Supply Chain Finance (Part 2) Efficiency Over Financing: A 30 Year Public Sector Executive Provides His Take On Supply Chain Financing

Posted on March 2, 2011

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No, this is the “cost” of doing business with the government. B2G is NOT for everyone and there are no guarantees that after 19.5 months business will occur.  There are resources to help companies long the way, though: PTACs, SBDCs and SCORE are all excellent – see links below.  Like any market niche, there are many things you need to learn before you come in (part of that 19.5 months).  There are many small and medium size businesses coming into the B2G market and some are succeeding.  It is a matter of dedicating the right resources and targeting the right business opportunities.

The American Small Business Coalition (www.theasbc.org), GovWin (www.govwin.com) and my book, Selling to the Government, are all excellent resources as well.

Response from expert author Mark Amtower regarding the question “should governments finance the RFP process?”

After a somewhat lengthy detour in which I shared with you the still active responses to the question surrounding the perceived obstacles to pursuing government contracts, including the somewhat onerous costs to SME suppliers, and whether or not this period of engagement should be offset through funding initiatives originating from the public sector, we are now ready to look at the practical aspects of creating such a program.  Or perhaps not creating such a program would be a better way to phrase it, especially when you take into account the response from a leading government business expert and author of the new book “Selling to the Government: Competing in the World’s Largest Market.”

According to Mark Amtower, the data associated with an AMEX Study which indicated that on average it takes 19 1/2 months at an annual cost of $89K per year for a supplier to win their first contract, means that government business is not for everyone.

While not surprising, this is nonetheless an interesting revelation in that the government has always advocated a level playing field access to all potential suppliers, in a kind of Hard Rock Cafe Love All, Serve All axiom of equal opportunity, that in reality does not actually exist.

It is of course this very misnomer of equal and fair access that causes the greatest degree of confusion and creates the attitude of entitlement that often times undermines rather than serves the acquisition process.

The truth of the matter is simply that Amtower is correct in his position.  Government business is not for everyone nor, for all intents and purposes does it offer any more access than any other buying organization in either the public or private sectors.  So financing the actual bid process – although there are many suppliers who would readily accept such largess, is not the answer.

Enter into the picture 30 plus year UK public sector veteran Colin Cram, who besides writing a seminal paper titled Towards Tesco: improving public sector procurement, has also been a regular guest and roundtable panel member on the PI Window on Business Show.

Cram for one advocates an efficiency over financing approach, in which improvements to the acquisition process on several fronts such as buyer education, equitable risk sharing and less bureaucratic administration, are far more effective vehicles for removing the barriers to entry into the government market than merely throwing cash at the problem.

By improving the purchasing process from initial engagement to bid submission and award, Cram believes that the AMEX 19 1/2 month period that suppliers must endure before winning a first contract can be significantly reduced.

He then suggests that once the inefficiencies are removed, then and only then does supply chain financing present a viable option in terms of leveraging a government’s usually stronger credit rating to facilitate faster and/or regular payments on a more favorable cost basis than would normally be available to SME’s through traditional finance programs.

In our next installment in the Supply Chain Finance Series, we will talk with Colin about the specific areas upon which governments can focus to identify potential problem areas in their acquisition process and, what they can do to institute resolutions on a timely and cost efficient basis.

Media Bites:

The following is an excerpt of the PI Inquisitive Eye TV interview with Colin Cram regarding the announcement on the part of the UK Government that they were going to pursue direct relationships with SME’s.  You can access the broadcast in its entirety through the following link; Colin Cram interview.

Colin Cram offer’s a 2-Day Acquisition Review Session for all levels of Government at a flat fee of $5,000 US plus travel.  Remember to contact Colin Cram directly at colin.cram@talktalk.net for further details including session specifics.

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