This is a guest post by Katie Bilek of Republic Capital Access.
Small businesses face a unique set of financial challenges as federal government procurement has evolved over the past few years. Here are some recent trends that stress small businesses:
Awards too large for a company’s financial wherewithal
The nature of the federal contracting environment has led to many out-sized contract awards to small businesses. It’s not uncommon for us to see a contractor win work that is at least 3 to 4 times the size of their existing portfolio of contracts. In many cases, this may be the result of desired efficiency, where a contracting officer chooses to merge multiple legacy contracts into a single vehicle.
More frequently, contracts are “flipped” from full and open to a small business preference (such as HUBzone, SDVOSB, etc.) to achieve set-aside goals, introducing the potential awardee to what was previously a large business task, most likely at the high end of their NAICS ceiling. It is important to have a financial institution that is prepared to triple or quadruple the size of your existing financing upon contract award.
Cost of pursuing indefinite delivery, indefinite quantity (IDIQ) and blanket purchase agreement (BPA) contracts
While multi-billion (or trillion) dollar contract ceilings sound enviable for any small business owner, IDIQ/GWAC and BPA contracts are merely a license to hunt. We have seen many small businesses expend nearly all of their resources and cash reserves to win large IDIQ contracts. When they finally pursue task orders and hire key personnel in advance of execution, many lack the capital to perform the work.
Focus on cash flow projections and choose a financial partner who can provide financing based upon the creditworthiness of your government customer and contract, not your balance sheet.
Requirement to have financing in place in order to be compliant with bid
We have seen increasing scrutiny on the part of contracting officers to make sure small businesses can demonstrate financial capability to execute the contract in compliance with the FAR.
Many solicitations now require a financial capability letter from a financing institution citing the solicitation, description and a financing facility equal to at least three months’ worth of billings in. Your financial partner should be able to provide this commitment letter at no cost for future contract awards.
Challenges related to financing joint ventures
Unpopulated joint ventures are a popular teaming vehicle, yet the unpopulated joint venture structure itself often struggles to qualify for stand-alone financing without significant capital contributions or guarantees from its participating partners. Even when the JV partners maintain their own bank lines of credit independent from the JV, those banks are often unwilling to extend credit to the JV as an external entity.
Find a financial partner who will underwrite the unpopulated joint venture without requiring capital contributions from either party. This is done via non-recourse receivables financing.
Surges and volatility of product procurements
For value-added resellers, the federal fiscal year-end results in the lion’s share of revenue. For our small business friends holding NASA SEWP, CIO-CS and other contract vehicles, a combination of receivable and vendor financing is critical to executing large product orders.
While vendor credit programs can be affordable sources of financing, not all small business balance sheets can support 8-figure product orders on vendor credit alone; the non-recourse sale of receivables to pay vendors and manufacturers completes the financing package that allows resellers to execute during peak seasonal times. Choose a financial partner with a vendor financing solution with adequate availability for your largest product orders.
Loan sharks in sheep’s clothing
The prevalence of online, financial technology (FinTech) loans is startling. These fast money products are basically like an electronic version of payday loans for businesses, usually priced well above 30%.
They dress their virtual storefronts up in any manner of ways: the jeans-and-t-shirt, San Francisco techies; the self-proclaimed veteran lovers invoking images of patriotism, the Buy by Midnight! used car salesmen and the not-so-subtle cash advance lenders.
All of these lenders hawk financial products that are priced higher than most small business government contractor margins can support. Beware of online lenders, and always read the fine print; even if they tell you “It’s only 9%!” share the proposal with a banker who can shed light on the real math.
Republic Capital Access (RCA) is a specialty finance company for government contractors. RCA’s product offering includes non-recourse receivables financing, unbilled (mobilization) financing, financial commitment letters, joint venture financing, term loans and more. Katie Bilek currently serves as senior vice president of Republic Capital Access. She is also co-founder of govmates and board member of the National Veteran Small Business Coalition. Katie lives in Alexandria with her husband Beau and son Jackson.
This is a guest post by Eileen Kent, The Federal Sales Sherpa.
1. Reach out to a Procurement Technical Assistance Center who can help your connection register with the federal government – it’s free, and SAM.gov is the site. If you want to learn more about it, listen to this episode of my blog talk radio show. It’s not rocket science – but it’s the first step a company needs to take first before approaching anyone in the federal government.
2. Find basic training if you’re dabbling in the market and doing it yourself. For a small investment (often under $100 and sometimes free), attend a few SBA-sponsored local events or PTAC-sponsored local events, or listen to some of my connections’ webcasts, podcasts, and webinars (including The Federal Sales Sherpa Show).
