Selling To The GovernmentBy Scott LeCalsey
There are countless myths about selling to the government that are common throughout the jan/san industry:
• “I have to give away my product to sell to the government”
• “There is too much red tape in dealing with the government”
• “Selling to the government goes against how I go to market”
• “The government does not buy my products”
• “The government is too complex for my company”
As for pricing, the government does command a “Most Favored Customer pricing.” Essentially, distributors cannot offer their best customers more favorable pricing than they offer the government. There are a lot of variables in that statement, however, and only a distributor and a contracting officer can decide how it translates to his or her business model.
If best customer pricing is not attractive, then selling to the government may not be either. However, most companies selling to the government in 2009 witnessed growth for government sales, while their non-government sales were negatively impacted due to the recessionary economy. The government is a huge consumer of products. If distributors aren’t selling to the government, then their competitors are.
The first step most companies take to sell to the government is to get a GSA Schedule from the General Services Administration (GSA). A GSA schedule is merely a hunting license, which enables one to sell to most government entities. It is basically a price list that ends up published on www.gsaadvantage.gov that enables end users to shop for products. Many companies use GSA schedules as a price list for Internet sales but offer deeper, discretional discounts for situations that warrant/justify them for specific end user situations. Vendors who directly engage end customers in the government understand this well and use it effectively.
GSA does allow for pricing that supports distribution or manufacturers that work with distribution: if a manufacturer typically sells through distribution, the government allows a dealer (a distributor) margin in GSA schedules, so that manufacturers can still sell products through distribution and carry a GSA schedule. Manufacturers simply must put the distributor/dealer margin in their schedule pricing negotiations. GSA is fairer in accepting commercial pricing practices than most people believe.
The bidding process is the reason for the negative view of government pricing. If distributors concentrate solely on bids, or focus on reverse auctions, they will certainly face lower margins. Bids are necessary evils, but do not focus on or spend time on bids alone.
A mistake made by many companies is solely focusing on bid business. Successful entities use bids for lower profit, higher volume business but concentrate attention on face-to-face end user sales for the longer-term programs. These continuous business relationships (indirect or direct) with government end users drive successful government programs. Building this continuous business is often overlooked in government programs. A smart tactic is to drive education/awareness of the value proposition(s) of products/services through all channels to the end user, making sure to educate all who are involved in getting products to its final consumption point.
For a manufacturer, it is advantageous to have a government subject matter expert on staff to facilitate this process. It brings value to distributor partners as well as allowing to control integrity. Training programs to deliver the message of product/services through all channels have shown tremendous success in many government programs.
A distributor wishing to sell to the government needs to touch the end user directly, to educate the value that it offers. Many government buyers make purchasing decisions based on a “best value” determination rather than price alone. For instance, if “Distributor A” can supply a product delivered in one day at a somewhat higher price than the competition who can supply it to the customer in several days, the customer may make a best value determination to purchase the product from “Distributor A” as it helps him/her to fulfill the task at hand more effectively. “Best value” is no different than in the commercial world, and yet this is not typically associated with government.
It’s All About Marketing
There are really two steps to beginning a government program. Obtaining the GSA Schedule or contract is just step one. Next, distributors need to market the schedule or contract.
Many companies fail because they stop with the first step, or fail to understand the second step. They get the contract or GSA Schedule but do nothing more. Understanding the market, how to get your products/services to that market via sales, networking, trade shows, etc., is as important as getting the contract or GSA Schedule. This applies to all government opportunities: federal, state and local.
GSA is only one of many vehicles that allow distributors to sell to government customers. If, for instance, products are ending up at a Goodwill cleaning company that is cleaning a federal building, this is theoretically a government purchase as the products are being consumed by the government via the service provided by the Goodwill cleaning services, which is a government contract. Distributors can sell to Goodwill entities without a GSA schedule. Goodwill functions like most commercial contract cleaners, with the exception that they employ persons that are handicapped to perform labor functions. Goodwill just so happens to clean approximately 2.3 million square feet of office space, much of which is federally owned facilities. Goodwill’s mission is to provide employment for persons with disabilities and they are a preferred source for government contracts. There are many channels to which distributors can sell their product/service to the government. Identifying which channels work best is also fundamental to a successful government program.
For most government purchases, there is a procurement hierarchy of sources from which it must work through. It gives preferential purchasing to small businesses, disadvantaged businesses, businesses that employ persons with visual or other disabilities (operating under the auspices of the Ability One program, formerly known as JWOD www.jwod.gov program), Veteran Owned businesses, Native American businesses, etc. Large business is the last stop of the hierarchy for a government purchase. So, for a large business, it is advised to understand how to sell its products through one of the aforementioned entities. This may involve adding new distributors, new resellers, or new channels to work with, but it is nonetheless providing products to the end user via its desired method. Understanding this further helps demystify this customer.
As far as red tape, bureaucracy, etc. all government purchases fall under Federal Acquisition Regulation (FAR). This is a reference point that is the foundation for all laws applicable to government purchases. It can be referenced at https://www.acquisition.gov/Far/ and contains all laws surrounding government purchases. It’s recommended that anyone selling to the government become familiar with, or at least spend time reviewing this document. It is the law. It provides answers to most questions that one might have with government purchases.
When filling out any contract or bid request, refer to the FAR for questions and concerns regarding the submission. It has a strong reference library to pinpoint keywords and is fairly easy to navigate. Also, keep a copy of the first bid proposal filled out to create a template for future responses to save time and frustration when doing new bids. This information is usually redundant from bid to bid. Well-written cover pages that define value to the customer as well as past performance is important for the contracting officer.
Beyond familiarity with FAR, a successful government program has to develop a strong relationship with the contracting officers that administer its contracts. They are open to providing guidance and support for you to be successful. Contracting personnel are very accommodating in helping one with contracts. A distributor that asks for help demonstrates to a contracting person that he or she is willing to do what it takes to be successful and allows the contracting person to provide his or her expertise to make the contract better.
There are programs that are provided to help distributors better learn government regulations and procurement. GSA offers them via its website; www.gsa.gov. At the bottom of this page is a link called “new to GSA” that will direct visitors to information. Also, GSA has an annual conference that provides a vendor exposure to government buyers from all over the world (anywhere from 4,000 to 8,000 attendees). The GSA Expo is an annual event that allows distributors to showcase their products/services, network within this world, and attend informational training events.
The government is a massive opportunity that many jan/san companies have often contemplated, but few have embraced. Interestingly enough, the government is one of the biggest jan/san opportunities that exists today. It is a low credit risk, and can pay via a p-card. A strong program can grow year over year with some sound strategies. It represents a solid market for which jan/san companies can sell products/services to and is relatively recession-proof.
Scott LeCalsey spent the first 10 years of his career in the paper/foodservice disposables industry working for Scott Paper, Bay West Paper and Wilkinson Manufacturing. He then entered working with state and federal government customers through non-profit agencies affiliated with National Industries for the Blind. For the past 11 years, Scott has worked with all levels of government customers and has been on over 104 military bases training associates on how to call on those customers. Scott is highly networked in the government arena. He can be reached at 402-547-6744 or firstname.lastname@example.org