Poorly defined project requirements by government buyers, a lack of strategic approaches to business development by contractors, and probabilities of win calculated by gut feel contribute to a slow, wasteful government contracting process.
Government contracting is hard, and there is evidence to back it up.
According to Grant Thornton’s 2015 government contractor survey:
- Profit margins are dismal, with 51% of respondents reporting little (1-5%) to no profit
- Revenue can be inconsistent, as 37% reported declining revenue year over year
- Contractors are often asked to perform work that is out-of-scope without a contract modification, further lowering profit margins
- Win rates average 35%, and that’s probably being generous
These are not good outcomes.
Government contracting doesn’t have to be this hard, but here are the primary reasons why it is.
1) Project requirements are often poorly defined
There are many situations where the needs and requirements of the government agency are extremely vague and poorly defined.
It’s easy for government buyers to define requirements when purchasing commodities like pens or toilet paper. Let’s see – I need 1000 blue pens, 800 black pens, and lots and lots of toilet paper. Go!
But when searching for a high-value solution like a software platform or strategic consulting services, clearly defined requirements can make or break a project, and many times these are lacking.
One reason for this is that some buyers believe that they can communicate the exact requirements they think they need. While some are able to do so, most just don’t have the subject matter knowledge or experience in the particular field to create these requirements.
Another reason is that government buyers focus on what they think the solution should be before properly identifying and communicating the problem they need to solve.
For example, let’s say the IRS needs a new software platform for its auditors, and releases an RFP for this project. The RFP might say that the software needs specific pages, certain features and functionality, a custom color scheme and layout, and the vendor has to follow a defined process in creating this website.
Instead of simply listing what they think is needed, a better approach might be to better communicate the problems that the end users are having and ask the government contractors to come up with the solution and approach.
There are plenty of other reasons why project requirements may be poorly defined. No matter what the reason, requirements need to be clarified from the start so a smooth acquisition process can occur and a successful project can be executed.
2) There is a lot of bureaucracy involved, unnecessarily extending sales cycles
The government moves slowly.
Sometimes this is caused by the aforementioned fact that agencies aren’t good at communicating what they need, and they have to revisit and edit their requirements over and over again.
Other times agencies are extremely conservative in interpreting what they can or can’t disclose to government contractors during the acquisition process to avoid getting in trouble. This leads to a lot of vagueness and uncertainty as well.
Career politics often rears its ugly head, too.
Starting an ambitious project with lofty goals can sometimes be more important to an agency official’s career than finishing it. So the official may kick off a huge initiative that may extend past his or her tenure, then leave for another agency. The project then becomes stalled for a long time or even cancelled, and many contractors who have been working on the opportunity are left twiddling their thumbs.
Other times, there are just some silly, unnecessary requirements that drag down everyone involved.
Regardless of the excuse, everyone can agree that the government contracting sales process is riddled with bureaucracy and just takes too long.
3) Cost plays too much of a role in determining awards
Lowest price/technically acceptable (LPTA) is perfectly fine for commodity supplies and services.
Are company 1’s pens and toilet paper cheaper than company 2’s? Easy choice.
Are firm A’s janitorial services a little more expensive than firm B’s? Go with the latter!
But it’s too often than high value-added services, like software development or strategic services, are also judged in this manner. And this can be the first step toward mediocre work and even costlier projects.
Agencies need to improve their recognition of situations where differentiation between contracting firms matters, and select the firm who can do the best work, even if it’s not at the lowest price.
4) There are RFPs everywhere
The ubiquity of RFPs might sound like a good thing, but it can be a real hassle.
Sure, there’s Fed Biz Opps and the many other software tools that let you filter through opportunities that might fit what your company does. But there are thousands of other RFPs that reside on agency websites and other locations that may not be as easily accessible.
Searching for and wrangling opportunities can take a lot of a contractor’s time and energy, and you often might have no idea what your chances of winning those bids are. This can cause your company to potentially waste time and throw good bid and proposal dollars after bad.
5) Some government contractors aren’t strategic with their business development efforts
Yes, there are thousands and thousands of open RFPs to bid on. But if you’re only using RFPs from Fed Biz Opps to fill your pipeline, it’s already too late in the process for you to have a chance to win most of them.
Building relationships early is critical to winning bids, and companies need to be strategic in their planning and sharp in their identification of potential opportunities to give them the best chance to win.
Other government contractors pursue every possible opportunity that they think they might be able to execute, with little regard for their probability of win (PWIN).
If you have the resources to do this, more power to you. Still, you may be wasting precious time and resources chasing opportunities that you don’t have a high chance of winning.
6) Building relationships with government buyers can be difficult
As mentioned in the last section, it’s imperative for contractors to develop a relationship with the government buyer prior to the RFP being released.
But it can be difficult to identify who the decision maker is and who you should approach to forge a connection.
Who should you speak with? Is it the contracting officer, program manager, or some scientist or other staff member? Who will be on the technical evaluation team, and how can you connect with him or her?
Many times it’s not clear who the best point of contact is.
Also, agency officials can be elusive and not want to talk to government contractor business development reps because having many of these conversations can be very time consuming.
Relationship building may be one of the most important steps in winning a contract, but it’s certainly not the easiest one.
7) It’s tough to analyze the competition
Understanding your competition is imperative to determine how to best differentiate your company in the eyes of the agency’s evaluation team.
You should ask yourself these questions:
- Who else might bid, and how does your company compare to the competition?
- How might the competition position themselves for success?
- How might the competition price their offering? Will your pricing be competitive?
Unfortunately, it can be difficult to find dependable answers to these important questions.
Many just assume that their closest competitors will bid, with little evidence to back up these claims. Others may not recognize that there are additional companies looking to expand their offerings and may also compete for these contracts.
There’s a lot that can go into a comprehensive competitive analysis and it can be difficult to wrangle all of this info.
8) Finding the right partners can be challenging
Your company may not have the credentials or past performance to compete for a particular opportunity, and partnering with another firm might be the only way you win that bid.
How do you identify other contracting firms that are open to partnering, and how will you know if they’re a good fit to work with your company? How can you know they’ll actually help you win the project?
And even if you identify these potential partners, how will you know they have the bandwidth to help you bid for that job?
There are many factors that can make or break a partnership, and finding the perfect partner to help grow your business can be a difficult task.
9) PWIN is calculated ad-hoc and with gut feel
Probability of win might be one of the most important metrics of the contract sales process. This is the foundation of the go/no-go decision and can determine whether a lot of time and money is spent pursuing a contract or not.
Yet many times this PWIN is pulled out of thin air and determined by gut feel, with little evidence to back it up.
There are many factors that can contribute to an opportunity’s PWIN, and gathering this data to accurately predict this probability can be difficult. Maybe that’s why some firms just make it up.
The ideal way is to use a combination of hard data and intuition to truly understand your PWIN for each opportunity, and dedicate resources to those bids where you have the best chance to win.
Unfortunately, not enough firms do this, which leads to a lot of wasted time, money, and effort in pursuing low PWIN bids.
As you can see, there are plenty of issues with the government contracting process.
Yes, the government’s strict requirements, inefficient processes, and suspect decision making hamper the process.
But it’s not all the government’s fault.
Contractors don’t always maximize their ability to make the right decision and be strategic with their business.
This leads to wasted time, money, and effort on everyone’s part.
There’s a lot that can be done to improve the process from both sides of the table. So let’s get to work.
What do you think of these problems with government contracting? Are there any that we missed? We’d love to hear your thoughts in the comments.
We hope you liked this post! If you did, please share it with the buttons on the left and sign up for future blog posts below. Thanks!