3. If you’re serious about this market, purchase one-on-one training from federal sales experts who have “been there/done that” – and can customize the material for your business and your services. This is only for those wanting to stand up a team member – or hit the ground running. It’s refreshing and time saving to hear a non-government sponsored training – because an expert giving you the training will tell you the realities of what it truly takes to win federal contracts.
My training is called, “The Federal Sales Game-How to Play to WIN!” but others have something similar. You and your team need to learn the difference between the goals of the contracting officer and your customer on the inside – the END USER – who will need what you sell. You need to find and capture their attention, imagination, pain, needs, and perceived solutions. You also need training on clearly understanding contracting vehicles. What is a GSA Schedule, IDIQ, BPA, GWAC? What are set asides, 8(a), SDVOSB, HUBZone, EDWOSBs? Know the difference and understand the power of having these contract “bridges” or partnering with someone who does.
4. Build a strong capabilities statement, with provable, quantifiable best values. Follow this document up with several past performance/case studies ready to present in a capabilities briefing, stand-up field meeting, or webinar.
5. Perform a competitive analysis of the data, which is available at your fingertips WITHOUT BUYING A SUBSCRIPTION. Know how to use all the tools available to you that can uncover which agency buys what you sell, from whom and with what contract vehicle, so you know who to approach, what to say and how to differentiate yourself from their current provider.
Only buy a subscription when you understand the data you’re looking at and you plan to DO something with the intel uncovered. One client of mine just got a renewal for a subscription which is $20k a year now for them. Stop the madness! Wrap your head around the intel and stop living in it. It’s time to take that intel and DO something with it, such as make decisions about which contract vehicles (like GSA, Seaport-e, GWACS and such) to keep and which to drop.
6. Build a federal sales action plan focused around the 3-5 agencies who buy what you sell. Stop stumbling around the public bid sites and randomly bidding on contracts you think are “perfect for us.” Start developing relationships and finding the end users and program managers making decisions about purchasing like-products/services as yours and execute that plan.
What do I mean by execute? Simple. Call. Email. Ask for directions. Call again. Email. Email. Call. Email. Visit. Present. Follow up. Call again. Check in. Follow through. Ask for referrals. Email., Call. Share an article or a whitepaper. Call again, and again, and again. Develop comfortable relationships with federal clients who start to share with you what’s really happening, and whether or not they need you now or later. If they don’t need you now, who would they call on if they were you? This is a long-term process of relationship building and you can’t hire a 100% commission sales person or a consultant to do it for you. This needs to be someone who is involved with your company – invested. You need the A-Team out front. Customers don’t want to talk to someone who represents you – they want to talk to YOU.
7. Train your team on proposal writing and have a standby proposal consultant ready to help if you have a sudden need to respond to an RFP/RFQ. But understand the process so you don’t waste a dime on misunderstandings between you and your proposal team. You need to have a strong bid/no bid process so you don’t waste a minute on a loser. You need to understand win themes, evaluation criteria, the past performance you need to submit which fits the opportunity perfectly, the technical, and more. If you don’t, get training and find a strong proposal team. Put this statement on your wall: We Only Write Winning Proposals.
About the author: Eileen Kent is The Federal Sales Sherpa and helps companies one-on-one with training on the federal sales game, a deep dive competitive analysis on who buys what you sell from whom and with what contract vehicles and then she builds you a custom federal sales action. If you’re serious about this marketplace and ready to hit the ground running, contact Kent at 312-636-5381.
We Need to Blur the Line Between Education and Training: Former TRADOC Commanding General David G. PerkinsPosted: March 28, 2018
We’ve been highlighting ideas from the keynote speech of retired Four-Star General David G. Perkins, former Commanding General of the U. S. Army Training and Doctrine Command (TRADOC) at the Interservice/Industry Training, Simulation and Education Conference in Orlando, Florida in November 2017.
In Parts 1 and 2, we recounted General Perkins’ three aspects of training that require innovation from industry. In this third and final post, we will present his ideas about the differences (and similarities) between education and training.
General Perkins stated that we have to redefine the idea of “education versus training.” He went on to describe that during a recent combined arms field training exercise, an Army major approached him with the question, “Are you educating us or training us?” In other words, the major understood education as learning concepts at a high level of thinking, while he understood training as learning potential courses of action to apply to real life. General Perkins indicated that as a commander, his greatest need was to strive to blur the line between education and training. He wants to see the two concepts combined into one practice.
General Perkins discovered that soldiers want to be trained, which in their understanding, often means they WANT to be told what to do and how to do it. He believes that trainees often do not believe that they need critical thinking (thought of as part of education) because they mistakenly feel that this will not prepare them for the “real world,” where they face the unknown. In actuality, General Perkins thinks education, and the critical thinking that comes from it, better prepares us for the unknown. He suggests incorporating critical thinking, decision making, and leadership into training events, even virtual and constructive ones.
