This is a guest post by Tom Dee and Frank Lovaglio, Sr. of Primus Results.  Tom, who is the Founder & CEO of  Primus Results, has more than 15 years of experience working with firms in the aerospace, defense and technology industries.  Primus Results helps small companies develop business development strategies to work with the Federal Government.  They have had particular success helping small research and development firms grow their businesses by winning grants and contracts with various government agencies.  In this post they provide some tactics of how R&D firms might best approach the government.

The Federal Government spends billions per year in early stage research and development. Most of the spending is done in defense, national security, science, energy, and health. For those small and start-up businesses looking to grow and profit from this immense funding machine it’s important to align your mission and resources prior to embarking on a government business development path.

Government business is more complex than commercial business in many respects. Most large companies often separate commercial from government business entities for legal, regulatory, operational, and cultural reasons. Small Research & Development firms can not afford to make the separation and as a result are forced to make the choice to structure the company operating in a 100% government business environment, notwithstanding the commercial revenue portion or percentage. It’s a big financial commitment when deciding to pursue Federal business, specifically, the overhead and cash flow needs required to comply with regulations and government pay cycles. But if planned properly, the efforts can pay off in providing your business sustained top and bottom line growth for many years.

Grants are Not Give-Aways

Like commercial business, the company vision, mission, and goals must be in unison with the Government customer and no less competitive. Companies that are working towards a unique invention, product or process, that directly apply to the Government need, can apply for grants. Grant applications are initiated by all levels of Government (federal, state, county, city) and anyone can apply. The grant awards are often based on the merits and benefits of the applicants’ proposal as compared to the Government need. The grant is funded by the government agency and the winning entity, working under agencies pre-established guidelines, completes the work as proposed. Usually, the work is a study or research that ends up as a white-paper, however, tangible products might also be the outcome. Contractor performance standards are very loose and judged by the agency as a “level of effort” e.g., a good try is sufficient. This is a crowed field:  non-profits, colleges, universities, and private entities all compete in this space.

Other forms of grants are Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) administered by the US Small Business Administration. Federal agencies with certain levels of research and development budgets are required by law to set aside a percentage of it for grants or contracts under the SBIR and/or STTR programs.  SBIR and STTR are designed to further R&D concepts in a private company by providing structure and funding for those deserving innovations.

Slight differences between SBIR and STTR exist in how the programs are phased, project durations, award amounts, sponsoring agencies, rules for uses of subcontractors, and small business or non-profit participation. The Department of Defense (DoD) is primarily geared towards bleeding edge solutions to specific problems, military in nature, but might have commercial applications, as well. National Aeronautics and Space Agency (NASA), like DoD’s SBIR/STTR mission, seek to add capability that expand business base while delivering valuable results to NASA.

Most major federal government agencies have some level of grant, SBIR, or STTR activity. Contract vehicles are typically Cost Plus Fixed Fee (CPFF) meaning the cost risk is borne by the Government.  Additionally, contractor performance is “Best Effort” thereby significantly reducing risk for the contractor, an important distinction in SBIR/STTR projects, compared to mainstream Government contracts which have strict performance requirements.

Five Solid Government Business Development Tactics

1. Use this great website to educate yourself about the SBIR and STTR programs, find workshops/conferences about the programs, and search for relevant research topics from all the participating agencies. Check federal Government DoD and NASA SBIR STTR listings and submit proposals that matches your technology as advertised here and here. (Calling or visiting the Project Engineer before submitting SBIR/STTR is good and helping define the SBIR/STTR is even better).
2. Target Government Agencies that are involved in the same technology. Contact the Small Business offices  of the Agency for leads on what funded programs are being released in the near term. Determine process for accepting “Unsolicited Proposal”.
3. Every DoD LAB has a website that lists their Mission, Goals and Organization charts. Spend time to evaluate the mission and organizations of several Government Agencies to determine if the technology they are pursuing matches what you do and submit unsolicited proposals. Even better, visit key personnel at several Agencies, present your technology and determine what programs they are funding and determine how your technology can solve their problem. Convince them that they want you to respond to their next funded solicitation or to submit an “unsolicited proposal”.
4. Respond to “Call for Papers” from large technology trade shows or get an article published in technology journals.
5. Team up with the local university or large general contractor to get advice and develop possible partnerships. As an example, University of Central Florida maintains  several programs aimed specifically towards small business assistance for growth such as their business incubation program. Also, many economic development projects provide support and in some cases funding for innovation.

