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Selling To The World’s Largest Customer

Selling to the U.S. government is just as much about relationships as it is requirements.

July 29, 2008

  M any organizations see the government market as an opportunity fraught with red tape. The truth is, selling to the government is just as much about relationships as it is requirements.

What makes government business such a tempting target is the scope of the opportunity. The government always has a need. This is one market that remains relatively stable even in economic downturns--and the sheer size of the public sector offers abundant opportunities to many different types of selling organizations.

The bottom line is this: Pursuing the government market offers plenty of attractive benefits, but you need to understand the relationship and regulation factors in order to succeed in what indeed is a highly complex market. And, the same regulated procurement process that aims to level the playing field demands attention to detail that could make or break the deal.

Representing the Sales Performance Journal, business journalist Jennifer LeClaire talked with independent consultant Joe LaPilusa and Mark Skinner. Joe LaPilusa is a sales and marketing executive with three decades of experience selling to state, local and federal government, as well as to commercial markets for Unisys, Deltek Systems and First Data Government Solutions, about the opportunities and challenges of selling to the world’s largest customer.

Mark Skinner, vice president of business development for USIS, a risk management firm serving the government, has extensive experience in business development including strategy, corporate development, opportunity development, pursuit, and bid. He has been involved in key industries that serve the government vertical including aerospace, homeland security, and information technology.

Sales Performance Journal: How does selling to the government compare and contrast to selling to other organizations?

Joe LaPilusa: The sales continuum of identification, qualification and bid submission requires different techniques in this highly regulated market. The government will typically put out a Request for Proposal (RFP). Many companies make the mistake of thinking that’s the beginning of the process, but it is the beginning of the end of the process. In order to be successful, you cannot wait for that RFP to come out. When the RFP comes out, the government usually has a pretty good idea of available solutions, and which companies are going to provide the best solution, because those companies were talking to agencies about their capabilities well in advance of the RFP being drafted. The proposal, in response to the RFP, is the formal process to put all of your solutions and recommendations together on paper.

Mark Skinner: The selling fundamentals are the same, but what makes selling to the government different is the fact that most of the sales are more complex in terms of the number of buying influences involved. That, combined with regulatory and federal acquisition regulations, adds a layer of complexity. On top of that, the sales cycle is longer because of the way the fiscal year requirements work in terms of funding and appropriations and the oversight within the government.

SPJ: How do you determine if it’s worth it to go through the competitive RFP process, whether or not it will be profitable?

MS: That goes along with the prospecting stage. You have to look at the upcoming requirements or potential requirements and ask yourself some questions. Do we have credibility with the customer? Could we establish credibility with the customer to put us in a winning position? Do we have a real solution that maps to their issues? Then you have to start looking at some of the other issues in terms of trade-offs. For example, how will my probability of win be impacted by my teaming strategy? Further, you have to start looking at your scarce resources and making those difficult decisions on what you can afford to bid based on the return on investment.

SPJ: How do you build relationships to get in at the ground floor?

JL: You have to build relationships with target agencies early so you can understand the challenges of that agency and provide suggestions for solving their problem using white papers or other techniques that may influence the RFP. You need to understand which agencies have requirements that match your core competencies. You need to find out if they are going to have budgets. You don’t want to chase after deals that aren’t funded in the agency budget. This identify, qualify and influence process can begin years in advance. Some large procurements take
several years to develop.

MS: You are usually the strongest with current customers. You should try to expand on your current customer base. Build in the adjacent markets with prospects that are really close to your current customers. Take similar offerings to them so you can leverage credibility from your current client base. Then take the time and effort--and that could be six months or it could be three years--to cultivate deep enough relationships to win business.

SPJ: What are the ingredients of a winning proposal in the public sector?

MS: I believe it boils down to five key elements: 1) Understand the buying influences, 2) Understand the issues and problems that will be fixed, avoided or accomplished with this procurement and how your team will map into that solution, 3) Understand how the customer will evaluate cost, as that will have substantial impact to your cost-to-win strategy, 4) Shape the winning solution with the customer, and 5) Deliver a compelling, compliant and responsive proposal.

JL: You have to be able to articulate your solution very well in the proposal because it’s like your resume. It is what the government agency will evaluate regarding your people, solutions and past performance. Past performance is where you show your credentials and how much experience your company has that is relevant to the bid. You have to provide names of clients and write-ups on solutions, and they will check those references on your past performance. So if you are evaluating a project to pursue, it’s important to have other projects or applicable core skills--even if it’s not the exact same kind of project- -so you can demonstrate through past history that you are capable of handling the contract without undue risk.

SPJ: Are there any special considerations regarding pricing for government procurements?

JL: There are various pricing methodologies used by the government. In some cases, it is a commercialtype procurement where you provide your price, and the government just evaluates your price as submitted. There are also cost-type contracts of various design in which you have to actually reveal your cost to the government with a government compliant accounting system so they can audit your cost. You bid a fee on top of your cost, and the government will evaluate your cost and fee versus other bidders. It is important to determine early in the process if the procurement will require a cost-type contract. If a company plans to do business on that type of a contract, it needs to have its accounting system certified in advance and the company has to be willing to expose its costs. If you aren’t willing to do that, then you shouldn’t pursue the contract.

SPJ: What are the biggest challenges in the RFP process?

MS: Getting into the customer’s discovery process before they develop the acquisition strategy for the procurement. Your chances of winning a large government procurement increase the earlier you are involved in the process. Another challenge is knowing how the customer is going to evaluate cost and what their sensitivities are and what tends to drive them and how they structure their RFPs around cost.

JL: All of the advance work activities we discussed previously are critical success factors to a winning effort. As far as when the RFP actually does come out, there will be a fairly tight timeframe to respond. If you miss the deadline, you are out of the running. If you omit a mandatory item from the RFP, you will be deemed non-compliant. You need to have skilled people completing the RFP response who understand the terminologies that go along with government procurements, like musts, wills and shalls for example. If you don’t agree with the musts, wills and shalls, you likely will be disqualified. It is a very formal process. A winning proposal must first be a compliant proposal. The government won’t even evaluate a non-compliant proposal.

At the Federal level, there is a very defined process of evaluation. Source selection officials and evaluation teams are formally appointed. There are financial analysts who analyze the price and technical analysts who evaluate the technical aspects of the response. Evaluators score in accordance with a predefined scoring system. Some of the states and local governments are adopting that same level of evaluation formality. So, while the sales effort and relationship building must take place well in advance of the RFP, the RFP response or proposal is the actual document that will be evaluated and against which they’ll make the award.