The Week Ahead - June 16th, 2014
PLEXICO - CONTRACT STRATEGY AS IMPORTANT AS SOLUTION
Deltek Vice President Kevin Plexico provided his latest insights on the federal IT market last week, but also gave advice that all contractors should heed in order to adapt to the current federal market. While crafting a great solution is often seen as the most important step in obtaining business, Plexico argued that having a strategy for contract vehicle positioning is as important. If your customer can’t easily obtain access to your solution, especially during the federal buying season, they may pass right by you. Companies under pressure from GSA to slash their prices and offer only basic, commodity-type solutions may want to take heed. There’s still demand in the market for more than a basic car with no AC and an AM radio (exactly like the cars Allen Federal grew up with). If GSA isn’t going to provide those things, you and your customer need to figure out how to get the deal done. Open market buys may be one way to go, but also to be considered are agency-specific Multiple Award Contracts (MAC’s). Prevalent in the IT world, MAC’s account for 35% of all IT spending, while the GSA IT Schedule captures 18%. This shows both that MAC’s aren’t a new idea and can be favored over more static contract options. If you’re firm hasn’t explored a MAC option with your best federal customers, now may be the time to start.
DOD MEMO ON CONTRACT FEES COULD ADD HURDLES TO INTERAGENCY CONTRACTING
Director of Defense Acquisition Policy Dick Ginman, issued a memo June 11th to all DOD buyers to be aware of the contract access fees incurred when using interagency contracts. This comes on the heels of recent guidance where Ginman directed DOD buyers to independently verify the price reasonableness of GSA Schedule services and products. Taken together, the two memos may have an impact on the degree to which DOD buying activities use outside contracts over the next few months. Contractors should be prepared to educate their DOD customers on access fees paid, especially the differentiation between relatively low fees, such as the Schedules Industrial Funding Fee (IFF) and the higher percentage fees that come from using assisted acquisition services. History has shown that buyers usually assume they’re paying the higher fee when they, in fact, are buying directly and incurring only the smaller one. When buying directly from a Schedule or other GWAC DOD buyers usually end up saving money because the fees are spread out over a large user base. These contracts can, indeed, lower the government’s total acquisition overhead. DOD policy memos may be intended to help, but could end up adding confusion. Be prepared.
HOW KNOWING CAMPAIGN STRATEGY CAN HELP GROW YOUR BUSINESS
Deltek’s Kevin Plexico laid out his map of the federal IT world this week and, like pre-Gallilean maps, that world is flat. Whether you’re in IT or another federal market segment, heeding Plexico’s advice, “Stealing market share is the key to growth” is a good strategy for gaining business in the current market. There isn’t enough federal money around for everyone to grow. Taking a look at basic election strategy, however, may hold clues on how your business can increase. The first step for companies wanting to grow is to actually protect what they already have. Anyone who has run a successful election campaign will tell you that you must secure your base before you move ahead. Only when you’re base is taken care of can you start looking at what others have that may be appealing. Even then, start slowly. You don’t want to go immediately to the precinct where most voters disagree with your message. Work on swing states (customers) first. These may be ones that have done business with you previously, places that are unhappy with the incumbent (see last week’s Eric Cantor vote). While money is key here, just like in elections, you don’t have to always be the low cost leader to win. Smartly crafting your value proposition, in much the same way a campaign crafts its message, can help win business at something beside a rock-bottom margin. Remember, though, unlike politicians, contractors do have to deliver on what they promise once elected.
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