Final Thoughts

Pursuing Grants, SBIR’s and STTR’s do require a certain level of expertise/skills in the following areas:  Grant and proposal writing; Federal Acquisition Regulation (FAR) and agency supplemental regulation compliance (accounting & law); business development strategists; technical/engineering; customer/prospect representation; executive leadership; and strong internal processes to manage the organization. What can you expect after building a fine tuned organization?  A good three year goal might be to capture 30% of bid dollars proposed. If your company implements the five tactics above, picks the opportunities carefully, properly examines risk and provides appropriate resources, a fair share of business can be won. Happy hunting!

You can contact Primus Results at 727-580-9883

This is a guest post by Jennifer Schaus the principal of Jennifer Schaus & Associates, a leader in government consulting and GSA Schedule services based out of Washington, DC. The Federal Government is in a hurry to award stimulus projects and kickstart the economy.  But as a recent article in Government Executive shows getting on a GSA schedule is key if you want to be on the gravy train.  Setting out to work with the Federal Government for the first time can be a daunting prospect for many businesses.  Jennifer Schaus & Associates has been hugely successful at helping companies win federal government business and so I asked Jennifer if she would write a post on how best to approach the federal market.

Selling to the federal government can be a lucrative long term investment.  A company who has done their homework and understands the process and time frames, obstacles, paperwork and financial investment involved will be successful.  Government sales should be evaluated in the same way you would evaluate selling to a foreign country; sales is sales, but there are different rules, processes, internal cultures and protocols to keep in mind.

For a standard B2B organization, selling to the federal government can be a smart way to mitigate risk, diversify the customer base and survive economic fluctuations.  Government business can be steady with predictable buying patterns and guaranteed payment.

Research

The US government is the largest purchaser of goods and services in the WORLD (pre-stimulus) spending $400 Billion dollars annually.  There is money to be made in this unique space.

The first step to considering the government as a customer is to conduct market research for your solution.  You can do this yourself or outsource to a government consultant who can quickly provide in depth information and analysis.  This data will include information about market share, competitive intelligence and historical government spend in your industry and strategic advice on best suited agencies.  With that information, you should have a sales target.

Game Plan: Players & Tools

Time and money are the necessary tools to cracking the government nut.  Time is essential as the government is a risk-adverse client and there are many hoops to jump through prior to winning business in this sector.  Substantial contracts can take anywhere from 6-24+ months to be realized.  Government budgets are cyclical but are appropriated in advance, so you may be in line behind the competition but this doesn’t mean you can’t also get a piece of the pie.  You just need to get into the rotation.

A sales staff dedicated 100% to the government market is necessary.  An educated and aggressive sales force with experience in your industry and also in the government arena is crucial to be effective. Sales agents, consultants and lobbyist can also be helpful and leveraged in conjunction with the sales team.  Networking events, trade shows, presentations and meetings are part of the plan and routine.

Because the government is risk-adverse, relationship building in sales process is imperative.  Once you have made your case, presented your solution, found a need and the budget dollars to cover the cost – the real magic begins.  All purchases over $25k must go out for bid and are found on  FedBizOpps.   Most purchases at this level (regardless of B2B or B2G) are slated for an intended recipient or a select few capable of performing within specific terms and conditions.  If you have been effective, these solicitations have been written with language that is geared towards your solution.

