Starting in Federal Contracting — 5 Keys to Success
So how do you know if you are ready to make the plunge into federal contracting?
In my 7 years as a business development consultant, I have had the pleasure of meeting owners of companies of different sizes, shapes, and offerings. Many of them are thinking about whether it is worthwhile to get into federal contracting. When they ask me if they should you get into federal contracting, I bring up these facts.
· The Feds bought $665 billion dollars worth of products and services through Federal Contracts in FY 20. It is the biggest customer in the world.
· Federal contracting can be a steady stream of income (compared with commercial work) if you keep your customer happy and stay out of compliance trouble.
· But many companies also take the plunge into contracting and get little or nothing out of it-- 60% of companies with GSA schedules report zero revenue from them).
Most of the companies I have worked with are newbies to the federal market. Some people who have had a federal contracting career and now have set out on their own, others have a successful commercial business, and they are extending their work into the federal space. In my business, I have worked for more than 40 entities (and have talked to dozens more) and - while my statistician friends would say that this is too small a sample size to make inferences - this is my blog and I feel confident making some generalizations about the factors that lead to success or stagnation, based on my work. Others in my position have noticed the same trends, which bolsters my confidence in them.
When I sat down to think about this recently, I came up with 10 attributes. I’m going to cover 5 of them in this blog post and 5 more in the next one.
What separates the new federal contractors who are successful from those who are not?
1. A long-term strategy for winning that the ownership supports. Getting into federal contracting is a get-rich-slow proposition. Anyone who tells you otherwise (especially if you’re paying for their advice) is lying. Federal buyers are risk-adverse – they just don’t like to try out new things and new contractors. This is baked into the reward system of federal contracts: feds get punished for mistakes much more readily than they get rewarded for innovation and success. This system remembers mistakes for a long time. But this needn’t discourage you if your intent is to build upon providing excellent service at a reasonable price. To win in the gov-con world, the ownership must be committed to a long game.
2. They have a narrow product or service offering that is memorable. I have written about the elements of a strong brand proposition in a previous blog post. What many new contractors miss in marketing to the government is they believe they can do almost anything, and this informs not only their marketing strategy, but also their decisions to pursue and not pursue opportunities. Don’t fall into this trap. Buyers and teaming partners cannot be counted on to remember a whole lot of things about your company over time. A good brand proposition is memorable in that it
is specific,
the value can be easily understood by the buyer (it solves their problems) and
is prove-able with data or testimonials.
Ideally you will tailor the messaging to different markets according to their needs and how they talk about what you do.
It is a sign of a mature company that they have put behind them the idea that they can do anything. A company that has well-defined specialty area has shown that it has figured out what it does best and is a leader in that area.
3. Be willing to start out small and work up the value chain to bigger contracts. I tell folks just getting started in federal contracting that they should expect their first check from government work in the 9 to 18 months or maybe longer. When I am approached by someone that is having a bad year and they think they can land a couple of federal contracts to make up for it by Tax Day, I have the urge to convince them to try lottery tickets. They probably will have better luck. In Good to Great by Jim Collins, he describes a flywheel that a company owner must work hard to get spinning before organizational transformation and company success can happen. That sounds right to me in respect to entering federal contracting. It will take sustained and substantial effort to get the process running, but once you get to the breakthrough point the benefits will be forthcoming.
4. Be willing to break in as a dependable subcontractor. Government agencies don’t like to award new companies their first contract. In addition to performing on the contract (that is, doing a job that is timely, high-quality and on-budget) there is just so much compliance, reporting and administrative nonsense that goes with a federal deal. Minor miscommunications can screw things up. Internal issues may waste a great deal of government staff time, and in the end make them look bad. They’d rather not take heat because they gave the work to someone that didn’t have this all figured out.
On the other hand, experienced mid-sized federal contractors regularly turn over suppliers, and might be more willing to take on the risk of giving you a subcontract - if you have something real (not just an idea) to bring to their proposal, and later to their contract performance. Because they (the Prime Contractor) will be handling most of the administrative, reporting and compliance on the federal contract, there is less risk for them. They can issue you a commercial contract under their federal contract that is simpler for you and for them, and they retain control over your performance. All your subcontracting work counts toward your all-important “Past Performance Experience” when you get ready to prime your first federal contract. A partnership strategy is key.
5. Base your strategic decisions on market intelligence. OK, this may sound like a shameless plug for what I do, but the reality is that I offer these services to companies because I know this can help them win! The federal marketplace is enormous, diverse and complex. I have conducted dozens of market research efforts for companies that sell medical billing services, secure fax machines, legal services and one company that had a system that prevented a surgical team from operating on the wrong body part. I found that the feds buy ALL these things and more. Every time I do one of these reports, I have surprises in terms of who is buying them, how they are buying them and who they are buying them from. Without this kind of market insight, the aspiring federal contractor is likely to waste valuable time looking for opportunities that they cannot see, because they are not included on the right contracting vehicle, and the solicitation is never released to the public. Or because they are bundled with some other product or service that they do not sell. Or they wear out their BD team trying to break into the largest agency, when another agency is significantly less competitive. Federal business development takes a great deal of work for you and your employees. Why would you want to expend scarce resources without knowing the playing field in advance?
More about market research in this blog post and some free options to get started.
These are five strategies that companies who are getting started in federal contracting improve their chances of winning. In my next post I will get a little more granular about the systems and practices that make winning easier and more frequent.