Dealing with Fiscal Constraints and the Increased Competitive Edge

Government contracting market is somewhat chaotic, although it breathed a sigh of relief when the Congress agreed on the spending bill, preventing a government shutdown. We should see a barrage of procurement activity between now and the end of the fiscal year.

Although we have narrowly avoided one train wreck, there still remains the $85 billion in automatic budget cuts known as sequestration. Over time, they may hit some businesses harder than others, depending on the specific contracts they hold or pursue. Companies, especially those in the DOD arena, should carefully check market forecasts and their portfolios to dampen the hard hits by diversifying their customer base. If they haven’t strategized and done market research already, it is an urgent priority now.

Then, there is the ever-present Lowest Price, Technically Acceptable (LPTA) evaluation criteria, where quality of performance erodes due to over-emphasis of “cheap.” Everyone is becoming a commodity no matter how complex are the services they offer. The belief of some contracting officers is that each contractor is just like the next one, might as well pick the least expensive. But it is not only the contracting shops’ fault. Companies fail to differentiate themselves, and they pay for it in lost deals and profits.  Differentiation starts with measures to avoid LPTA during capture while interfacing with the customer. LPTA is often inappropriate, and companies have to make a concerted effort to prove it to the government. It means an early capture start when one can still talk to the customer.

Oh, and there should be a capture effort to start with. The necessity of running capture to avoid unnecessary losses is akin to having a doctor washing hands to avoid spreading more disease and causing iatrogenic illnesses. It seems unfathomable that so many companies still don’t invest in proper pre-proposal preparation. They cultivate bad habits that have a higher probability of disastrous results. The current market favors the sharp and the quick, and it’s unforgiving.

Speaking of differentiation and not using “hope-to-win” as a strategy, proposals have to get way better to maintain the competitive edge. It means consciously applying proposal persuasion techniques such as win themes with detailed benefits and proof, customer-focused graphics, professional presentation, and so on. Do not settle for “good enough” as it may not get you the wins you got last year.

And, now we come to the biggest challenge of all: the sinking profits. According to the Grant Thornton’s 18th Annual Government Contractor Survey, 60% of the participants reported either no profit or profit in the 1–5% range. This compares with 37% in the prior year’s survey. With all the need to differentiate yourself through capture and proposals, how does one scrape up enough money to invest in business development? The current day’s challenge is how to do more with less, while achieving spectacular results in a much tougher environment. The Bid and Proposal budgets are tighter, leaving fewer options for business developers to bring in consulting help. Companies don’t invest in professional business development, leaving these duties to untrained operations personnel. Without creating the value in the customer’s eyes, the only option is to keep cutting costs in order to win.

How do you succeed in this new market?

Gone are the cumbersome processes. The new approach is to run lean techniques that produce faster results. Every process has indispensable steps, and those that can be sacrificed with caution. The remaining steps have to boil down to the level of a checklist, so that your staff doesn’t spend valuable time on planning repeatable tasks, or reworking and scrambling because they forgot to perform a vital task. Companies need to invest in a process book to save significant money in every pursuit thereafter.

Just outsourcing business development to project personnel is a recipe for stunted growth. Project personnel have to be trained in business development first, because it is an actual profession. They need skills to find and recognize opportunities, support capture efforts, brainstorm to develop solutions, write persuasive proposal sections, and conceptualize graphics. This way, a company can achieve high growth rates with its existing resources, avoid burning out its dedicated proposal staff, and cut expenses by bringing in consultants only for targeted tasks.

Consultants are there to help companies maintain a sharp edge in this highly competitive market. Not every consultant is the same, as they are not a commodity, just like government contractors. It is important to get the best ones when you are looking for a winning difference. A great consultant with experience at multiple companies has the snapshot of the industry that only a few employees who stay at one company possess. Great consultants adhere to higher standards, so they are more effective and efficient at what they do. But there is a price tag associated with their use, and it feels like an unattainable luxury for many companies in the lower-profit range or revenue bracket.

The secret to giving your capture and proposals an edge is to target consultant use to the specific areas where they can produce the most impact. For example, have a consultant facilitate your win_theme and strategy development session, or develop your solution. Have them outline your proposal to ensure it is compliant out the gate. Invite them to run your reviews, to raise your proposal quality a whole grade up. Have them evaluate your proposals and BD processes as a whole to give recommendations you can implement right away, to improve the way you go after business.

In a nutshell, in this world of chaos and fiscal constraints, you need to rethink how to go about developing business. You have to be aggressive and smart. You have to develop new habits. And pull all the stops within your financial means to differentiate yourself and beat your competition.

 

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