An interesting article on the Public Spend Forum US website caught our eye recently. “Why Contractors Don’t Have Other Clients” was written by Spence Witten, Director of Federal Sales at Lunarline, a US-based contractor specialising in cybersecurity. He points out that even outside sectors like defence equipment where governments may be pretty much the only buyers, there are many suppliers in the USA who only supply government organisations and have little or no private sector business.
“Over the past five years about 80 companies have scored repeat performances on Washington Technology’s Fast 50 list of fastest growing small businesses holding federal contracts. But they’re almost all pure-play government contractors. Hardly any of these organizations manage to bring in significant revenue from commercial sector clients”.
This is “weird” as he puts it – outside those very specific sectors like defence, government generally buys the same products and services as the private sector, so in a properly functioning market, a company that is successful in one sector should be in both. But this does not seem to be the case.
Now we don’t perceive the problem is quite as great in Europe – but it still exists to some extent. We can probably all think of firms that very much built their success on government work. Certain firms, whether in IT, construction or elsewhere seem to do particularly well with public sector clients. Why is this?
Spence answers this very simply in his article. “Doing business with the federal government is really hard. And expensive”, he says.
His firm has “easily spent more than $1.5 million just to build the corporate infrastructure necessary to administer complex federal contracts. And that’s just the back office stuff”.
Sales cycles are measured in years rather than months, just chasing a contract can cost $100,000, and bids can take hundreds of hours to complete the paperwork. So firms that do well in this arena have to really specialise in getting good at winning government work. As Spence admits, “I know for a fact that I’ve won large, lucrative federal contracts, not because I had the best solution or was the most capable, but because I was the only one willing to jump through all the hoops. Other providers were far more qualified. They just couldn’t – or wouldn’t – stick it out. “
Now there are some initiatives under way in the US to try and address some of these issues. And as we say, the situation in Europe is perhaps not quite as bad. But even here, there is no doubt that certain suppliers are good at winning public sector contracts, whilst others, probably just as capable, don’t know how to play the game or just give up trying.
So some of the critical success measures for public procurement should be around getting true competition wherever possible, attracting a wide range of bidders for competitive processes, and seeing new suppliers – who previously focused on the private sector – coming into the picture and looking to win government work.
As we’ve said before, there are a whole range of measures that procurement people can take to encourage these open, dynamic, competitive markets – which is really what we are talking about here. That can start with educating firms in terms of how and why they can bid for government contracts. It runs though ensuring that whenever possible, the specifications for what government buys are aligned with more general private sector standards and requirements. And of course, it includes making sure tendering processes are robust and identify the best suppliers – but are not so complex, onerous and costly that they discourage what might be the best suppliers from even participating.
As Raj Sharma said in the article we featured last week, this is all about developing successful and dynamic government supply markets. So well done to Spence for his honesty around his firm’s situation, and if any contracting authority finds they have a lot of suppliers who only seem to do public sector business, maybe that is a warning sign that the authority is not doing enough to develop those open markets. Finally, we would very much welcome articles here from suppliers who might like to put constructive ideas forward as to how European public procurement can improve further!