The GSA Schedule is your government hunting license.  Much of the stimulus spend will flow through this contracting vehicle.  The GSA Schedule is a highly leveraged open contract that allows commercial companies to sell direct to the government.  There is specific business criteria that must be met to obtain the GSA Schedule and the process can and will take several months.  Efficient companies will outsource this to a government consultant due to the opportunity cost associated with completing this internally.  Once you are “on Schedule”, you are viewed as a serious contender by the government.  The government is required by the FAR (Federal Acquisition Regulation – the government Bible) to first look for the item desired on the GSA Schedule prior to seeking on the open market.  Government also prefers to purchase from the GSA Schedule as it accelerates the procurement process – making it a win-win situation for both you and your customer.  The GSA Schedule does NOT however guarantee any sales, as it is only a ticket to the dance.  (*GSA Schedules are also utilized by state and local governments as well as a select list of NGO’s.)

Conclusions

While a good portion of the ARRA stimulus spend is flowing to businesses who have been in the mix and played the game for several months or years, there are still opportunities to win government contracts.   Before, during and after the stimulus money comes and goes, there will be contracting opportunities.  The goal is to quickly determine your market share potential and your return on investment while being cognizant of the key resources required and leveraging the resources available to you.

If you are a small business considering or actively seeking to bid on federal contracts it is crucial that you look into what small business certifications are available to you.

This year federal spending is expected to reach its highest levels since World War II and account for nearly $1 out of every $4 in the US economy.  If there was ever a time to be thinking about government as a customer it is now.

Under the Small Business Reauthorization Act of 1997, the federal government has a goal of awarding at least 23% of contracting dollars to small businesses each fiscal year.  In addition, Federal Acquisition Regulation (FAR) 19.502-2(a) states that a purchase with “an anticipated dollar value exceeding $3,000, but not over $100,000, is automatically reserved exclusively for small business concerns and shall be set aside for small business unless the contracting officer determines there is not a reasonable expectation of obtaining offers from two or more responsible small business concerns that are competitive in terms of market prices, quality, and delivery.”

As a result the Federal government will award contracts with an aggregate value of over $85 billion this year to small businesses.  There are very few other customers that are predisposed to small business in this way.

Within the 23% goal there are several smaller goals focused on different types of businesses as follows:

• Small Disadvantaged Businesses – 5%
• Women-Owned Businesses – 5%
• Disabled Veteran-Owned Businesses – 5%
• HUBZone Businesses – 3%

In order to be able to take advantage of contracts that are “set-aside” for these types of businesses you need to be qualified.  It is up to the company itself to self-certify as to whether it qualifies as a small, small disadvantaged, women-owned, veteran or disabled-veteran owned business. I covered what the definition of a small business is here.

The Small Business Administration administers 2 programs which it provides formal certifications for:

• HUBZone
• 8(a) Business Development Program

The benefits of being qualified in these programs are considerable and warrant their own posts which I will do later this week.

As a footnote, until October 2008, the SBA formally certified Small Disadvantaged Businesses (or “SDB”) but this program was suspended as it was deemed too cumbersome and costly.  Any business that has 8(a) status is also considered an SDB.

Finally, please note that this post only relates to federal contracting.  At the local level there will be other qualifications and certifications for small businesses that I will separately cover another time.

The most common way that formal competitive bids can be avoided is when a contract value falls below a certain dollar threshold.  Above that threshold and a formal competitive sealed bid is usually required.

At the local government level, the threshold amount can vary considerably from one agency to another.  There is no rhyme or reason to what the thresholds are and it is not uncommon to have 2 neighboring cities of similar sizes with very different threshold levels.  I have seen them as low as $10,000 and as high as $250,000.

Any vendor wanting to do business with a local government agency should research what the thresholds are because it may be that you are able to set your prices below the threshold and avoid a long costly process that is highly competitive.

How do you find out what the threshold is?

Every government agency will have a set of rules, codes and ordinances that govern the way its business is run.  One part of these ordinances will be a procurement code.  The purpose of this section is to provide the agency with a unified purchasing system, to maximize the purchasing value of public funds and to provide safeguards for the integrity of the system.  The procurement code will clearly outline what the threshold levels are.  Sometimes there are multiple thresholds and different levels for some services (like construction) that are frequently purchased and command a high value.  The best way to locate an agency’s ordinance is to look for details on their website.  There are some sites that store codes for a number of local governments.  For example Municode claims to have the codes for 1,600 local government agencies.