General Perkins believes the Army must adapt future Programs of Instruction to a changing world. His question is, “How do we bring that changing perspective into the educational domain?” He added that the military cannot tie itself to only one domain; training must incorporate all the domains: land, air, sea, space and cyber.
General Perkins explained, “A lot of times as I was growing up in the Army, we would have a training strategy with various gates and sometimes some of our simulations and training aids and devices weren’t all that great. But it would be put in the strategy like, ‘You have to do this first, then you have to do this, and you have to do this.’ And it may not have actually been a particularly useful tool for getting at what you want to get at, but it was a requirement. You can’t do this until you get to this, and so it was a little bit of a check the block.”
Ultimately, General Perkins advocated for “command, training, and student (training, education and the art of command)” to come together so that training is an integral part of command and not something different or extra. He wants to see not just industry change their technology ideas, but for the Army culture to change regard training as integral with command and operations. His challenge to industry is to help the Army make this happen.
In a series of three posts, we’re highlighting remarks from retired Army Four-Star General David G. Perkins, former Commanding General of the U.S. Army Training and Doctrine Command from his keynote address at the Interservice/Industry Training, Simulation and Education Conference in Orlando, Florida in November 2017.
This is a guest post by TAPE President and CEO Louisa Jaffe.
In Part 1 of the blog series, we discussed three innovative aspects of training that a commander needs from industry as identified by General Perkins. In this post, we delve deeper into the third aspect – that we must see training “as a tool, not a task.”
General Perkins stated, “What we need to do is make sure that when we take a look at our training capabilities and training aids, devices, simulators, and simulations (TADSS) that commanders will say, ‘This actually solves one of my training problems.’ It’s not a tasking to do it. It’s a tool that I can use to get better.”
He exclaimed that he does not need “a tool that is just a tool to train, for training’s sake.” General Perkins specified that he needs industry to innovate a tool “that I can use to train for specific missions – mission rehearsal exercises.” He sees a future where a commander, when given a mission to conduct an attack, will also, “look immediately at what training capability [is needed] to get ready for that mission.”
General Perkins called upon the Army to completely integrate training in a mission from its inception. Moreover, he challenged industry to develop the type of training tools that the Army could use across the enterprise from education to training to mission rehearsals. He does not want any more “one trick ponies.” Using General Perkins’ framework, soldiers would waste less time learning multiple training tools and the training data inherent in the tools would benefit commanders across multiple domains.
General Perkins provided key insight into industry’s difficult task of innovating for military training. In Part 1 of this series, we detailed that he not only wants to see the emotional and practical experience of a large-scale live exercise, but one that is put into live, virtual, and constructive (LVC) environments to scale a combined arms training experience.
General Perkins further wants to see all possible domains – land, sea, air, space, and cyber – be interactive in LVC environments. To buttress his goal to integrate training into mission-accomplishment strategy, General Perkins wants to see TADSS become integrated tools for operations instead of separated tasks.
General Perkins envisions innovative training that becomes an extension of the service member at the same time it becomes an innovative extension of leadership itself up to the highest levels. He affirms that the Army is open and receptive to innovations “that connect useful powerful tools with mission strategy.”
The third and final post in this series will explore General Perkins’s innovative views about the concepts of education versus training.
Do you have innovative training ideas to offer the U.S. Army? Well, TAPE President and CEO Louisa Jaffe was fortunate enough to hear now-retired Four-Star General David G. Perkins, former Commanding General of the Training and Doctrine Command (TRADOC), speak from experience about what a military leader at his level (and all levels) is seeking in today’s Army.
General Perkins delivered the keynote address at the Interservice/Industry Training, Simulation and Education Conference (I/ITSEC) in Orlando, Florida in November 2017. The event occurred a few months before his recent retirement on March 2. In a series of three articles, we will present Louisa’s key takeaways from General Perkins’ I/ITSEC speech.
General Perkins started his speech by explaining that TRADOC serves as the proponent FOR and deliverer of doctrine, training, simulations, and education TO the entire Army. He spoke of the long-term requirements of TRADOC’s mission and articulated his vision of industry support from an unusual perspective – not speaking in terms of technical Army requirements or existing contracts coming up for recompete.
He said, “I’d like to talk to you from the point of view of a commander, not as the commander of TRADOC, but as ‘a commander.’ And so, what does a commander expect from his ‘training enterprise’? What does the commander expect from his ‘simulations enterprise’? What does the commander expect from his ‘education enterprise’?” General Perkins spoke in real and genuine terms about what any military leader needs from industry with respect to innovation in training.
He emphasized three main aspects of training that innovators need to consider:
1. Training serves as a “forcing function” to introduce new intellectual ideas. General Perkins explained that one of the impediments to that effective function is overcoming the “tyranny of training.” He defines this phrase as the enormous costs, logistics, labor hours, planning time, and execution of a practical combined arms training exercise – a simulation event that can only train a fraction of those who need it.
