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.
THIRD PARTY SPECIALISTS PLAY A ROLE IN GOVERNMENT WORK
As mentioned earlier, SLGs are slowly starting to transition from best price acquisition processes in favor of best value awards. To help manage the process, many SLGs are contracting with specialized "acquisition" companies. It is important for vending operators who want to win government contracts to understand what these specialists do. These acquisition specialists work directly with an agency's procurement official(s) to ensure best practices are maintained throughout the RFP process.
Soliciting and awarding bids is a time consuming and challenging process for many public agencies. Acquisition specialists handle this process for them. They write the bid specifications and evaluate the bids and recommend who should win the contract.
It is important to know as much about the acquisition company as you do about the customer. Most often, these companies focus on incorporating the federal government's best practices of best value to the process; however, there are several that don't.
There are a few areas vendors should be cautious of when working with acquisition companies:
- Unreasonable business development costs during the proposal phase. In other words, any situation where the scope of the response far exceeds the ultimate value of the contract award. For example, in the federal government, it is not uncommon for a $200,000 award to be based on proposals limited to 150 pages or less. However, I have seen SLG proposals of similar value that require responses in excess of 6,000 pages. This is not a best practice, but it does happen.
Researching the company's track record will help determine any extraneous costs. An acquisition being touted as a "best value" competition sometimes ends as a "cost shootout" and best value criteria are essentially thrown out. When this happens, you've spent unnecessary time and money developing a best value approach.
- Acquisition approaches that unnecessarily string out the proposal phase with multiple "customer" one-on-one sessions. This often results in significant changes in RFP requirements throughout the procurement process and every change can be very expensive. Federal best practices avoid this by soliciting industry inputs through use of Requests for Information (RFIs) and Draft RFPs (DRFPs). Again, researching the acquisition company's history will help determine the probability of this happening with your opportunity.
Again, the majority of acquisition companies follow federal best practice guidelines. Unfortunately, not all do, and it is important to understand what you are dealing with up front. Remember, the path to a win isn't always the easiest path.
KNOW THE CUSTOMERS
It is important to study your customer and understand the primary drivers initiating the procurement. As true in any sales scenario, you need to know who the decision makers and influencers are. An effective way to do this is to develop a "power-player" map with the following information:
- Who are the players?
- What is your relationship with them (good, bad or indifferent)?
- Do you have an inside coach? Identify who it is and who they have relationships with inside the organization.
State and local procurements tend to be much more influenced by elected officials and staffers than federal agencies. Be sure to develop a political plan that does not violate any anti-lobbying laws.
Next, develop and execute a strategic, detailed call plan for the political map specifying who, what, when, where and why. If you leave this to chance, you are taking one.
KNOW THE COMPETITIVE LANDSCAPE
When ranking your opportunities, you need to have a solid understanding of the competitive landscape. Part of this is determining which competitors are likely to bid on the same opportunities, and how you compare. Identify both your strengths and weaknesses. If the weaknesses outweigh the strengths, you may want to reconsider pursuing that opportunity. In some cases, you may decide to act as a subcontractor to a prime, or vice-versa.
One of the most critical factors to winning government RFPs is the development of the winning strategy. A winning strategy is not a list of what makes you great; it is an understanding of what you need to be in order to win. A good strategy is to provide the customer with the compelling reasons your company should be selected over all other vendors.
This is also the most difficult step because it requires you to bridge the gap between your understanding of what you offer and the customer's needs.
A good technique is to envision having the contract and the actions you will be following in executing the contract. Ask yourself how these actions are meeting the customer's objectives, as stated in the RFP. This will allow you to identify what you need to do to perform the service successfully. It will also allow you to know what to say in your bid to win the contract.
VALIDATE YOUR MESSAGE
This process involves "deciphering" your own messages. For example, if you say you offer healthy products, what exactly does this mean? You must validate this message. You accomplish this by stating the nutritional contents of the products you provide, along with an explanation of why those nutritional contents constitute "healthy" offerings.
We call this validating your strategy. In doing this, you validate that what you are saying in writing is going to meet the customer's objectives. It involves a higher level of detail than what you provide in a typical sales proposal.
Practice, preparation, research and execution are key components to winning.
WHAT TO WATCH OUT FOR
There are a few things you should absolutely never do, unless you want to guarantee failure. They are as follows:
- Never violate acquisition protocol - understand the customer's rules of engagement from the start.
- Never assume that you know what the customer "really" wants if you think something should be provided that they haven't asked for.
- Never be arrogant or condescending to the customer (yes, this happens more than you might think).
It is absolutely critical that you study the customer's goals and objectives. The best way to position your company for success is to show the customer how you can help effectively meet their objectives or, even better, demonstrate how you have helped others do the same. If possible, provide references for similar customers.
Customize your approach and marketing efforts to the customer. A big mistake many make is simply repurposing materials targeted at other customers or supplying marketing materials used for all customers that often contain general (and mostly unsubstantiated) claims. Make sure any and all documentation is customized to the agency's specific needs.
A successful bid is usually a team effort. Once your strategy is defined, make sure everyone on your bid team reviews it. The team review is important for two reasons: 1) It improves the chance that the strategy meets the customer's objectives, and 2) It ensures that everyone who will be involved in providing the service will know what is expected of them once the contract is approved.
PROPOSAL DEVELOPMENT AND SUBMISSION
After completing all of the work above, you're ready to move on to the proposal phase. The ultimate goal in drafting the proposal should be making it easy to evaluate. Some guidelines that help with this process are as follows:
- Respond to the RFP on time - late proposals never win
- Follow the RFP outline - ensure all questions are answered and easy to find
- Satisfy all readers and scorers - write for all levels
For some reason, many proposals are full of verbose, unnecessary and extraneous language. Don't make it hard on the readers; they shouldn't have to spend time figuring out what you mean. Furthermore, longer doesn't always mean better. Use simple and direct language, but remember - the evaluators are as smart as you are. Never talk down to the reader; simple writing and talking down are not the same.
Respect the evaluator's time. A one-page answer to a question is much better than 20 pages that don't provide a clear answer. If possible, use pictures and graphs to illustrate your point. This helps draw people in and is an extremely powerful and effective way to provide clarification without words.
- Substantiate all claims - if you can't prove it, don't include it
- Be consistent within the document
- Project a professional image
- Offer the customer what he wants, not what you think he needs. Proposals that tell customers they asked for the wrong things and that you know more than they do never win.
- Make the facts the foundation of your response. Remember, a proposal is not a report. It is easy for companies new to the process to get confused between the two. Understanding the difference will help avoid that mistake. The Report versus proposals table illustrates the key differences.
If you are adequately prepared and have taken the steps we've recommended, you will improve your probability of winning and simultaneously control your business development costs.
ABOUT THE AUTHOR
Inform and educate reader
Win a contract
Focus on results/methodologies
Focus on features/benefits
Convince reader of validity
Convince evaluator of value