Ask a simple question about government procurement . . .

Posted on January 14, 2011

2


Perhaps the natural radio host in me is the reason why I am interested in everything that goes on around me and thus like to ask a lot of questions.  What is it my mother used to say . . . there is no such thing as a dumb question?!

Great advice, and I have of course conducted my affairs in both my business as well as private life based on the premise that the only bad question is the one that is never asked.

That being said, I have found that some questions lead to answers that in and of themselves are thought-provoking and even controversial.

Take for example my question arising out of my recent interview with Mark Amtower (Selling to the Government: Competing in the World’s Largest Market) regarding his new book Selling To The Government.

During the interview Amtower provided some interesting data such as a report by Amex that on average it takes a supplier 19 1/2 months from when they begin to pursue government business to actually winning their first contract at an annual cost for the supplier of $89,000.

Based on the above, I posed the question to our social media audience, “is it too costly to do business with the government?”

The responses were and continue to be fast and furious generally reflecting the sentiments of one respondent who said:

“If you are entering government markets as a greenfield opportunity, the time-lines, the bidding, and the customer acceptance is almost sure to be too long and too costly.”

In other words, and reflecting Amtower’s expressed opinion as a small business owner himself, if you are not already in the game the cost of entry is far too high and it would as another respondent intimated be more “worthwhile” to pursue private sector business.  If you think about it these points are hard to argue in that a supplier, especially a Small, Women and Minority Owned business owner, is being asked to invest more than a $100K to pursue a payout 19 months down the road that is not guaranteed!  Given these kinds of odds, how many business people during boom periods let alone a struggling economy want to play in this sandbox?

I would hazard a guess, and based upon the responses I have received, the answer is not many.

There are to be certain many ironies associated with these sentiments including the growing acknowledgment on the part of the public sector that eroding supply bases with a corresponding sharp decline in RFP responses is leading to rising costs and diminished levels of service.

Coupled with recent announcements such as the one made by Cabinet Office Minister Francis Maude in December regarding the UK government’s decision to move away from costly, over-arching contracts with large IT suppliers and, to instead pursue direct contracts with smaller vendors is at this point long on intent and short on practical execution.

As Colin Cram, the 30 plus year public sector veteran and author of the seminal paper Towards Tesco – improving public sector procurement put it in a recent PI Inquisitive Eye TV interview, while the UK government knows that they have to move in this direction they have not established an effective and therefore reliable mechanism to actually engage these smaller suppliers.

Interview with Colin Cram

(NOTE: this is an excerpt from the LIVE PI Inquisitive Eye broadcast from December 9th, 2010. Here is the link to the broadcast in its entirety; http://www.ustream.tv/recorded/11452443)

Add into the equation that with their current budgetary woes, which has many municipalities and perhaps even states on the verge of going bankrupt for the first time since the Great Depression, a growing number of governments now see procurement as a means of stimulating their economies through increased engagement of their  indigenous Small-Medium Enterprise “SME” supply base.

The problem this revelation presents is that after years of being an exclusive versus inclusive process (Amtower’s research shows that little has changed over the past decade as the majority of Federal Government business is still going to a group of approximately 20 vendors he referred to as The Usual Suspects), this shift in focus is tantamount to the prettiest girl in school waiting by the phone for someone to call to ask her to the prom.  After years of telling prospective suitors that she was washing her hair on Saturday night, the phone isn’t ringing anymore as the boys have moved on to pursue more attainable friendships.

As confirmed in my May 14th, 2009 interview with a senior executive from the Canadian Federation of Independent Business “CFIB,” which represents more than 105,000 small businesses (Government Procurement Policy: A Question of Synchronization Versus Compression), this problem is not unique to the United States.

According to Corinne Pohlmann, CFIB’s Vice President for National Affairs, while a small percentage of businesses represented by the Federation sell to the public sector, the vast majority have long since moved on to pursue private sector opportunities as they consider the government procurement process to be a costly endeavor with little chance for meaningful success.

It would seem that given the obvious potential associated with the public sector’s recent overtures to better connect with the small business community, along with the decline in supplier revenue streams from the private sector due to the still struggling economy, bringing the parties to the table of mutual gain makes a great deal of sense.

However, bridging this dollar and sense chasm or disconnect is at least for the time being, an easier said than done proposition.  Perhaps this is the reason why books such as Mark Amtower’s Selling To The Government: What It Takes To Compete And Win In The World’s Largest Market is both timely and essential reading regardless of what side of the purchasing equation you find yourself.

Stay tuned as we will be airing a Special 90 minute guest panel segment in March aptly titled “Is it too costly to do business with the government?”

30