Because of high overhead, the exercise cannot really provide the needed repetition for trainees. Innovation from industry must provide not only the “forcing function” of training, but also all the benefits of a large, practical exercise at a fraction of the overhead costs, and perform it locally at the trainees’ home station. General Perkins stated, “I see that as sort of the next training revolution coming into the Army and probably the Joint Forces. We need to change how we view what is done day-in and-day-out as we prepare for the large collective training events – getting rid of this sort of ‘tyranny of training’ and high overhead.”
2. Innovation must bring together all the domains for training. We have to redefine the training requirement from the very beginning as a converged requirement with all of the domains: land, air, sea, space, and cyber. Commanders need training to give participants the experience of “inter” and “intra” domain communications and leaders/commanders the practical experience of commanding within and embracing all these domains. He stated emphatically, “This is an innovation that commanders need from industry.”
3. Commanders (and therefore industry innovators) need to see training “as a tool, not a task.”
Our next blog post will discuss this third aspect of innovation in training. The third and final blog post will explore General Perkins’ innovative views about the concepts of education versus training.
This is a follow up post from one of TAPE’s “capture managers,” a member of our business development team.
It’s important to understand that there are different intelligence zones involved in capture management – customer, competitive intelligence, program, staffing, and pricing. Being able to define it in those chunks helps us understand the kind of solution that we need to write towards in our proposal. Each of those zones have some basic questions and KPIs (key performance indicators).
We looked at client relationships and competitive intelligence in Part 1. Today we’ll look at staffing, and how the TAPE team works together and decides what to bid on.
Staffing is one of the most important aspects of capture to get right because clients don’t buy products or companies; they buy people. Having the right people on your team is critical for success, but who are the right people?
It’s important to distinguish between the key personnel and the rest of the team. Your key personnel are usually the people who lead the program, and their resumes are usually required to be submitted with the proposal. If they’re not already on your payroll, letters of commitment are often required.
The right key personnel will have all the required certifications, training, and years of experience, are known to the customer and have a good reputation, and can help you write the proposal.
For non-key personnel (other team members), it is important to identify as many qualified candidates as possible before submitting a proposal. Staffing matrices are typically required, listing all of the positions and hours assigned to the project.
If the only names in the staffing matrix are those for the key personnel, the program looks unstaffed and therefore more risky to evaluators. That’s why it is important to identify as many qualified candidates as possible (those with all the required certifications, training, and years of experience) before submission.
TAPE’s capture team
Because TAPE is a small business, we often have to wear a lot of different hats. There is always a locus of intelligence in one area, for example our senior vice president, administration and our chief financial officer will certainly help with pricing, but so will others who can bring the customer intimacy and program knowledge – perhaps someone who’s been in government and knows the program or its people. That person may be on staff at TAPE, or we’ll hire subject matter experts who can provide us that information.
It’s a shared responsibility amongst the team to go out and find this information, and my role to coordinate all these efforts and all of these people. What’s most important is having a team you trust, because you can’t do everything. Trust is the biggest component – trust, good working relationships, and good communication.
Also important are positivity, a can-do attitude, and being able to see things from multiple perspectives to gather what’s really important and what can wait, as well as graciousness and thankfulness for everyone’s efforts. At TAPE we always put a high value on our working relationships and communication – things are just so much easier when everyone’s on the same page.
Some days there is bound to be confusion. Giving everyone the benefit of the doubt can be difficult but at the end of the day it keeps us communicating and honest with each other.
Successful relationships require trust and credibility. So often we deal with teammates who are not a part of TAPE. When we’re not teaming, we’re competitors – it’s a friendly competition, but building and maintaining trust in those relationships is vital.
Yes or no?
A big part of capture is about continually vetting and re-vetting opportunities to understand exactly what it is you’re investing in. So often there’s a huge disconnect or built-in conflict between the business development and capture proposal sides of the house. Business development wants to say yes to everything and capture proposal wants to say no to everything. It’s essential to build a bridge between the two because proposals often get seen as Dr. No and business development seen as snake oil salesmen.
When you do decide to qualify a bid and devote capture resources to it, you’re making an investment – though not all investments are equal. Sometimes you invest in a contract that will lose money so you can establish a relationship with a customer; other times you make a smaller investment by teaming with someone. But in all cases these are investments in time and resources, and you must understand exactly how that investment impacts your bottom line.
Thinking back to Lohfeld’s wise words that the best informed win, we can look to the data for this purpose. When discriminating what will remain in the pipeline and what we’ll invest more into, we need to know how much a proposal will cost. Do we have the necessary internal resources, or will we have to hire out? What will that cost?
