There are Pros and Cons to Winning a Government Bid. Here are 8 Essential Tips to Help You Understand the Process.

By Ruth King

Purchasing by federal, state, and local governments represents about 25 percent of the economy. Big businesses and governments need everything from lawn care and public relations services to jet fighters. Winning bids can result in great profits or horrific losses. Here are eight things you must do so that winning bids doesn’t put you out of business.

1. Find the right contact person or partner
Find the contact in the government or big business who has the authority to purchase what your business sells. You’ll also need to contact the users of your product. It’s a two-pronged sales approach. Target your message to the decision-maker and the user of your product. Both audiences are necessary to be successful.

You can also partner with a company that has experience with government contracts. If your company is certified as a women’s business enterprise (WBE), a minority contractor, or other disadvantaged business, look to work with companies who need to work with your type of company as part of their contracts.

Once you find the right partner or government contact person, making him/her look good can lead to other work. HR Anew, a human relations WBE- and minority-certified enterprise, prides itself on always exceeding expectations, according to Deborah Stallings, founder and CEO. Stallings explained, “When one of our contracts was completed, they were so happy with us that the contact person referred us to other government agencies that we have subsequently done work for. Our contacts also keep an eye out for us for bids that are coming up that they think we should bid on.”

2. Get help
If the government approaches you wanting to buy your products and services, don’t try to negotiate the contract yourself. Get help from people who are experts. One large manufacturer was approached to sell its product to the government. This company negotiated the contract itself.

Unfortunately, the contract required the product be delivered in quart bottles. This company didn’t think to negotiate this point and didn’t read the contract. Of course, the government rejected the product, refusing to accept anything larger than a quart bottle. The company resolved the contract by finding a third party to take the product, which had been shipped in a rail car, and repackage it in the sizes required by the government—at a great loss to the manufacturer.

The Defense Logistics Agency has the Procurement Technical Assistance Program. The sole purpose of this program is to help small businesses learn the mechanics of doing business with the government. The agency is staffed throughout the country with procurement experts who can help maximize the dollar value of a contract for any government agency and make sure that you stay in compliance with your contract.

Try www.governmentexpress.com for help with valuable government contacts.

3. Don’t put all of your eggs in one basket
If more than 20 percent of your business revenues are generated by one company or government agency, then your business can be in trouble should that revenue source disappear.

A small business had a contract with a Fortune 50 company. The company liked the small business’ work and asked it to do more and more. Soon this Fortune 50 company represented more than 80 percent of the revenues generated by this small business. Then, there was a problem on a contract, and the services weren’t delivered on time. The company lost the business, and 80 percent of its revenues disappeared overnight. The small business went bankrupt.

Make sure you have the staff to fulfill the contract. One of the questions in Requests for Proposal (RFPs) often is about the expertise of the people who will fulfill the contract requirements and provide the deliverables. If your company is hiring people just for the contract, and your company doesn’t get additional contracts or work for these people after the contract is done, you’ll have to lay them off.

“We are constantly battling the need for men to work on construction jobs with the work available for those jobs,” said Emory Young, CEO of Certified Electric, an electrical and heating and air-conditioning contractor with many government jobs. “It’s especially hard when you have good men and a contract gets delayed. You don’t want to lay them off waiting for the contract. However, it costs the company a lot of money to keep them. It’s a delicate balancing act.”

4. The bid process takes time and is tricky
RFPs can be an inch thick or greater. To even be considered, you have to follow all of the instructions, which sometimes can include the font size that you have to use in your response. Make sure that you only go after those proposals that your company can truly win. Otherwise, you may be spending more time writing proposals than generating revenues for your company.

According to Amy Cohen, marketing manager for software company Acquire, “You don't always know if you are seriously being considered or if a vendor has already been singled out and they are simply going through the process because they are required to do so.

“As far as bids being successful or unsuccessful, it can come down to price, connectivity to certain systems—as is our case being a software company— industry certifications, and expertise, or even recommendations by another vendor,” says Cohen.

I experienced a tricky bid process. A state agency wanted to work with a computer graphics company that I owned. They liked our design for a project they were working on. However, because the price was higher than the “no bid” price, an RFP had to be issued. They created the RFP according to our specifications and price. We won the bid. However, the contracting officer told us that we won it by only $50. Had our price been $1 higher, the agency would have been forced to award the contract to the next lowest bidder.

