Three “iron laws” you need to know.
by Dave Alexander, Lincoln Strategies, LLC
Are you thinking about entering the federal government market for the first time? In developing a strategy, keep in mind the following “iron laws.”
The federal government market for services and products is huge. Depending on who is doing the counting, federal agencies and departments procure more than $500 billion per year via contracts.
By any standard, that is an impressive number.
But the firms that are successful in the federal market ignore this number, and so should you. Do what the successful firms do: define, target, and pursue niches of the market in which your firm can profitably compete.
The starting point is to identify divisions and branches of federal agencies that procure the types of professional services or products in which your firm specializes. The next step is to identify the subset of these niches in which your firm might be successful.
For example, let’s say that you have determined that the XYZ Division of Federal Agency ABC procures precisely the types of professional services in which your firm specializes. Will this Division’s market be a good niche for your firm? The answer depends on this Division’s procurement practices, its contracting budget, and the competitive landscape. For example:
- Does this Division tend to procure your firm’s type of services in highly focused acquisitions? Or, does the Division tend to procure these services bundled with dozens of other types of services?
- Does the Division tend to procure your firm’s type of services using in-place task order contracts? If so, which types of contracts? Who holds these contracts?
- Does the Division tend to acquire these services on a cost-reimbursable, T&M, or fixed price basis? How well can your firm support each of these types of methods?
- When holding competitions, what types of evaluation criteria does the Division typically use, and which are weighed most heavily? Do these factors play to your firm’s strengths?
- How does the Division define “relevance” when evaluating Past Performance?
- Who are the incumbent contractors for the Division? The most heavily used subcontractors?
- Are the incumbents performing well? If so, do you have a vision of how to overcome this advantage, by differentiating your firm’s technical and cost factors? Do the incumbents have weaknesses in their recent performance? Can your firm present a compelling contrast?
- What is the XYZ Division’s history of awarding contracts to firms that have never submitted a proposal in the past?
- Which types of firms has this client favored in the past?
- How often does this Division set aside competitions for small business firms? What types of NAICS codes does the Division tend to use, and is your firm considered “small” under these codes? In these cases, would your firm qualify as a prime contractor? If not, do you know which firms would make good teaming partners, where your firm would participate as a subcontractor?
- How often does the Division set aside competitions for subcategories of small business firms? Again, how well would your firm fit?
If you can’t answer these questions with some degree of precision, you would be entering this niche blindly. You will not just be competing against other potential new entrants that might have done their homework better than you did. You also will be competing against firms that have spent years becoming ideally suited for this particular competitive landscape, and that know exactly how to identify, pursue, and win contract opportunities within it.
Iron Law #2: Contract vehicles will make or break your attempt.
Virtually all professional services performed or products delivered for the federal government are provided under a contract. There are many different types, and it is common to refer to them as “contract vehicles.”
In the federal market, the phrase “contract vehicle” is simply an overblown (but much-used) word for “contract.” You might have the perfect credentials for a particular federal project, with the capacity to start work almost immediately. The prospective federal client might be convinced that you would do a great job, and cost effectively to boot. But unless your firm has a contract vehicle that is accessible by that federal client, you will not get the project.
It is often difficult for federal agencies to establish new contract vehicles. The rules that govern federal procurements—the centerpiece of which is the roughly 2,000-page “Federal Acquisition Regulation (FAR)”—can often result in year-long processes just to issue a single contract.
The typical federal agency manager who is trying to initiate new projects quickly, therefore, will often turn to multi-year, task order contracts that are already in place with existing federal contractors; or (b) issue new contracts, within the FAR rules, where the procurement cycle will be as short and as predictable as possible.
This plays to the strengths of well-established, experienced federal contractors. They know that one of their key competitive advantages is the ability to tell a prospective federal client: “Not only can we do a good job on this project—but we also have an existing contract vehicle in place. You can ‘get’ to us with a minimum of paperwork and delay.”
Also, given your firm’s specific characteristics, to what extent can you offer federal agency managers a good option for accelerated procurement methods? For example, would your firm qualify for participation in a contract that the federal agency could issue under the FAR’s “Simplified Acquisition Procedures” rules? Can you realistically obtain a GSA contract quickly—one that has an appropriate scope?
Iron Law #3: Federal government agencies want “safe buys”—a tough hurdle for first-time entrants.
When federal government agencies select firms to perform projects, technical and pricing considerations are always important, but so is the issue of “safety.”
A federal agency Evaluation Panel can be perfectly satisfied that your firm can do a particular project well, on time, and within budget—and still award the contract to a firm with lesser technical skills or that proposed a higher price—if that other firm appeared to be a “safer” buy.
Federal agencies want to award contracts to firms that can be trusted to understand the special administrative and contractual requirements of doing business with the government. They want to select firms that understand that submitting properly formatted invoices and progress reports—on time—are important. They want firms that will not inadvertently bill the client for charges that are perfectly acceptable on commercial contracts, but not on federal projects. They want to do business with firms that are savvy enough to warn the client ahead of time if it appears that the client will need to seek approval from his or her contracting officer for special, long lead-time contract modifications to accommodate new circumstances.
If your firm is considering entry into the federal market for the first time, you need to understand how you will build the infrastructure and procedures to truly make your firm a “safe buy” in the federal market, and how to convey that theme in proposals.
All of this can be handled with aplomb by firms that are willing to invest in additional procedures and infrastructure, but as the hurdles get higher, the decision on market entry becomes more complex than simply declaring, “There are a lot of new federal projects out there. Let’s compete for some of them.”
When staff members in an agency decide whether to select your firm for a new contract or task order— whether as part of a formal Evaluation Panel (for competitive procurements) or as individuals (e.g., to select a firm to perform a project under an existing task order contract)— they have to consider many factors: your firm’s past performance, technical expertise, pricing, and capacity to perform the project within the required timeframe.
But even if your firm shines in all of these areas, there is still another hurdle. If the relevant federal staff members sense that you do not understand the nuances of federal contracting rules, the agency will not select your firm— even if your firm represents superior technical skills at reasonable prices.
Let’s look at this issue from the perspective of a federal agency employee who is trying to select a firm to take on a pending project. The agency employee wants to avoid three types of risks:
- Having to devote an excessive amount of time to teach the contractor the relevant federal contracting rules.
- Having to untangle sticky situations after the fact.
- Being blindsided by a major problem that the contractor arguably could have foreseen, were the contractor more experienced in federal contracting rules.
Firms that are successful in the federal market know the importance of conveying a sense of “safety.” This sense of safety has to be conveyed in all of the firm’s informal and formal interactions with prospective new federal clients: in informal relationship-building meetings; in formal pitches and presentations; and in written proposals or oral presentations that are a part of a formal competition.
This imperative includes a firm’s interactions with a potential prime contractor. If your firm has not previously performed work for the federal government, your first forays very well might be as a subcontractor to an experienced federal prime contractor. You need to be able to convey “safety” to the prime contractor. The prime contractor will not try to help you establish a contract vehicle if there is a sense that you don’t understand federal contracting rules, because any problems that you might create in performing the project will inevitably cause problems for the prime contractor.
Establishing your firm as a “safe buy” can be particularly difficult if you have little to no previous federal contracting experience. As part of your strategy for entering the federal market, be sure to develop an action plan for learning the rules, and how to convey confidence in your potential federal clients.