Capture management means having a systematic way of reviewing an opportunity to determine your probability of win, and how that equates to what you’ll see in revenue and return on investment. Measuring those things and collecting that data in order to make an informed decision is an important component of what we do in capture.
This is a guest post from Dave Moyer, part-time senior analyst for TAPE, LLC.
As a member of a group of adjunct professors for the Graduate School USA, we collectively develop abstracts of pertinent, current legislation for use by the group in multiple class presentations. We attempt to author papers that enlighten our students and occasionally will develop papers that are of use to entities working in the government arena.
The follow paper was developed by four of the financial management professors and contains information that would be of interest to government contractors. In my ongoing capacity as a senior analyst for TAPE, I condensed this information, which is available in the public domain, in an effort to make it a handy thumbnail of the latest NDAA.
On December 12, 2017, President Trump signed the 2018 National Defense Authorization Act (NDAA) (Public Law 115-91). It contains many significant changes to DoD operations and organization, as well as some government-wide changes. Here are some of the important changes, starting with a new law with government-wide applicability:
Subtitle G of the NDAA is referred to as the Modernizing Government Technology Act. It establishes a Technology Modernization Fund and a Technology Modernization Board. The Act also authorizes any agency (not just DoD) to establish an information technology working capital fund (WCF) to improve, retire, or replace existing systems, and for any project, program, or activity related to IT modernization.
An interesting aspect of these WCFs will be their funding sources, and the length of availability of the funds. Agencies are given the authority to transfer other appropriations into the fund, and the WCFs may also receive discretionary appropriations. Thus, the WCFs won’t rely on sales to customers to earn revenue.
In addition, due to their nature, currently WCF balances are always available without fiscal year limitations (that is, no-year). This is no longer true, as these WCF balances will be available for only three years after the year in which funds are transferred in, or the appropriation is received from Congress. After three years, any unobligated balances revert to the general fund in Treasury.
Section 806 of the NDAA amends Title 41 of the US Code and applies to all federal agencies. The micro-purchase threshold increases from $3,000 to $10,000.
The following are some DoD-specific provisions to be aware of:
- Section 827: Directs a pilot program on recovering costs from contractors whose protests are denied by the Government Accountability Office.
- Section 831: Redefines Major Defense Acquisition Programs and Defense Business Systems.
- Section 832: Prohibits the use of lowest price technically acceptable source selection process for engineering and manufacturing development contracts for major defense acquisition programs.
- Sections 841-844: Numerous enhancements relating to the acquisition work force.
- Section 854: Pilot program for multiyear contracts up to 10 years in length.
- Section 905: Adds qualifications for appointment as the Under Secretary of Defense (Comptroller) and the Deputy CFO. Adds duties and powers to the Under Secretary’s position.
- Section 906: Redesignates Principal Deputy Under Secretaries of Defense as Deputy Under Secretaries of Defense.
- Section 910: Establishes a Chief Management Officer of the Department of Defense. This will be the number three ranking person in the department, below the Secretary and Deputy Secretary, but above the Under Secretaries.
- Section 921: Adds qualifications for appointment as the Assistant Secretary for Financial Management in each of the three military departments.
- Section 925: Moves background and security investigations from OPM to DoD.
- Section 1002: Adds a new chapter to Title 10 consolidating, codifying, and improving authorities and requirements relating to the audit of DoD financial statements. Among many other changes, the Financial Improvement and Audit Readiness (FIAR) plan is now called Financial Improvement and Audit Remediation (FIAR) plan.
- Section 1004: By mid-March 2018, DoD must submit a report to Congress ranking every DoD component/agency on their auditability.
- Section 1103: The temporary authority for DoD to offer Voluntary Separation Incentive Program payments up to $40,000 (rather than the old $25,000) will not expire on Sept 30, 2018. It is extended to Sept 30, 2021.
- Section 1648: Requires a report to Congress by May 1, 2018 on the termination of the dual-hat arrangement for the Commander of the United States Cyber Command.
- Section 2802: Operation and Maintenance (O&M) appropriations may be used for construction up to $2,000,000 (up from the previous $1,000,000). Also, the unspecified MILCON limit goes from $3,000,000 to $6,000,000.
- Section 2803: The Secretary of each component will adjust the $6,000,000 unspecified MILCON limit each fiscal year to reflect the local construction cost index, but the limit may not exceed $10,000,000.
- Section 2805: The Secretary of each component may use O&M funds to replace building damaged or destroyed by natural disasters or terrorism incidents, with a limit of $50,000,000 per fiscal year.
This is a guest post by Jason Miller of Federal News Radio.
It’s been a year since the Office of Federal Procurement Policy released and accepted comments on its draft circular around category management.
With little-to-no activity on the draft circular over the past year, it seems OFPP is taking a less permanent route to further institutionalize this approach to buying.
