Strategies for Winning Government Contracts: Building Strong Relationships with Manufacturers and Collaborating for Better Margins and Payment Terms

April 26, 2023 | Business Development, Government

Last week, we covered a common mistake government contractors make: chasing bids proposing the brand name before building a relationship with the manufacturer. This week, we’ll discuss some strategies to win opportunities with better margins and potentially better payment terms.

Brand Name Or Equal

One of the keys to this strategy is to better understand the FAR’s Brand Name or Equal clause (BNOE). A BNOE is a provision found in federal contracts that allows bidders to offer products or services either identical to the brand name specified in the solicitation, or equal in quality, features, and performance. The purpose of the BNOE clause is to promote competition by allowing bidders to offer alternative products that meet the government’s requirements, while also ensuring that the government receives the desired level of quality and performance. The clause requires bidders to provide detailed technical specifications and other information about the proposed “equal” product or service to allow the government to determine if it meets the specified requirements.

Basically, this means you can find an equal product for the proposed brand name as long as it meets the brand name’s salient characteristics as defined in the RFQ. Again, however, it is best to establish these specifics before you pursue an RFQ or you will run into the same issues we discussed last week.

Research

When conducting research, it’s important to identify who buys what you sell, as well as how they purchase the products. This includes whether the products are being bought through the open market or GSA Schedule, and what brand they are purchasing from. It’s also important to identify who they are currently buying from, including whether they are purchasing from SDVOSB, 8(a), or WOSB companies. It’s also useful to take a closer look at brand names that don’t have as much traction. These brands may not have been ordered as often or the orders may be smaller, possibly under the micropurchase threshold. Although government procurement officials are not required to post these orders, they sometimes do. To find potential partners, it’s recommended to reach out to procurement officials to see if they would be interested in working with you.

Building Relationships with Manufacturers

To build a long-term strategy, it’s important to learn as much as possible about the manufacturer’s products. One way to do this is to ask for a plant tour, which may take time and money, but can be valuable in the long run. It’s also recommended to sign a distribution agreement that complies with the Non-Manufacturer Rule. This agreement should include wording that ensures you take possession of the order once it leaves the manufacturer’s dock, and that you won’t be stuck with the products if the government cancels the order for convenience. Pricing is also an important consideration, and it’s recommended to establish pricing that is FOB Destination. Why? Agencies have maximum thresholds they can spend on shipping, so it’s best to include it in the individual product price. Another important aspect of building relationships with manufacturers is to only sell their product and not their competitor’s equal model. Showing allegiance to their brand will help build the relationship.

Collaborate

Collaboration can be key to success in government sales. When collaborating, it’s important to consider pricing, especially if you have researched what prices win bids. It’s also important to share as much intel as possible, especially for larger bids. This will help you differentiate your product from the brand name. It’s recommended to introduce each other’s contacts, which can help both parties expand their networks and find new opportunities. Marketing is also an important aspect of collaboration, and it’s recommended that the manufacturer and B2G distributor have a clear and consistent message. One way to do this is for the manufacturer to continue to do their marketing and use the distributor to leverage the best way to procure the product, whether it be through a contract vehicle or socioeconomic set aside.

When You Win

After winning a contract, it’s possible that some companies may request a deposit or full payment for the first few orders. In this case, it’s recommended to ask if an “assignment of claims” option would work for them. This clause is a provision commonly found in some government contracts that allows one party to transfer the right to receive payment to a third party, typically a financial institution, in exchange for an advance on the payment owed. It’s important to note that the assignment of claims may not always be allowed, particularly in government contracts, and may be subject to limitations such as requiring the consent of the party that owes the money or limiting the percentage of the claim that can be assigned. Therefore, it’s recommended to ask that this clause be included during the RFQ process, although it may be added after award. Finally, it’s important to stay in touch with the customer, communicate ship dates, and follow up post-shipping. It’s also recommended to ask for a business review meeting a few months later to gather feedback and identify potential areas for improvement. Additionally, it’s useful to collect intel about equipment that is going to reach end of life and be ready to find ways to differentiate on those bids. 

Building strong relationships with manufacturers and collaborating effectively with them will position you to win more government contracts and improve your margins and payment terms. It’s important to conduct thorough research to identify potential partners and understand the requirements of the BNOE. By establishing clear communication and building trust, government contractors can establish themselves as reliable partners to both the manufacturer and the government agency they are working with. By following the strategies outlined in this guide, contractors can increase their chances of success in the competitive world of government sales.

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