| | A/E firms that traditionally have shunned the federal market are now finding it hard to find reasons not to take the plunge. The American Recovery and Reinvestment  Act will provide federal agencies with billions of additional dollars to spend directly—much of it which they will use to procure A/E, environmental, and construction services. Combined with the Obama Administration’s strong emphasis on “green” projects—retrofitting federal buildings to make them more energy-efficient, for example—the time seems auspicious for firms that want to pursue federal business for the first time.As you think through the market entry decision, however, do not confuse two issues: (a) the market is growing; but (b) while it is growing, it is not necessarily changing and, in fact, the “recovery” and “stimulus” legislation that is making the market bigger is also, in some respects, making the market a tougher one in which to participate.
When I am approached by clients who want to develop a strategy for entering the federal market, I almost always start by explaining three “iron laws” of the federal market. Iron Law #1: All federal markets are niches. You have seen the headlines proclaiming that now are the “golden times” for federal contractors. “$400 billion is at stake!” is a common proclamation.Forget the headlines. The A/E firms that are successful in the federal market ignore them. So should you. Even the largest and most successful A/E firms pursue niches within the federal market. If you want to be successful in the market, too, you have to be able to define, target, and identify the niches in which you can profitably compete. You probably will not succeed, unless you can, at minimum, identify the types of federal opportunities that are ideal for your firm. For example, let’s say that you have identified what appears to be a good opportunity for an A/E project being procured by the XYZ Division of Federal Agency A. Can you, at minimum, answer the following questions?What type of acquisition method is the XYZ Division likely to use? How are the evaluation criteria likely to be structured? Which factors will probably be weighed the most heavily? Do these factors play to your firm’s strengths? Can you differentiate yourself from the competition? What is the XYZ Division’s history of awarding contracts to ?rms that have never submitted a proposal in the past? Who are the incumbent contractors for the XYZ Division? Are they performing well? Which types of firms has this client favored in the past? Is the new procurement likely to be a set-aside? If so, what type? Will your firm qualify?
If you can’t answer these questions with some degree of precision, you probably can’t win. You will not just be competing against other potential new entrants. You also will be competing against firms that have spent years becoming ideally suited for this particular opportunity, and that know exactly how to fashion a winning proposal.Iron Law #2: Contract vehicles will make or break your attempt. 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. The “recovery” and “stimulus” programs are putting tremendous pressure on federal agencies to initiate projects quickly. But it is often difficult for federal agencies to establish new contract vehicles quickly. The rules that govern federal procurement—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.” To enter the federal market quickly, therefore, your firm will need a carefully crafted strategy for contract vehicles. For example, to what extent should your firm pursue subcontracting relationships with firms that already have multi-year contracts in place? How likely is it that federal agencies in your target niches will procure new contracts? What types are most likely (e.g., GSA; accelerated SF330 processes)? How can you position your firm to win such competitions as a prime contractor? Or, is your best strategy to develop teaming relationships now, where you will act in a subcontracting role in the new competitions? 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 selection committee 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 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. And keep in mind that the “recovery” and “stimulus” programs will make your job even tougher. For example, these programs bring with them new reporting requirements for almost all federal contractors. Are you prepared to report regularly on how your firm’s new federal contract is affecting job growth or retention within your firm? With sharp increases in federal spending, there will be tangible, new types of reporting, new constraints, and new scrutiny. 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.”
Dave Alexander of Lincoln Strategies, LLC (www.LincolnStrategies.com), helps A/E firms and others enter and thrive in government markets. He assists in areas such as market research, strategic planning, and pursuing federal contracts. Contact him at 978-369-1140, or send him an e-mail at dave.alexander@LincolnStrategies.com.
A note about the publisher of A/E Rainmaker, in which Mr. Alexander's article was published: Headquartered in Newton, MA, PSMJ offers more than 150 titles in book, audio, and video and publishes two newsletters on A/E/C firm management. PSMJ also produces the industry's preeminent annual surveys on management salaries, financial performance and fees and pricing. | |