Federal News Radio has learned OFPP sent a draft memo out for comment across the agencies earlier this summer, focusing on demand management and “best-in-class contracts.”
Several sources confirmed agencies submitted comments and OFPP is reviewing them.
Government sources familiar with the draft memo say OFPP wants agencies to set goals for using “best-in-class contracts,” and implement demand management by analyzing procurement data and making decisions on who to buy from and how to buy from those vendors.
One source said the draft memo would require agencies to negotiate with OFPP a percentage of work that would have to go through some of the currently 29 governmentwide, multiple-award contracts that have been designated “best-in-class.” These include several General Services Administration contracts, such as OASIS for professional services and Alliant for IT services, as well as the governmentwide acquisition contracts run by NASA and the National Institutes of Health.
“Each agency’s goal would be different because it would be based on what you buy and what you think you should be buying,” said the source, who requested anonymity in order to speak about the pre-decisional memo. “OFPP will look at what you bought in the past and determine what percentage should be bought through these contracts. You will then negotiate with OFPP, much the same way we do with small business goals.”
Multiple government sources say they have real concerns about the memo and have expressed them to OFPP.
Another government source familiar with the memo said they are not a fan of the “best-in-class” designation because it’s based too much on labor rates or categories, and not based on whether the vendor can do the work the agency needs.
“To be ‘best-in-class,’ you have to demonstrate that the vendor is best in class,” the source said. “I understand using it for some things, like delivery services, but for anything mission-related or more complicated, I’m not sure you can just look at the basic information and decide a contract is ‘best-in-class.’”
Lesley Field, the acting OFPP administrator — who, by the way, has been acting for more than a year— said at the Professional Services Council’s Vision Forecast Conference on Nov. 2 that agencies use rigorous criteria to determine “best-in-class.”
“We developed the requirements with a lot of government agencies in mind. It’s not just one agency, but there were customers at the table helping with the requirements,” Field said. “We want to take advantage of volume pricing. We want to have benchmarks for what industry is driving toward. We want to make sure is there data-driven demand and we have to validate our savings methodologies.”
But the criteria for “best-in-class,” according to GSA’s website, are much less rigorous than what Field described.
GSA says to be “best-in-class” a contract must:
- Allow acquisition experts to take advantage of pre-vetted, governmentwide contract solutions;
- Support a governmentwide migration to solutions that are mature and market-proven;
- Assist in the optimization of spend, within the governmentwide category management framework;
- Increase the transactional data available for agency level and governmentwide analysis of buying behavior.
Field said OFPP, GSA and other agencies look at those contracts to make sure they meet all these criteria as well as others, such as ensuring they support contracting with small businesses.
Roger Waldron, president of the Coalition for Government Procurement, said his members and others in the federal community are concerned about the impact the “best-in-class” designation could have on the marketplace.
“To the extent that ‘best-in-class’ contracts are selected, it’s like picking winners and losers. It could lead to less competition and higher prices in the long run,” Waldron said. “Industry also is scratching their collective heads about what criteria should be used, and even if it’s the right idea. Best-in-class predisposes that it’s the right way to go, but what if it’s a platform or new idea instead of just a contract?”
Waldron said the Federal Acquisition Regulations already tell agencies there are priority sources of supply, so if OFPP wants to hold agencies accountable for using these “best-in-class” contracts, what does it mean for the small business community?
“Is best-in-class establishing a different framework for priorities?” he said. “We don’t understand why OFPP isn’t going through a typical rulemaking process. The Obama administration put out the circular and asked for some comment on it. We submitted a series of comments and questions, and to date, we’ve received no response from the executive branch. I’m not sure how OFPP can implement category management and best-in-class without addressing industry questions and concerns. It doesn’t demonstrate a real partnership.”
Industry isn’t the only place where collaboration may be falling short.
The second government source said OFPP has talked — but not to the acquisition community — about category management and the use of “best-in-class” contracts.
“I’ve been told our comments will be addressed,” the source said. “This is a leftover initiative from the last administration and they are just keeping it going without taking a new look at the effort.”
Sources said OFPP should bring the Chief Acquisition Officer’s Council together to discuss category management and what “best-in-class” really means before creating what some may view as a mandate to use these designated contracts.
Government and industry experts say OFPP should reconsider what “best-in-class” really means.
The government source said maybe it’s around acquisition practices and not contracts.
Waldron said maybe OFPP should consider identifying key characteristics of contracts to drive the best value.
“The only thing we have is criteria that were identified in the draft circular that are all process-driven, not outcome-driven,” he said. “Plus, the definition of best-in-class in government seems to be different than best-in-class in the private sector.”
Sources say one problem with the entire category management effort is it’s being driven by GSA and they stand to gain from the effort.