If you are below the threshold does that mean you can totally avoid competition?

Unfortunately not, even informal solicitations will require the agency to get quotes from other vendors.  But a formal process with voluminous documents and strict rules will not take place, making the life of the vendor much more straightforward.

An RFP process often includes a formal presentation by a select group of short listed vendors.  An evaluation committee is established by the agency and based on the initial RFP responses they select a small number of vendors to formally present their company and pitch why they are best placed to perform the contract.  By this stage there may be little between the vendors and so the presentation enables the evaluators to have an “eye-to-eye” meeting and help them make their decision.

If you are invited to present it means the winning post is within touching distance.  As a finalist you have a great chance of emerging as the victor.  The presentation is now crucial and you need to do everything to ensure you are in the best position possible.  If you can, the first thing you need to do is engineer when you will present.

Is it better to present first or last?

Seth Godin, who writes a must-read blog recently wrote a post about the benefits of being first. Seth says “applying for a job, or to college, or visiting a client to pitch a project–in each case, going first is a significant advantage”.  He argues that by being first you have the ability to set the standard and, if you have persuaded the buyer, another vendor will have the more difficult task of changing his mind.

I agree with Seth that there are situations where going first is an advantage (particularly if you offer something very unique and different) but in an RFP bid with little between each of the finalists in terms of price and service I believe being last is preferred.  Usually there will be at least 3 finalists and sometimes as many as 5.  In many RFP situations (particularly for standard services), each vendor will offer a very similar proposition and the evaluation committee will be primarily concerned that the winner will perform the contract to the level they require.  The evaluators have to sit through many hours of presentations and each will have their own highlights.  It is the last presentation that will be most clear in their minds and when they meet shortly after the last presentation to make a decision you want to be at the forefront of their thoughts.  That’s why I consider last as the most advantageous place to be.

How do you engineer when you present?

You may not be able to but it’s worth trying.  When you are informed that you made the shortlist you will probably be given a time (rather than a choice) when you are expected to present.  In order to change your slot all you need to do is contact the agency and ask if you can.  They may refuse or have to contact another vendor to see if they will swap but if you don’t ask you won’t know.  The important thing is to try – even the smallest advantage can be important.

A recurring trend I see among first-time bidders is the submission of a significantly higher price than the winning vendor.  It is not uncommon to see bid tabulations that show the highest priced vendor at 10 or 15 times the awarded contract.  More often than not the culprit is a first-time bidder.

Why does this happen?

Vendors often fall into the trap of thinking that government has a lot of money and they can get away with charging a higher price than they might ordinarily propose.  Those who are less experienced at government bidding sometimes fail to do their homework on their competition and customer.  They sense that in the scheme of things the contract they are bidding on is small given the overall annual spending of the agency and so the customer can afford a higher price – basically they get a bit greedy.  But the reality is very different.  Government often will get a better price than the market because they are disciplined buyers – seeking as much competition as possible and undertaking a rigorous procurement process.

You need to change your strategy when it comes to proposing a price that will win a government contract

First, don’t be greedy.  It goes without saying that your proposal should be profitable though.  It’s not worth bidding a price that will cost you more than you make as it will only end up catching up with you later.

Remember also that in the private commercial world, vendors often pitch a price that is higher than the one they will ultimately take on the basis that they expect some kind of negotiation to take place.  Street smart business people know that buyers like to feel they are getting a good deal and so often propose prices that end up being higher than the amount they finally settle upon.

Government contracts that are awarded solely on price require a different strategy.  There is rarely any negotiation – the lowest bidder wins and the government agency accepts the price that was bid.  Moreover, 9 times out of 10 other experienced government bidders will also be submitting proposals.  They will price competitively and so failing to analyze what your best price is may mean that you have wasted your time and energy responding to the bid.

