According to vending industry sources, approximately 22 percent of all sales in the vending industry come from government contracts, the majority of which come from primary schools, colleges and correctional facilities. In an estimated $24 billion industry, that is a $5 billion opportunity, yet industry sources indicate that only a minority of operators actively pursue this business.
Many vending operators shy away from bidding on government contracts, assuming they are impossible to win, expensive to prepare, time intensive, and that the incumbents usually win. It's true - competing for government contracts is expensive, time consuming and heavily resource intensive. However, it is a myth that incumbents have a competitive advantage, especially in the vending industry. It is not hard for a government entity to change a vending service provider if they think they will get a better deal.
Structured competitions favored by the government can be very costly in both time and resources. No company can go after every opportunity - you need to be selective and go after the opportunities that best suit your business.
There are a few guidelines that, if followed, are proven to help improve the probability of winning. In many cases, smaller companies with limited resources can compete as effectively as the larger companies - sometimes even better. In observing many bidding competitions in different industries, it is clear that the successful bidders are the ones who use their resources wisely, and this has nothing to do with company size.
There is a wide perception among vending operators that government contracts are not worth the effort because the agencies are only interested in the highest commission and hence, these contracts are not profitable. This is true in some cases, but it is changing.
Schools, for example, are placing greater importance on nutritional requirements. Other public entities are following suit. There is a growing opportunity for vending operators to focus on driving the need for better service and lower commissions. The vending industry has an opportunity to change the way these agencies view their service.
Regardless of whether the award is strictly commodity based or best value, there are some guidelines to follow that will help a vending operator gain a competitive advantage in bidding on government contracts.
FIRST STEP: OPPORTUNITY ANALYSIS
The first step in the process is to identify the scenarios that best apply to your offering and only pursue those opportunities that best fit. Those opportunities should be ranked and a strategic plan needs to be developed - especially in the state and local government (SLG) marketplace.
To find out about requests for proposals (RFPs), simply contact the government agencies in your market area. Many agencies post RFPs on their websites. Some have notification lists that companies can sign up for. The agencies send RFP notices to companies on these lists.
A solid understanding of the budgets and politics is key to predicting where the money will be and what projects will actually be funded.
UTILIZE MARKET INTELLIGENCE SERVICES
If you don't have the time and resources to dedicate to this, there are strategic market intelligence companies that provide this type of information. They exist in every major market and they refer to themselves as lobbying/marketing firms. They specialize in helping businesses develop relationships with government entities. The costs for their services vary.
An example of such a company is Strategic Partnerships Inc. in Austin, Texas. This company focuses specifically on the Texas public sector and provides customers detailed projections about what expenditures (typically referred to as "acquisitions") are being forecast in the market place. They also provide information on items like "who is who" politically that you need to be ready to deal with if you want to win.