The first government source said OFPP needs to be more flexible in how it requires agencies to use these contracts. The source said they can’t understand how the GSA Schedules are considered “best-in-class,” given how many vendors there are and the fact that the prices aren’t great to start.
“The way GSA negotiates them means you are not getting the best price, because anyone can get on it as long as you are a legitimate company, you don’t have any failed past performance and can offer a decent price,” the source said. “To me, ‘best-in-class’ means you negotiated and are getting a good deal. Best-in-class should minimize my work and Schedule 70 doesn’t do that, and that’s where I get a little nervous because OFPP is going to an extreme. Best-in-class should be contracts that are products or services that are proven, efficient and cost-effective. You are after quality, timely delivery and cost-effective buying. Right now, the criteria is too loosely written.”
This post originally appeared on the Federal News Radio site at https://federalnewsradio.com/reporters-notebook-jason-miller/2017/11/ofpp-drafts-memo-to-replace-category-management-circular/ and was reprinted with permission. You can also click here to listen to Jason Miller discuss the topic on the Federal Drive podcast with Tom Temin.
Here’s a guest post from one of TAPE’s “capture managers,” a member of our business development team.
A large number of my family and friends live outside the “beltway.” So when I tell them I’m a capture manager, they give me a blank look – and you might, too. Unlike medical and legal professions, capture management is a profession that doesn’t get a lot of attention outside of the beltway. But today, we’re going to break it down and understand what capture is and how small businesses can use it to grow.
What is capture?
Selling to the Government is like a chess game with three phases:
- Opening – this is where businesses identify who they are, what they’re going to sell, and the clients they’re going to target. In essence, this is how businesses condition the marketplace to be successful.
- Middle – this is where businesses, focusing on specific accounts, manage the client relationship and develop opportunities. This middle game focuses on gathering information and then shaping the client’s perceptions. In essence, this stage of the game is all about conditioning the client.
- Endgame – this is where businesses write proposals, negotiate, and sign contracts. This endgame is where businesses condition the deal.
As in chess, when businesses wait until the end to try and win, they’re more likely to lose. Chess games and business contracts are won or lost a majority of the time in the middle game.
Capture is the middle game. It comes after making contact with a prospective client, and before an RFP is released. My colleagues and other industry veterans will tell you that a prospective client’s buying decision is typically 40-80% complete before proposals are even submitted. This means that the middle game constitutes as much as 70% of a company’s probability of win.
Considering these statistics, it is no wonder that large government contractors (LGCs) have dedicated capture teams. In addition to their capture personnel, though, LGCs have also developed a capture discipline, or set of processes, by which they organize, monitor, and evaluate their capture efforts.
Many small businesses cannot afford the cost of a dedicated capture team, but none can afford to neglect building a capture discipline. The question, then, is how can small businesses go about developing a capture discipline?
Developing a capture discipline
One way to begin developing a capture discipline is to define the activities and outcomes that reliably predict success. Since capture is all about conditioning the client to prefer your solution, at TAPE we use the following five characteristics to predict success:
- Strong client relationships
- Client-centered solutions
- Robust competitive intelligence
- Secure staffing
- Competitive pricing
When clients know you by name, when you’ve collaborated with them to develop their solution, when you’ve used your knowledge of the competition’s strengths and weaknesses to refine your solution, when you’ve identified staff in your solution that the client knows and trusts, and when you’ve priced it competitively you have effectively positioned yourself to win the contract.
Accomplishing all of these goals takes time and persistence. It also helps to have a shared understanding of the steps one takes to achieve these goals.
Building strong client relationships
Before I moved to the DC area, friends here told me that it’s not what you know, but who you know. While this is probably true everywhere, it is especially true for DC. Knowing the right people – and being known to the right people – is critical for success. To ensure that we’re building strong client relationships, we ask ourselves the following questions:
- Does the client know your name?
- Does the client understand your company’s capabilities?
- Has the client met with you to understand and/or develop their requirements?
- Does the client trust you?
If the answer to any of those questions is no, our team meets to devise a plan that changes those answers to yes. We assign tasks and record our progress so that our team operates from the same page. This data helps us measure our progress and make key decisions,
Developing client-centric solutions
This is the heart of capture, and doing it well requires that you know the customer’s needs, issues, and hot buttons. Client-centric solutions come down to four key steps:
- Meeting the needs of the customer
- Understanding the needs versus the wants
- Understanding the risks
- Developing a solution that meets the needs
Knowledge is power, and what you don’t know can hurt you. My mantra for capture comes from industry titan Bob Lohfeld, whose book of collected articles is titled Best Informed Wins. The whole idea for capture is that we gain as much intelligence as possible to win bids.