Be smart when submitting a proposal on a government bid and be realistic with your pricing.

I have written before about the difference between an RFP, RFQ and ITB.  In particular, that an RFQ and ITB are usually based purely on price whereas an RFP will have a variety of additional evaluation criteria.  But RFQ’s and ITB’s are not always awarded automatically to the lowest bidding party.  That’s because the bidder must also be responsive and responsible.  This can often confuse vendors trying to win government contracts so it’s worth explaining what the term means.

A responsive bid is one that meets all the terms, conditions and specification of the bid. The bid must comply with the content requirements of the bidding documents.  In other words the bidder must do what the bid documents say they must do, whether it be pricing in a certain way, attending a mandatory pre-bid conference or submitting a bid bond.  Other examples where a bid may be considered non-responsive include:

• Bid is incomplete
• Bid is not signed
• Bid is late
• Discrepancies in the bid

A responsible bid is one where the bidder has the overall capability to satisfactorily perform the contract. In some ways it’s similar to buying a pair of running shoes.  Just because one pair is cheaper than another does not mean you will always buy the cheaper pair.  If say you are training for a marathon you need to be sure that the shoes you buy will last long enough to get you through your training.  In a similar way a responsible bidder will be one that has the financial resources, employees, facilities and references that will ensure it performs the contract.  Examples where a bidder may be considered not responsible include:

• Poor references
• Bidder does not have proper business registration or licenses
• Banned from working with other agencies
• Not qualified as a foreign corporation
• Questions about financial capability to perform

Anyone who has ever been involved in sales knows how important it is to have open lines of communication with prospective buyers.  This is of course how a seller can identify a customer’s pain, show where his product or service can add value and build trust.

Selling to local government is no different to any other sales process – you still have to find a way of convincing someone to buy your product or service.  But the rules of engagement can often be quite different, particularly once a bid has been published.  Many local government agencies impose strict regulations on when and how a bidder can communicate with them.  This can often be a source of real frustration to a vendor and many feel isolated and curious about the real intentions of the buyer.

However, it is important for vendors to understand that this is pretty normal in the public procurement world and doesn’t necessarily mean that you are at a disadvantage.  Like no other buying organization, government is under the public microscope and so they must put in place mechanisms that ensure fairness and transparency in the acquisition process.  If they don’t they leave themselves open to questions about favoritism and the potential of an outcry from their shareholders – you and me.

Rules vary from one agency to another but generally vendors find that there is a prohibition on any oral communication between a vendor and the government agency employees once a bid is advertised until a contract is awarded.  In some places something called a “Cone of Silence” may be imposed. The Cone of Silence prohibits communications regarding an RFP, RFQ or bid between potential vendors, service providers, bidders, lobbyists, or consultants and the agency’s employees.  A Cone of Silence is also usually imposed between the elected officials and the agency’s employees.  All of this is to ensure that one vendor is not favored over another.

Communication is generally allowed in the following circumstance:

• Written communication
• Questions of process or procedure
• Oral communications at pre-bid conferences or oral presentations before selection committees
• Contract negotiations during any public meeting

Any question that changes, adds to or clarifies the terms of the bid will then usually be conveyed equally to all competitors in an addendum to the solicitation.

Communication rules are much more relaxed prior to a bid being published.  This is the time when I always urge vendors to meet and speak with government buyers, build relationships and qualify their prospects of selling.  Once the bid is published it becomes much more difficult.

Juan Tambolini is the owner of a South Florida car wash called Sample Road Auto Spa. The business was established about 6 years ago and since then Juan has built the company into one of the most successful car washes in the region.  Today Sample Road Auto Spa becomes the first company on our Smart Vendor List because they put the time and effort into winning a contract that at least 103 other companies were eligible for but weren’t smart enough to bid on.  The result is that Juan won his first government contract which has the potential of adding 10% more volume to his annual business.