All bids can be rejected and the process started again with different specifications. A city government wrote the specifications for a new computer network that it needed. The city wanted one vendor’s equipment and wrote the specifications around that equipment. To the city’s surprise, another vendor met the specifications and had a lower price. The city threw out all of the bids and started over again with tighter specifications geared toward the company and equipment that it wanted.

5. Follow the rules and get paid
Government and big businesses have the funds to pay your company for the work you provide. However, without the properly completed paperwork you won’t get paid. Government forms can be confusing and payment will be withheld if you don’t comply.

Mark Amtower, author of Government Marketing Best Practices, helps small businesses successfully market and comply with their government contracts. A company hired him after pursuing government business for a long time. It finally won a contract recently. The company struggled initially to get paid because employees did not know how to fill out the forms required by the federal government. Consequently, no one at the company got paid that week.

It can take weeks to get purchase orders and set up the accounting procedures. In addition, payment terms are often spelled out in the contracts. Many times, payment is net 45 days or net 60 days, especially with large corporations. Or, with construction jobs, there can be 10 percent retainage, which is held back to ensure that all work has been completed. This can be remitted to your company months after the job has been completed.

Make sure that you read the contract, know the payment terms and understand all of the forms required to get paid.

6. Watch set-asides and givebacks
Many government contracts require that you give back funds. For example, most Government Services Administration

(GSA) contract schedules have a 0.75 percent selling fee attached to them. This is paid quarterly to the government. If your company provides $100,000 in products per quarter, you are responsible for paying $750 back to the government for the privilege of selling to the government.

Lauren Walters, vice president for government contracts at Volmer Public Relations, has been responsible for overseeing the completion of federal contracts that had a 20 percent local set-aside requirement. “We have to be careful to comply with the local requirements. Often, it means bringing in corporate sponsors to pay for a portion of the event. We don’t want to be 20 percent short of the funds that we need to have a successful event.”

7.You can get audited
f you work with large corporations and governments, you have to follow their rules. Often, you have to live with certain legal requirements.

“We work solely with large businesses and have learned that legal departments can be inflexible about some of the terms of their contracts, including payment terms,” said Lorin Coles, founder and CEO of Alliancesphere. “As long as we know the terms upfront and can live with the conditions, we accept them because we want the contract.”

Federal contracts are audited for compliance with Equal Employment Opportunity Commission (EEOC) laws and regulations. Setting up these procedures in your company takes time and money. However, you have to know the requirements and follow them. If you are not EEOC-compliant, your contract can be terminated.

There are also accounting audits. The media delight in reporting stories of thousand-dollar screwdrivers and other outrageous costs after a contractor has been audited. Make sure that you comply with the contract costs and deliverables. Then you don’t have to fear a government accounting audit.

8. Successfully completing a contract doesn’t guarantee you the next contract
Winning a contract requires deliverables for a specific period of time. Once that time period is over, a request for proposal will be issued. Assuming that your company has successfully completed the contract, it will be one of the companies on the bidders’ list. However, being on the list doesn’t guarantee that your company will get the next contract.

Volmer Public Relations was a successful bidder for the Houston-Galveston Area Council Buying program. The contract was for one year with a two-year renewal option. The company held the contract for all three years. Even though Volmer had successfully completed the contract, it had to go through the RFP process again. It was easier the second time, and the company was selected to provide work for the next contract period.

One small company had built 80 percent of its business around manufacturing and supplying equipment to comply with a federal program. That program, which had been in place for five years, was abruptly cancelled. The company had to lay off 134 people in one day. It took them 10 years to recover.

Once a contract is completed, there may not be another contract. Once a federal building is built, there isn’t another one to build at that same location. However, there may be contracts as a result of the building, i.e. for maintenance and renovations. Keep your eyes open for additional opportunities that were not a part of the original contract. The work will have to be bid. However, with your company’s input, it might be bid to your specifications.

A small business can be profitable with a strategy of winning government and large-business work. However, as Mark Amtower says, “A company coming into this market blind expecting big bucks leads to a great police chalk line on the ground.”

Forewarned is forearmed. Do your homework and avoid the Ugly Truth.