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Evaluating Factors Essential to Government Subcontracting Success

Filed under Government Contracting. Fact checked on May 24, 2012.

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To get government subcontracting opportunities, you'll need to do some background work to understand your customer - the prime contractor, honestly assess your own capabilities, identify your competition, and learn how to sell yourself as a sub.

If you are serious about being a government subcontractor and selling your company's products or services to a prime, first, you'll need to know that customer—the prime.

When we say, "get to know your customer," we mean that you need to learn everything you can about each prime that might offer some opportunity for you, including how it does business, what it needs, and what it doesn't need.

What does the prospective prime sell or produce? What product or service does it provide to its customers? What does the prime make in-house? What does it outsource? What products or services does it need to fulfill its manufacturing needs? And what's important to this particular prime? What are its hot buttons? Fast service? Quality parts? What does it need?

Identify your customers' needs and requirements and you'll always have work!

Work Smart

If you offer generic types of products—products that are used by almost every business no matter what product they manufacture or service they provide (for example, office supplies, janitorial services, or other products of a non-technical, consumer-like nature)—you don't need an intimate knowledge of a prime's products or services. But you do need to know how they buy the type of services that you can provide. Do they use corporate-wide contracts or can each location buy on its own?

As important as it is to know what each prospective prime needs, it is equally important to know what it doesn't need. For instance, you might have to look not only at what the prime buys, but also in what quantity.

Knowing the quantities of items can help you evaluate whether a prospective prime presents a good opportunity for your business. For example, if you need to sell 10,000 widgets per year to be profitable and a particular prime buys only 300 to 1,000 of that item over a year's time, you may want to re-evaluate whether you want to spend your time and effort trying to sell to a prime that buys such low quantities. In that case, the prime's needs and your needs may not be the good match you thought it was. And it is best to know this information before you walk in the door, so you don't waste precious time—both yours and the prime's. Remember, the average sales call costs your company about $250, so use your time wisely. Ask better questions!

Example

In general, small businesses that need long production-run items (usually in the tens or hundreds of thousands) and are looking in the government arena might be disappointed. The government and government primes usually need what some small businesses would consider short-run production (at the max, at the thousands level). There may be higher volume in certain products, such as ammunition, that are used up or worn out rapidly, but for the most part, it's going to be a low volume situation.

Finding the Information You Need

Where can you find this information? You can find much of it by doing research from the comfort of your own desk. Many, if not all, of the large prime businesses have websites that should provide most of the information you need. The business section of your local newspaper or current or back issues of the Wall Street Journal may be of help. The Business Section of your local library could offer other helpful materials. A commercial website that you may want to check out is www.govexec.com, which covers the federal government and usually has informative articles. It also publishes special editions on the top 100 or 200 federal contractors and on the IT business world.

Work Smart

A quick trip to your local PTAC (Procurement Technical Assistance Center) can also help you get information about the large government prime contractors in your area. PTACs participate regularly in meetings and conferences with large primes, both on a regional and national basis, to discuss contracting and government issues. Therefore, your PTAC is in a good position to help you make contact with the large primes in your area. It can tell you who the large primes in your area are, can advise you on which contractors might offer the best opportunity for your particular capability and what the issues might be, and can keep you informed about opportunities to present your capabilities to the group or attend a matchmaker conference.

As a matter of fact, a trip to your local PTAC can help jump-start the subcontracting (or contracting) process for you at any stage and for free.

Since part of their job is to provide information to prospective small business subcontractors, you can also make a preliminary fact-finding call to the small business liaison or representative or the purchasing office of each prime you are interested in. Ask about their needs, the type of subcontractor they are looking for, the procedure required to become one of their subs, and the average size of an order.

Work Smart

Recently we had the good fortune of hearing a speaker at a government business conference who would be an inspiration to any small business working hard to succeed. She started as the sole employee/owner of a minority woman-owned business that today is doing millions of dollars in business with a prime contractor. What are the secrets to her success?

She came back to the same two "secrets" again and again: (1) She spent a great deal of time and effort identifying exactly what her targeted customer's needs and requirements were, and (2) she then set up her business to meet those needs and requirements to the letter.

She didn't try to get the prime to lower its expectations, or just give her a chance, or change the way it worked, or accommodate her on any level. Instead, she adapted to the prime's requirements and way of doing business. She got in step with the prime, instead of expecting or wishing that the prime would get in step with her. She didn't look for or take any shortcuts. She found out what was needed and simply did the work to make it happen.

If you want to be successful, you can't take any short cuts either. You have to do the work. You have to find out what they need and how they want it and then give it to them.

Successful Subcontracting Rests Knowing Capabilities and Competition

In order to be a successful subcontractor and sell your company's products or services to a prime, you'll need to know your capabilities as a supplier. Therefore, after you have identified your prime's needs and requirements, you need to decide whether your company can provide them—i.e., whether your company and the prime are a possible match.

And, if, at first glance, you decide that you cannot fit into the prime's needs because you don't make the specific product the prime uses, take a moment to reconsider.

You probably spend lots of time thinking about what your company does, makes, etc., but how much time do you spend thinking about what your company could do, make, etc.?

Try thinking in terms of your capabilities. How can you use your same equipment, skills and processes to make other things-perhaps things you never even considered before (and perhaps things that the prime needs)? Changing the question from "Does my company make this?" to "Is my company capable of making this?" creates more possibility (and maybe more business).

However, in the end, unless you provide—or have the capability to provide—products or services that can be an integral part of what the prime needs, you will just end up spinning your wheels and being disappointed. If your capabilities are compatible with what the prime needs, you are a potential fit. If they are not, move on to the next prime.

Example

Re-thinking your process (be it welding or manufacturing or writing or whatever) in terms of the end product(s) that you are capable of producing can be good for your business, even if you never work for the government or a prime.

