10 Myths about Selling to the Government
Combined, U.S. government agencies (federal, state & local) represent the largest customer in the world. 89,000 government agencies are spending over $7 trillion per year (TRILLION)…that is just under $20 billion per day (EVERY DAY). That is A LOT of money.
The federal government spends over $4 trillion per year, and state & local agencies spend over $3 trillion. Government spending is the largest “industry” in the United States…representing over 13% of U.S. Gross Domestic Product (GDP) — with manufacturing second at 12% of GDP.
However, some companies decide not to pursue the enormous opportunity of doing business with the government because of common misconceptions about the government sales process. This report is meant to debunk some of the most prevalent myths about doing business with the government.
Myth #1: A majority of government procurement opportunities go out for bid/ RFP.
One of the biggest myths about government sales is that a majority of government procurements are completed through a bid or RFP (Request for Proposal). The reality is that up to 80% of government spending does NOT go through the bid/RFP process. Over the years, government agencies have developed numerous ways to purchase products/services without issuing a bid or RFP.
Download the full report here for a list of methods for government procurement outside of the bid/RFP process.
Myth #2: The Government is looking for the “cheapest” (lowest cost) solution.
When discussing the opportunity to pursue government business with companies that are new to government sales or only have limited experience with just a few agencies, some say, “it’s not worth all of the effort because the government is just looking for the cheapest solution.” That is NOT true.
The government is looking for the “best overall value.”
Government agencies are not profit-driven organizations. They are not seeking to save money to be “more profitable.” They are spending the taxpayer dollars that are allocated to them. Purchasing the “cheapest solution” that may require significant support/maintenance costs or may need to be replaced in an unusually short timeframe is not better for the agency or its citizens.
Download the full report here for examples of why the government chooses the best overall value and not the cheapest solution.
Myth #3: Government procurements are highly competitive with low margins.
Some government procurements can indeed be highly competitive resulting in lower margins/profitability, but this is certainly not true of all nor a majority of government opportunities.
Government acquisitions that are processed through a bid or RFP can be very competitive because Bid Notification solutions (covered in Myth #5) make more companies aware of each potential government procurement. Companies from around the country (and world) can submit bids/proposals for these procurements, and sometimes companies that are going-out-of-business or desperate for revenue will submit extremely low pricing.
However, many very successful companies are winning government business with attractive profit margins.
Download the full report here to see how companies are utilizing these strategies.
Myth #4: Your company needs to be on GSA or State contract to win government business.
The General Services Administration (GSA) has established a series of contracts/schedules with specific products/services offered by companies at predetermined prices. The items on GSA contract/schedule are normally commodities that are purchased in high volume by government agencies. Agencies can purchase from a GSA schedule like how consumers purchase items from a private company’s website (through an eCommerce transaction). Full details of the products available on a
GSA contracts/schedules are available at www.gsa.gov.
After witnessing the success of the GSA contract process, many states have also created contracts/schedules structured similarly to the GSA, but typically with products/services that are unique to the specific state (e.g. Florida has a “Vehicle Schedule” that only includes car dealerships offering vehicles for sale in Florida).
Companies new to the government sales process sometimes ask: “Don’t we need to be on GSA or State contract to win a government contract?” or “Don’t agencies purchase almost everything off GSA or State contract?” The answer to both of these questions is: No.
Companies do not need to be on GSA or State contract to win government business. Taking the time and effort to get your company’s products/services on GSA and/or a State contract can reduce the length of the government sales cycle, but it’s not mandatory.
Agencies could choose your competitor’s product if they are on GSA or State contract (because it would shorten the acquisition process), but again, there is no requirement to be on GSA or State contract to win government business.
Find out more in the full report here.
Myth #5: It’s hard to find/identify government sales opportunities.
There can be a sense that the U.S. government is SO big (with a combined total of over 89,000 agencies) that it’s too difficult to identify applicable sales opportunities for your company. However, there are a large number of resources to assist companies in identifying realistic government procurements for them to pursue.
The most prevalent resource is a Bid Notification system. These solutions aggregate the bid/RFP notifications that are released by government agencies daily. When an agency releases a bid/RFP notification on its website, it is free to obtain for any interested party.
However, it is nearly impossible for any company to properly monitor 89,000 government agency websites. The power of Bid Notification solutions is that they aggregate the bid/RPF notifications for their customers. Numerous Bid Notification solutions focus on various market segments. Some only cover agencies in a certain region, some only cover specific procurement types (such as technology or construction), some only cover federal agencies or just state, local, & educational agencies, and some attempt to cover all procurements of all agencies. A few of the available Bid Notification systems are free but most require an annual or monthly fee.