That includes intelligence on the customer and customer intimacy, e.g., do we know who the program manager and contracting manager are, have we had conversations with them, are they comfortable calling us by name, do they know who we are, either as TAPE or individuals?
What are their problems, what do they see as possible solutions, and how do we help them solve those problems? Knowing all of that gives us customer intimacy, and the intelligence that comes along with that.
Then there’s market intelligence, e.g., who are our competitors, what have they done recently, and what are their significant strengths and weaknesses? Do we have everything it takes to provide solutions or do we need to team? Do we have the right people, who are of interest to the program office, that they know and trust? Are we able to get people quickly?
There’s also financial intelligence, i.e., knowing the costs, how much the government has to spend and wants to spend. Is cost their biggest priority or is it having the right people?
The more informed we are, the better proposal we are able to write, so capture management is a process of strategically uncovering all the information we need to make the win.
We’ll address the fourth and fifth characteristics of successful capture (secure staffing and competitive pricing) in a future post, along with some of the other elements that affect TAPE’s capture process.
This is a guest post by Donna Porch, former program director for MO PTAC-Kansas City.
Q: What are bonds and when are they required?
According to the Federal Acquisition Regulations (FAR), a bond is a written document between a bidder or contractor (the principal) and a second party (the surety) to ensure fulfillment of the principal’s obligations to a third party (the obligee or government) identified in the bond. If the principal’s obligations are not met, the bond ensures payment, to the extent stipulated, of any loss sustained by the obligee. Put simply, bonding protects the government from financial losses.
The bonding process
Contractors seeking bonding must be prepared to prove to a surety that their company has the capacity, character and capital to perform the project(s) on which they are seeking to be bonded. Sureties want to be sure that entering into a bond relationship with a contractor is a good business decision.
Prior to issuing a bond, a surety will analyze a contractor’s capacity to perform (necessary equipment), financial strength (good credit history and line of credit), past performance in similar contracts, and organizational structure.
Types of bonds
In construction projects, it is typical for the federal government to require bid, performance and payment bonds.
A bid bond provides financial assurance to the government that a contractor has submitted the bid in good faith, that the contractor will not withdraw a bid and that if awarded the contract, the contractor intends to enter into the contract at the bid price. A bid bond also ensures that the contractor will provide the required performance and payment bonds.
A performance bond protects the government from financial loss should the contractor fail to perform the contract in accordance with the terms and conditions of the contract documents.
A payment bond guarantees the contractor will make payments to all subcontractors supplying labor and material in performing the government contract.
An ancillary bond guarantees other factors incidental but often essential to perform a contract.
When are bonds necessary?
Unless waived, bid bonds are only required when performance bonds or performance and payment bonds are required. In such cases, all bidders must submit a bid bond with the offer. The bid bond amount shall be at least 20 percent of the bid price but shall not exceed $3 million.
The Miller Act requires a successful bidder to submit performance and payment bonds for any construction contract exceeding $100,000. This requirement may be waived in limited circumstances. Unless the contracting officer determines that a lesser amount is adequate for the protection of the government, performance and payment bonds shall be 100 percent of the original contract price. If the contract price increases, the performance and payment bonds must also increase by the same amount.
For any construction contract between $25,000 and $100,000, the government contracting officer shall require two or more of the following payment protections from the successful bidder:
- A payment bond
- An irrevocable letter of credit, a written commitment by a federally insured bank to pay a stated amount until the expiration date of the letter
- A tripartite escrow agreement, in which the government makes payments to the contractor’s escrow account, and the escrow agent distributes the payments to the contractor’s suppliers of labor and material
- A certificate of deposit from a federally insured financial institution, executable by the contracting officer
- A deposit of the amount of the bond in U.S. bonds or notes, certified or cashier’s checks, bank drafts, postal money orders or currency
Generally, federal government agencies do not require performance and payment bonds for contracts other than construction contracts. However, they may require performance bonds when a contract exceeds the simplified acquisition threshold ($100,000) and government property/funds are provided to the contractor for use in performing the contract; when substantial progress payments are made to the contractor; or if the contract is for dismantling, demolition or removal of improvements.
A payment bond is only required when a performance bond is required and if its use is in the government’s interest. Annual bid bonds and annual performance bonds might be used in lieu of individual bonds for each project.
Reference the FAR Part 28 Bonds and Insurance for further guidelines on bonding for federal government contracts. State and local government agencies may also use bonds for their financial protection. However, they may use them in different contracting situations and with different dollar values.
For more information on bonding, consult your local Missouri Procurement Technical Assistance Center (MO PTAC). A list of MO PTAC training seminars is available online.
Donna Porch was a former program director for MO PTAC-Kansas City. This article originally appeared at https://missouribusiness.net/article/bonding-basics/ (with permission from the Kansas City Small Business Monthly) and was reprinted with permission.