A few years ago, business was very slow for a small arc welding company that we know of. It did precision welding of industrial parts, but the economy had slowed down, none of its regular customers needed its normal services, and the company felt it had marketed to everybody in the area that might. Then at a meeting, someone had an idea: "We keep talking about working on the same kind of products. Let's not keep going in the same circles. Let's try to think about welding something we never tried before." When they began brainstorming about things they could make that were metal and that there might be a market for, it dawned on them that they could also make furniture out of metal.

Today, they are making lamps, chairs, and tables, among other things, out of steel and aluminum. In fact, they opened a showroom, and their furniture making could turn into a nice profit center for them.

What can you take away from this example? Don't get stuck on what you have always done or are doing now. Take the time to set a vision for what you can do.

Size Up the Competition

In addition to knowing the customer (the prime) and understanding your capabilities, you'll also have to research your competition and ascertain how and why your competition has been successful at getting sub-opportunities

Your goal here is to gather as much intelligence as you can about these companies, including the type of work they are doing for prime contractors, how much work they are getting, how they work with a particular prime, what they do best, etc.

However, getting this information is easier said than done. In your initial contact with the prime company, you can try asking about these issues. If the prime is not forthcoming with information, drop it and do some detective work on your own.

There's an element of practicality that needs to come into play here since all the answers about your competitors will probably require considerable time and effort. If you're looking at a big opportunity and it really does feel like there's a good fit in there, you might want to do as much as you possibly can. If it's not that type of a situation, we recommend you spend less time and effort. Do what you can, but consider rate of return on investment when you decide how to spend your time.

Are you competitive? As long as we're on the subject of competition, we'd like you to consider another important issue: How competitive are you in the marketplace? Are your products or services priced "right"? Are your prices competitive? Do they reflect your true overhead costs or do they just reflect some kind of average overhead rate that "seems" right? Could your prices be more competitive? Are you sure?

The hard fact is that unless you know what your true costs are, you can't control them. You can't ever know for sure what your overhead is, or whether your prices are "right," or whether you are being as competitive as possible.

If you don't really know what your costs are, we strongly recommend that you look into some type of activity-based costing, in which you look at everything—from your lights and heat and wages and unemployment, etc. to the costs of each activity, like sending out an invoice or preparing a proposal—and put a cost on it. Only then can you know your true costs and only then can you be sure about your pricing and about how competitive you can really be. (For more details on the ABC method, see our article on pricing.)

You can look on the Internet for information on average rates, average salary information, etc. In addition, the U.S. Census Bureau has business statistics that you can use to gauge such things as whether you are salary-competitive with the industry. You can also obtain general average-rate information with regard to your industry from a consultant perspective from the SBA's Business Information Centers (BICs).

Tips to Selling Yourself as a Subcontractor

Selling yourself as a potential subcontractor to large companies with government contracts is no different than selling to them in the commercial arena. Here are a few tips that may help you:

  • Be courteous and considerate. Make an appointment and be on time.
  • Be professional. Don't demand!
  • Prepare your presentation. The research you have done earlier on the prime will pay off in creating your presentation. It should focus on one main point: How you can meet the prime's needs and fulfill all its requirements.
  • Keep your presentation short, on point, and clear, and be sure to practice, practice, practice. Keep necessary supporting materials or documents out of the presentation in order to keep it short and focused; you can hand them out at the end. Don't just memorize the presentation (if someone asks a question in the middle of it, you may get lost.) Memorize just the important points you want to cover. Talk it; don't just read it and don't just wing it.
  • Be ready to offer a 30-second summary/outline about your company. When you get to the point where you can tell your storyline in 30 seconds, you will find more people wanting to talk to you about what you do. Unfortunately, many companies adopt the opposite strategy, telling everything about the company: what they can do; how good they are; "just look at this;" how they can change the federal government if it would "just listen;" etc. If you don't talk about your core capabilities, you have lost their interest.
  • Be yourself. Don't put on airs and don't try to make yourself something that you're not. Expressions like "I can do anything" or "I can do whatever you want me to do" are usually a turn-off. They make you sound desperate, not impressive. Be honest and realistic about your capabilities.
Work Smart

These are five things you should never say during a presentation to a prime contractor. Never just say:

  • "We do good work." Instead prove to them that quality and delivery are central to your business. Explain your quality assurance procedures or, even better, show them your quality assurance manual.

  • "You can't go wrong with us." Instead refer them to other customers that will attest to the quality and reliability of your work.

  • "You'll really like us." In reality, the prime will "like" you only if you make him/her look good to the boss and to the government. Instead, emphasize that you always come through, as promised, on quality, delivery, and any other project requirements that you sign up for.

  • "I know my trade. I've been in business for twenty years!" On its own, this statement probably won't impress the prime. But explaining how you have made your business more efficient over the years and producing a long list of satisfied customers over the 20-year span will. It will show your ability and willingness to keep up with new developments in your field as well as new ways of doing business.

  • "We'll do anything and everything for you." Very unrealistic. Instead, let the prime know that you are ready and willing to abide by their protocols and procedures, and fulfill on their requirements.

  • Say it well and say it once. In other words, present the capabilities of your company in the best light possible and, when you have done that, stop speaking. If you continue, redundancy tends to set in and you start telling them again what you just told them. If you are uncomfortable with the silence after you have finished, you can throw it back to them and ask if they have any questions.
  • An important fact that you have to deal with in today's market is that the moment that you stop being the best deal or best value for your customer, you are in trouble. But, like we explain in the next chapter, best value is not only price. You have to address a variety of other factors as well, including quality and performance. The best deal for one prime could be price; for another it could be something else. You stand a good chance of figuring out what that is for a particular prime if you have done your homework.

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