series – A three book series by Richard White

•!Rolling the Dice in DC

•!Cracking the $500 Billion Federal Market

•!GSA Schedules: The Fastest Path to Federal Dollars

Complimentary eBooks available from Fedmarket:

•!Loading the Dice in DC, Legally: Learn the Politics and Realities of Federal Contracting

•!Government Contracting for Donkeys

•!Government Proposal Writing for Newcomers

20
Complimentary Webinars from Fedmarket:
•!GSA Schedules 101

•!Government Proposal Writing for Newcomers

• Realities of the Government Marketplace

• Small Business Preference Programs

Free Product Trials

•!IDIQ Search Engine - 30 Day Free Trial

•!Proposal Writing eTemplate - 2 Week Free Trial

21
APP EN D I X A
PU RC H AS I N G M EC H A N I SM S A LLOWED BY FEDERA L BIDDIN G REGULATIONS

Number of Bids
Amount of Order Purchasing Mechanism Type of Mechanism
Required

Purchasing rules allow

Government credit
Up to $ 3,500 1 sole source credit card
cards
purchases under $ 3,500.
Purchasing rule allows
Small purchases made
informality, simplified
with purchase orders
documentation, and a
Up to $ 25,000 (telephone call and 3
limited justification for
minimum
purchases under $
documentation)
25,000.
Almost all buys under $
Up to $ 150,000 Small business set-asides 1 to several 150,000 are set-aside for
small businesses
Small business
preference buys made
with certified small Special purchasing
businesses including programs set up for
Unlimited 1 to 3
disadvantaged small businesses of
businesses, veteran various types
owned, women owned,
HUB Zone, etc.
Multiple award contract
Agency specific multiple with pre-approved
Unlimited 1 to several
award contracts vendors (orders placed
over term of contract).
GSA schedule product Multiple award contract
1 to several for products
buys (government-wide with pre-approved
Unlimited 3 bids received for
multiple award schedule vendors (orders placed
services
contracts) over term of contract).
Informal rule under the
Subcontracts to existing
assumption that the
Unlimited contracts with large Usually 1
prime contractor will
prime contractors
ensure competition
Public bids requiring
months of elapsed time
Unlimited Unlimited Purchasing rule
and huge files to justify
award decisions

22
APP EN D I X B
GS A AN N U A L S AL E S B Y SCHE DULE

Estimate of Federal
Annual Sales Market Size
Schedule Number Schedule Name
(in millions) (5 x GSA sales, dollars in
billions)
The Consolidated
00CORP $820 $4.1
Schedule
23 V Automotive Superstore 240 1.2
The Office, Imaging &
36 680 3.4
Documents Solutions
03 FAC Facility Maintenance 440 2.2
Transportation, Delivery
48 600 3.0
& Relocation Service
51 V Hardware Superstore 720 3.6
Building & Building
56 Materials/Industrial 570 2.9
Services & Supplies
Professional Audio Visual
Telemetry/Tracking,
58 I 760 3.9
Recording, Reproducing
& Signal Data Solutions
Scientific Services &
66 170 0.9
Equipment
Photographic Equipment-
Cameras, Photographic
67 40 0.2
Printers & Related
Supplies & Services
General Purpose
Commercial Information
70 17,200 86.0
Technology Equipment,
Software & Services
71 Furniture 1,600 8.0
Comprehensive Furniture
71 IIK 50 0.3
Management
Furnishings & Floor
72 80 0.4
Covering
Food Service, Hospitality,
Cleaning Equipment &
73 240 1.2
Supplies, Chemical
Supplies & Services

23
APP EN D I X B
GS A AN N U A L S AL E S B Y SCHE DULE

Estimate of Federal
Annual Sales Market Size
Schedule Number Schedule Name
(in millions) (5 x GSA sales, dollars in
billions)
Office Products/Supplies
75 & Service & New 740 3.7
Products/Technology

76 Publication Media 120 0.6

Sports, Promotional,
Outdoor, Recreation,
78 320 1.6
Trophies & Signs
(SPORTS)

Shipping, Packing &

81 IB 130 0.7
Packing Supplies

Total Solutions for Law

Enforcement, Facilities
Management, Fire,
84 2,600 13.0
Rescue, Clothing, Marine
Craft & Emergency
Disaster Response

Financial & Business

520 1,400 7.0
Solutions

Advertising & Integrated

541 430 2.1
Marketing Solutions

599 Travel Services Solutions 180 0.9

Temporary
736 Administration & 130 0.7
Professional Staffing

738 II Language Services 130 0.7

Human Resources &

738 X Equal Employment 240 1.2
Opportunity Services

24
APP EN D I X B
GS A AN N U A L S AL E S B Y SCHE DULE

Estimate of Federal
Annual Sales
Schedule Number Schedule Name Market Size (5 x GSA
(dollars in millions)
Sales, dollars in billions)

Leasing of Automobiles &

751 3,300 16.5
Light Trucks

Professional Engineering
871 2,900 14.5
Services

Mission Orientated
874 Business Integrated 5,200 26.0
Services

874 V Logistic Worldwide 1,200 26.0

899 Environmental Services 500 2.5

$40,000
Total Sales $200
(approximate)

25