Eye on B-to-B: The Fundamentals of Selling to the Feds

There’s no question that selling to the federal government is more difficult than selling on the open market. Often you must document your absolute best prices and offer the government the same or better. The amount of paperwork required is discouraging. And if you want to sell directly to a specific government operation (such as an entire agency, a specific department within an agency, or the local military base), you’ll have a devil of a time identifying the appropriate person to whom to send catalogs. Even if you finally find a contact, that person can be reassigned at a moment’s notice.

But aside from such daunting drawbacks, the federal government can be a dream customer. It’s the largest purchaser of products in the world, it tends to be very loyal, and it’s diligent paying its bills. Plus there doesn’t seem to be much that the U.S. government doesn’t buy. The feds purchase parkas, petit fours, pool supplies, popcorn machines, puzzles, and pup tents, and that’s just a minuscule sampling under the letter P.

The work required to sell to the government definitely pays off, says Jody Bertrand, director of corporate sales at Colchester, CT-based S&S Worldwide, which sells products for recreation, education, and physical therapy to institutions and the government. “It depends on the commodity” you offer, he says — but if there’s a need for that commodity, selling to the government can be “very rewarding.”

Going direct

You can do business with the federal government in four ways: by direct mail, by direct bidding, by getting on a schedule — a catalog of products at negotiated prices approved for sale to the government — and by marketing through a third party.

One of the best reasons to mass-mail a catalog to federal employees is that 800,000 of them have been issued credit cards for making government purchases, says Richard White, CEO of FedMarket.com, which helps vendors do business with federal, state, and local governments. That makes for an attractively large potential pool of customers. For purchases of less than $2,500, government employees need only to document that they surveyed three vendors and ended up purchasing from the company that offered the best value (unless, of course, they buy directly from a schedule).

On the downside, building a good list often involves the filing of numerous, and fairly specific, requests under the Freedom of Information Act. Some compiled lists are available, but because people are reassigned so frequently — especially those in the military — the lists can become quickly outdated. What’s more, the lists don’t specify which individuals purchase which products. If you sell computer accessories, for instance, you could be mailing to government purchasers who buy toilet paper, cleaning supplies, or calibration tools.

A more focused approach is to bid on specific contracts. Open bidding requires that a goodly amount of forms be completed, but it’ll be much less than the mountain of paperwork necessary to get on a schedule (see “The Skinny on Schedules,” opposite page).

If you take this route, however, you shoulder the unending burden of monitoring Commerce Business Daily (CBD), the newspaper in which the federal government publishes all of its open-bid opportunities. (By the begininning of January 2002, CBD will be superseded by FedBizOpps, which promises to be more comprehensive and will also offer vendors the opportunity to be notified electronically of any business opportunities.)

An increasing amount of government purchasing activity is being conducted through schedules, however. Those purchases never reach the stage of being listed in CBD. So vendors that pursue only open bids risk missing opportunities.

Getting on schedule

Government employees who buy from schedules have great flexibility to purchase the goods they need without going through a drawn-out, months-long bidding process. But for vendors, getting on a schedule is only the beginning of their work.

A company looking to get on a schedule must provide an exhaustive amount of information. Because the government cannot investigate every company with which it does business, it indemnifies itself by forcing vendors to engage in thorough self-reporting. If the government agency ends up under fire for dealing with a given vendor (for instance, it buys from a vendor that neglected to file its taxes for the past five years) it can go back to the paperwork and look for any misrepresentations that would absolve it from responsibility. “They get you to hang yourself,” White notes.

A vendor also has to substantiate that it is giving the government its best price on every single product it wishes to sell to the feds. It must do so by documenting the prices it offers to its best customers. And the vendor has to give the government agency it deals with a piece of the action — the General Services Administration (GSA), for example, gets 1% of every sale.

The GSA buys almost every type of merchandise, except weapons and pharmaceuticals; its schedule is one of the largest and most varied published by the federal government. White estimates the costs associated with getting on a GSA schedule at $5,000-$10,000, not including the salary of someone to read and decipher approximately 150 pages worth of GSA paperwork, which might take months. The response that person has to generate may run up to 100 pages, depending in part on how many products the company wants to sell. Once a company is on a schedule, it needs to renew its application every year.

