Despite the many obstacles to contracting with the government, the second half of 2012 offers many lucrative government selling opportunities, GovPro.com's Mike Keating writes in this Expert's Corner.
Do government purchasing departments drown prospective vendors and contractors in paperwork and procedures?
"I certainly believe there is too much red tape in selling to the government, which is driving up procurement costs on lower ticket items, which is the core of our business," Steven Bosio, president of Grand Rapids, Mich.-based MarketLab, told IMT. MarketLab is a direct-mail catalog supplier of specialty products and services for health care professionals.
"We have been seeing a phased approach in eliminating government procurement cards, and have also started to see headcount reduction in the purchasing functions that is forcing centralized purchasing for even the smallest items," Bosio adds. "We continue to hear from our [government] customers that this will be the new process for all items going forward."
At Los Angeles-based OnSite Consulting, founder and principal James Sinclair says his restaurant consultancy had to stop accepting and responding to government requests for proposals (RFPs) last year, even though "almost all the time we had the most cost-effective and viable solution" in the RFPs his firm submitted to cities, states, development zones and municipal properties.
"It's not that the hoops weed out the under-performers," Sinclair says. "Instead, they weed out companies who recognize that the value/time of preparing the document and follow-up work just doesn't make sense. So super-large companies that have divisions set up just to write documents and lobby for the contracts are the only ones left in the game, hence the incredible lack of evolution, innovation or care in these units."
There is plenty of red tape for manufacturers looking to land government business, according to Mark Amtower, a government marketing expert at Amtower & Co. "In part, the hoops are there - registering with the Central Contractor Registration-CCR System, for example - to ensure that the business is legitimate and established," Amtower says. "The small biz regulations are there for the 'level playing field,' but they are complicated and sometimes with loopholes that can be exploited by larger businesses."
For most manufacturers, Amtower advises using channel partners, or resellers. "It is the best way to go. That way the manufacturer can avoid the red tape and avoid setting up a government unit for sales, marketing, accounting and bidding."
Manufacturers looking to break into the government market should acquaint themselves with one of the 93 procurement technical assistance centers around the U.S. (Check here to locate the center nearest you.)
"Our common mission is to assist businesses that are seeking to do business with the government," Chuck Schadl, group manager of contracting services at Georgia Institute of Technology's procurement assistance center, told IMT. "We teach, advise and coach companies on how to do business in the government sector.
"These days, more than ever, our advice for businesses is to be realistic and to allow for a realistic amount of time to effectively market to the government," Schadl explains. "It doesn't really matter whether a company is new or very well established. If they don't have previous experience selling to the government, then it's going to take a while to learn how to do that because the government sector is different from the commercial sector."
The Washington-based Coalition for Government Procurement offers training workshops for companies new to the federal GSA Schedules program and those with contracting experience. The Multiple Award Schedule (MAS)Basic Training workshop provides companies with the tools and information to obtain and manage a Schedule contract and become familiar with the Schedules program. MAS Basic Training is offered quarterly. (Check here for training guidelines.)
Lukewarm economic news and uneven revenue growth in governments translate into minimal growth in government purchases. In 2012, government purchases of goods and services will total $3.03 trillion, the same as 2011, according to economic forecasting firm IHS Global Insight, with federal government purchases reaching $1.22 trillion and state and local government purchases reaching $1.81 trillion. In 2013, government purchases are expected to rise to just $3.04 trillion, and in 2014, purchases will grow to $3.07 trillion, IHS forecasts.
State tax revenue is one bright spot. In the final quarter of 2011, states recorded their eighth consecutive quarter of revenue growth. In fact, in Q4 2011, overall state tax collections finally reached levels last seen in the final quarters of 2007 and 2008, when the recession first took hold.
State fiscal conditions are continuing to improve into fiscal 2013, although many state budgets are not fully back to pre-recession levels. The National Governors Association and the National Association of State Budget Officers' Spring 2012 Fiscal Survey of States report shows governors and legislatures are keeping a tight grip on state spending, even as state revenues are expected to top the levels last seen before the height of the recession.
Fiscal 2013 general fund revenues for the states are projected to increase by $27.4 billion, or 4.1 percent, but recommended spending in the states is projected to increase by $14.6 billion, or 2.2 percent, suggesting that states remain cautious about the strength of the national economic recovery.
Benjamin Dunay, founder of Cambridge, Mass.-based Sixthree Technology Marketing, LLC, a company that helps small businesses sell to the military and government consumers, sees several opportunities in the market through the rest of 2012. "I remain bullish on the defense marketplace generally, and specifically in the clean energy, IT and surveillance sectors - each of which has wide-reaching technology sub-sectors and each of which is being driven by real, operational needs (and not budgetary or economic drivers)."
"In some cases, government business is definitely worth it, as margins can be good and companies can become adept at how to most effectively deal with government contracts," Lisa Anderson, founder and president of Claremont, Calif.-based LMA Consulting Group, says.
Anderson, whose firm consults with businesses on strategic operations, supply chain, operations management and other disciplines, nevertheless cautions, "If your business isn't focused around a core competency that relates to government contracts, it can be an overwhelming burden."
Michael Keating is senior editor for Government Product News and a contributing editor for American City and County, both published by Penton Media Inc. His 2012 government budget forecast is available at GovPro.com; as well as the mid-year 2012 forecast. Go here for his IMT 2012 outlook on government selling. Keating has written about do-it-yourself market research for manufacturers and manufacturer-distributor relationships for IMT. Keating has written articles on the government market for more than 100 publications, including USA Today, Sanitary Maintenance, IndustryWeek and the Costco Connection. Mike can be reached through his website, MikeKeat.net.