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Clearing the Hurdles: Six Common Barriers to Entry in Government Sales and How to Overcome Them

June 14, 2023 | Business Development, Government

Government contracts represent a tremendous opportunity for both small and large businesses. As I have mentioned in previous articles, the U.S. government is the largest buyer of goods and services in the world. If you sell it, the government has most likely bought it at some point. 

Yet this space remains a challenging frontier for many businesses, primarily due to the significant barriers to entry. This article will discuss these barriers, along with practical solutions to overcome them.

1. Complex Bidding Process

One of the most daunting barriers is the intricate nature of the government procurement process. With numerous forms to fill out and strict rules to abide by, the bidding process can seem overwhelming. Submitting a bid with a format and layout based on what you think is important will most likely be rejected.

Solution: Educate yourself about the government procurement process. Online resources, seminars, and training programs can be invaluable. Read the solicitation carefully and search for the offerors’ instructions for the proposal response. Also, consider consulting with or hiring experts with firsthand experience with government contracts. Over time, the process that initially seemed so daunting will become more familiar and manageable. Our first government contract win in 2004 was due at least in part to hiring a consultant to assist us in our response. 

2. Compliance Requirements

Government contracts often come with strict compliance requirements. These include quality control procedures to specific employee training and wage mandates. Non-compliance can lead to contract termination and even legal ramifications.

Solution: Be proactive about compliance. Make sure you fully understand all compliance requirements before bidding. Assemble a compliance matrix as part of your proposal submission even if the evaluation criteria don’t require it. The document will serve as an internal tool to make sure nothing is overlooked. Consult with a legal expert if needed and consider investing in compliance management software

3. Lengthy Sales Cycle

Government contracts are known for their long sales cycles. Contracts often have both an initial base year and option years, which means other contractors won’t even have a chance to bid up to five years after the initial award is made. This is not all bad because it takes time to build relationships. But once the relationship is established, the RFP released, and the proposal submitted, months or even years can pass from when you submit a bid to when the contract is finally awarded. 

Solution: Patience and persistence are crucial. Focus on building relationships, refining your proposals, and continually improving your understanding of the government procurement process. Also, maintain a robust pipeline of other sales prospects to keep cash flowing while you wait.

4. High Competition Levels

Government contracts attract a high level of competition, from large corporations to small businesses. This competition can be intense, particularly for more lucrative contracts. The first one is sometimes the toughest to win. Pricing also must be competitive.

Solution: Differentiate your business. Identify what makes your offering unique and valuable and communicate this effectively–not only in your bid proposals but in your marketing and your discussions with government customers. Furthermore, building strong relationships with the agencies you’re targeting can give you a competitive edge. Finally, do you research and make sure your pricing is competitive with historical government bids.

5. Specific Certifications and Qualifications

Certain contracts may require specific certifications or qualifications, like being a certified veteran, woman or minority-owned small business. Others require contractors to adhere to specific accounting, construction, or environmental standards.

Solution: Make sure you know any necessary qualifications and work towards obtaining them well before an RFP or RFQ of interest is released. Even better, examine past RFPs and RFQs of interest and begin obtaining the certifications that were required in the past. When in doubt, ask the customer what types of certifications and qualifications their agency seeks from contractors. Certifications not only qualify you for specific contracts but can also give you a competitive edge.

6. Financial Requirements

Preparing for and fulfilling a government contract can be a substantial financial undertaking. It’s not uncommon for businesses to underestimate the costs involved, leading to financial strain. It is also not uncommon for a company to perform work for 60 days or more before receiving payment, adding to the list of financial concerns. 

Solution: Prepare a detailed budget forecast and take all possible costs into account, including administrative overhead, compliance costs, and possible delays. It is also essential to establish a relationship with some form of lending institution. Some companies specialize in funding companies with government contracts. If you would like some names of companies that can fund companies based on their awarded contracts, contact me at [email protected]

Conclusion

Navigating the barriers to entry in government sales may seem daunting, but the potential rewards are significant. With understanding, patience, and a commitment to learning and adapting, you can succeed. As they say, “every wall is a door,” and the seemingly formidable barriers in government sales are no different. With the right strategies in place, these barriers can become stepping stones leading you to significant growth opportunities.


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MYTH: Government agencies always award contracts based on price alone. Lowest price always wins.

FACT: While some contracts are awarded to the lowest bidder, government agencies also make awards based on the best value which includes trade-offs between the ability to perform the work, quality, past performance, and price.