Download the full report here for a list of several Bid Notification solutions and Purchase Order data solutions.
Myth #6: You need a large/dedicated team to respond to government procurement opportunities.
The government procurement process CAN be complex and require a significant amount of time and effort to complete. However, companies can be very successful in utilizing a small, targeted team focused on pursuing government opportunities. The key is to ensure this team is experienced and qualified.
A significant component of being successful in winning government opportunities is having a solid understanding of how the overall procurement process works for your target agencies. Every agency and state can have different rules/guidelines for their procurement processes, and hiring someone familiar with these rules/guidelines is invaluable. If they have a network of contacts within the agencies your company is targeting — that is even better, but not required.
In addition, understanding how the items you are selling are typically purchased (e.g. bid/RFP, P-card, state contract, etc.) is an important contributing factor to knowing how big your “government sales team” should be. If your company sells a low-cost item that is typically purchased via P-card, your government sales team may have more sales and business development representatives that are responsible for ensuring the P-card holder at targeted agencies is aware of your product/service. If the item you sell is typically processed through the bid/RFP process, your team may need to consist of more proposal/technical writers that can provide all of the necessary written responses to the agency.
Companies just entering the government sales process will typically need a team of 3 to 4 individuals.
Download the full report here to see who you need to complete a successful government procurement team.
Myth #7: It takes a long time (6 to 9 months) to win a government procurement.
This is probably one of the biggest misconceptions about doing business with the government. Although government procurements can take 6, 9, 12 months or longer (especially large dollar efforts and federal acquisitions), there is a large number of government procurements that are completed in just a few weeks…and sometimes just a few DAYS (believe it or not).
If a procurement is released for bid/RFP, it will usually take 3 to 9 months to complete — resulting in the stereotypical “lengthy” government sales cycle. However, all of the ways agencies can complete a procurement without issuing a bid/RFP, such as P-Cards, GSA/State schedule, and discretionary spend (as referenced in Myth #1), enable government acquisitions to be completed much faster. For example, GSA/State Schedule and Co-op acquisitions can be completed in just 1 to 2 weeks, and P-card and discretionary spend acquisitions can be completed in just 1 to 3 days.
Download the full report here to see how companies can shorten the government sales cycle.
Myth #8: You need to be a “registered company” to be awarded a government contract.
There is no mandatory, standardized “company registration” process to be awarded a government contract for state and local agencies. Across the country, agencies have varying policies regarding the paperwork that must be completed before a government contract is awarded. Some agencies have a significant number of company registrations/approvals that need to be completed, and while other agencies have surprisingly little paperwork required to win a contract award. The registration guidelines are usually listed on the agency’s website, or can quickly be obtained by calling the agency’s procurement department.
To be awarded a contract with a federal agency, companies need to be registered with the System for Award Management (SAM): www.sam.gov. This registration needs to be renewed each year.
Find out more about this process in the full report here.
Myth #9: The process to sell to various government agencies is basically the same.
There are four major government agency types: federal, state, local, and education. Companies with a significant government sales team will typically have a “federal team” and a SLED (State, Local & Education) team.
Each of these four agency types has access to all of the various procurement options detailed in Myth #1 (e.g. bid/RFP, sole-source, piggy-backing, etc.). However, the reality is that the sales process can vary greatly between federal, state, and local agencies — with educational institutions typically operating like local agencies. In addition, the sales process can even be significantly different between local agencies located in the same state.
Three of the most notable differences in selling to the various government agency types are:
Ability to access agency personnel to discuss the procurement
Number of regulatory guidelines that must be followed to complete the procurement
Process and expediency of obtaining payment for the procurement
Download the full report here to see how these differences play out in different agency types.
Myth #10: Your company doesn’t need to be selling to the government.
Combined, U.S. governmental agencies represent the largest customer in the world, spending over $7 trillion per year. How can your company not attempt to sell to the largest “prospect” in the world that spends an average of $20 billion per day?
If your company is not currently making any effort to sell to the government — it NEEDS to.
Find out more in the full report here.
Hopefully, debunking these 10 myths about selling to the government will provide you and your company the impetus to aggressively pursue government sales.
If you would like assistance with your government sales initiative, GovSpend offers strategic insights that enable companies to identify the specific agencies that are most likely to purchase from you. GovSpend works with companies of all sizes…from Fortune 500 companies to local small businesses.