Catalogers that have got themselves on a GSA schedule include Carolina Biological Supply Co., Galls, Global Computer Supplies, Grainger, Lakeshore Learning Materials, and Lincoln Equipment. This last company, which sells pool supplies, tried to compete on open bids but found that many of those contracts went to companies that were already on a schedule. “We lost business because of it,” says Lincoln Equipment CEO Charlie Lucker. “Now that we’ve got a GSA schedule number, we’re doing well.” He estimates that the government now represents 5% of his business. Concord, CA-based Lincoln has 6,500 products in its catalog, and about 70% of those items are included on the GSA schedule. The company, which mails about 50,000 catalogs a year, has been on the schedule for about five years. Lucker says the initial application process took about a year.

S&S Worldwide has been on the GSA schedule for about 15 years; Bertrand has managed the annual renewal process for the past eight years. He says that S&S provides 500-750 pages of product information and other data each time.

As there are several government agencies with their own schedules, you would have to repeat the process for every schedule you want to get on. For instance, the GSA doesn’t buy for the National Institute of Health (NIH). To sell to the NIH as well as the GSA, a company would have to get on both schedules.

A number of organizations can help you jump the hurdles to getting on a schedule. For instance, the Federal Supply Service (FSS), which administers the GSA schedule programs, provides assistance to companies that are new to the process. Other organizations you can go to for help include the National Contract Management Association, the Institute for Supply Management (until last May known as the National Association of Purchasing Management), and the National Institute of Government Purchasing.

One of the federal government’s goals is to do more business with smaller companies, which can get assistance from the Small Business Administration, says David Drabkin, deputy associate administrator for acquisition policy at the FSS. “All branches of the government have small-business offices, and they’ll all help. They’re all over the country, and typically the service is free.” The government is also interested in doing more business with companies owned by women, minorities, and veterans.

A small company can also team with a larger firm that already has a schedule. The FSS has a mentor program to help small companies find suitable partners. Drabkin also recommends visiting your local federal contracting officer (“never from mid-August to September,” he adds, since that’s when they’re swamped with putting together their annual budgets). At worst, he says, the contracting officer won’t have time to see you, but at best, he or she might walk you through the entire process.

If you’d like to avoid the red tape of getting on a schedule, you can hire a consulting company. Some consultancies will do the paperwork to get a vendor on a GSA schedule for a fee that can range from $15,000 to $25,000. Others will compile the mailing lists and handle the actual marketing of the goods to the government. These firms typically charge 1%-4% of the total sale.

Don’t forget the marketing

Once you get on a schedule, you still have to focus on marketing and sales, says Fedmarket.com’s White. “People don’t just find you in the morass of GSA Advantage,” the Website on which the GSA has put most of its schedule. “Getting and maintaining a schedule contract will be a waste of money unless you have a dedicated, focused government sales program,” White notes.

Both Lincoln Equipment and S&S Worldwide use direct mailings, outbound telesales, and field salespeople to market to the government. S&S adds a special price sheet for the government when it mails its catalogs. Lincoln Equipment will often place a sticker with the company’s GSA number and a U.S. flag on the catalogs being sent to its government customers. It also advertises in periodicals aimed at government employees, such as Government Product News and Government Recreation & Fitness.

Address Book

For more information about selling to the federal government, try a few of these Websites:

The Skinny on Schedules

For orders of less than $2,500, federal agencies may order from just about any supplier, so long as they checked the price lists of at least three vendors. For orders of at least $2,500, agencies have to accept bids or purchase from a vendor on a schedule. Agencies can search for items using the General Services Administration’s GSA Advantage, a Website from which government employees can purchase approved products at negotiated prices. Agencies select a vendor by making a best value determination (price and other factors considered).

Factors to consider about government schedules:

  • A schedule contract favors feature-rich, higher-quality contractors. Because buys are based on “best value,” not lowest price, don’t be discouraged if your prices are not the lowest.
  • Schedule contract buys do not have to be advertised in government newspaper Commerce Business Daily, nor are they subject to formal competitive procedures.
  • Buyers like using schedules because the purchase process is fast and simple.
  • Schedule contract buys no longer have an order-size limitation. Multimillion-dollar orders can be processed using the schedule contract ordering procedures.
  • Schedule contracts provide the basis for blanket purchase agreements for multiyear, extended agreements between the contractor and ordering agency.
  • Teaming arrangements allow two or more schedule contractors to propose and deliver multivendor solutions.
  • Credit cards and electronic funds transfer (EFT) may be used to simplify purchases and speed payment.

Source: FedMarket.com