I caught up with Juan earlier this week and he explained how an employee of his mentioned to him that the local county (Broward) had issued a bid for car washing services.  Like many vendors he had never considered that he could provide his service to local government but as soon as he found out about the bid it made sense.  Local government owns a whole variety of vehicles from police cars and fire engines to public works trucks.  Broward County actually has an entire Fleet Services Division which is dedicated to maintaining the County’s vehicles.

In the bid, the County estimated that they would need about 4,500 car washes each year.  With the contract potentially lasting 3 years he figured that could add a good deal of stable revenue and so he jumped at the opportunity to bid on this lucrative contract even though he had no experience working with government.

In order to bid, a Vendor needed to be certified as a small business enterprise and have a physical address within the County.  According to the 2006 County Business Patterns Census there are 107 establishments in Broward County that provide car wash services and were likely eligible for this contract.  However only 4 companies actually bid and as Juan submitted the lowest price and was the most responsive and responsible bidder he was the clear victor.

While the benefits are obvious – an increase in volume, marketing within the community and ultimately revenue – I was interested in understanding Juan’s experience in submitting the bid and whether he had faced any major difficulties.  From an administrative perspective he said that submitting the bid and gathering the paperwork was a lot of work.  Also, he needed to extend his insurance so that it was in line with County policy.  This took time.  However his main challenge had not been evident at the outset. The volume of business estimated in the bid had not immediately emerged. Many within the County were unaware that they now had somewhere to get their car washed.  Juan realized that even though he had won the contract he still needed to market internally within the County and make sure that employees know that Sample Road Auto Spa is available to clean their County vehicles.

Juan is now beginning to reap the rewards of putting in the time and effort to bid on the contract.  He hopes to win many more local government contracts in the future.

You can visit Sample Road Auto Spa at 2501 W. Sample Road, Pompano Beach, FL 33073.  Check out their website for coupons and promotions.

If you want to be in the best position to win local government contracts your first step should be to register as a vendor at as many local agencies as you can.  Let’s look at why it’s so important and how you go about registering.

Why?

Simple – that is the way agencies will know that you exist.  It is just about the best initial marketing you can do if you want to win government contracts.  Get your name in their database.

Vendors spend huge amounts of marketing time trying to build lists of prospective buyers.  Local government purchasing departments actually do the opposite and look to build a database of companies they can buy from.  Even better, they want to know about local, small or disadvantaged businesses too.

Whenever an agency wants to buy something they likely go to their database first.  If they are publishing a formal bid they will make sure that their registered vendors are notified.  If they don’t need a formal bid because their purchase is at a low enough value, you are more likely to get a call if you are on their list than not.  In my opinion, vendor registration is a sure fire way of getting qualified inbound leads.

How to register as a vendor?

I won’t pretend otherwise – registering can be a tedious task.  The problem is there is no universal registration at the local level (CCR does not apply) and so you have to complete much of the same information in different formats over-and-over again. That said it is worth the effort.  Here is some advice about how to approach the task:

1. Make a list of all the local government agencies in your region together with their website address.  A good place to start building that list is your State’s website
2. Visit each site.  Larger agencies will often have a purchasing section on their website with details of how to register as a vendor.  You may even be able to complete registration online.  For medium sized agencies you might find the purchasing section under the finance department.  For smaller agencies, the website may not contain any information so you will need to phone
3. Be prepared with some basic information to fill out the application.  The level of information varies but in general you will need your Federal Tax ID, business license numbers, years in business and also think about who will be your contact person
4. Make sure your business is correctly listed.  One of the key parts of the application will be letting the agency know what you sell.  You may be asked for your NAICS code, which I discussed here or the agency may have its own classification system and ask you to choose from a number of selections.  Be careful to go through this thoroughly as quite often more than one category will be applicable

Finally in addition to the application you will probably also have to submit a W-9 which is an IRS form requesting your taxpayer identification.  It is straightforward to complete and you will be certifying that your tax ID is correct and whether or not you are subject to backup withholding. Don’t be concerned about this if it is requested as it is standard practice.

Get started – go register!