Are you ready for life in the low-cost era?
- By Matthew Weigelt
- Feb 01, 2012
Companies might find 2012 frustrating as the government embraces the mentality of "lowest price, technically acceptable" as its guide for picking contract winners.
In other words, agencies identify the bids that meet the minimal requirements, find the cheapest price, and that's the winner. It's simple and faster than deciding the best value.
Most important, it allows them to say they have saved money.
Agencies are pushing to spend less because their funding is drying up. With that mentality this year, companies have to adjust to that thinking.
“Budget constraints make price more important than ever before,” said Robert Burton, partner at the Venable law firm and former deputy administrator of the Office of Federal Procurement Policy.
Although it's a cliché, companies have to separate themselves from the pack of competitors. Standing out becomes more important for a company that submits a proposal with a higher price tag.
Agencies will have a hard time justifying why they chose the more expensive bid, Burton said.
Nevertheless, a standout company will have more for its customers than merely the skills to do their jobs well. One thing agencies might go for is numbers. The Obama administration wants numbers.
In 2012, federal officials certainly will want to know where their money is going because the Office of Management and Budget will be asking. OMB has handed agencies’ financial and acquisition officials several goals for decreasing spending. Most recently, the administration wants a 15-percent decrease by the end of the fiscal year in contractor management support services.
For proof of cuts, agencies must have the numbers. And managing that data in 2012 will yield the agencies much more than wealth. It will help officials make valuable decisions to both save money and understand their buying habits.
Agencies crave information on their historical buying patterns, information on usage, and ways they can change their buying behaviors to maximize efficiency, said Larry Allen, president of Allen Federal Business Partners.
Central buying agencies, such as the General Services Administration, hear from customers daily about their need for such information. The information that companies store may be a sort of treasure chest for an agency wanting numbers.
“Providing this information, and working with customers to make logistical improvements, sets your firm apart from the competition,” Allen said.
Companies should put the data they already have into keeping and expanding their customer relationships. Companies might capture data for their commercial accounts and having the information may be good business sense.
When it comes to relationships, OMB’s Myth-Busters Campaign will continue its influence this year. Dan Gordon, former OFPP administrator, told agencies to talk with industry, pointing out that it’s not against the law or the Federal Acquisition Regulation. In fact, money and contract requirements demand interaction between the two.
Companies need to take hold of that authority.
For example, Roger Waldron, president of the Coalition for Government Procurement, recalled a company that found itself dealing with a contracting officer who was shy about talking to companies. So the contractor mailed the officer a hard copy of Gordon’s Myth Busting memo.
But Waldron also advised against giving a busy contracting officer a sales pitch. As a former GSA procurement official, Waldron said a standout company should talk about the business at hand and discuss what the agency is trying to accomplish through a procurement.
“You’ve got to know your customer’s requirements,” he said. “It’s always been important, but now it’s more important, if you think about it.”
Knowing your customer can set a company apart in the lowest cost, technically acceptable atmosphere.
With pressure to save money, agencies will be turning even more to strategic sourcing.
Use your buying power, officials from the Clinton, Bush, and Obama administrations have told agencies. Join together as one unit and demand contractors lower their prices to get your business.
Agencies now may be listening, because the strategy becomes more important when money is tight.
But companies need to listen too. The demand for more sourcing vehicles will increase.
The government already has issued a number of blanket purchase agreements and other multiple-agency contracts for office supplies, domestic delivery service, and wireless hand-held devices, such as smartphones.
In addition, Waldron said GSA’s Multiple Award Schedules program will become more attractive to agencies too. It’s a competitive market with many options for products and services. Agencies also can find many small contractors there as well.
In January, Frank Kendall, acting undersecretary of defense for acquisition, technology and logistics, held a conference call from Afghanistan at 10:30 p.m. to calm a troubled defense industry. The Defense Department had just announced it was making major cuts and industry would feel them.
“Less is less,” he said. “You cannot expect the market to continue to grow as it has in the past.”
However, technology remains one area that likely will still see investment and the private sector’s partnership will remain critical to military operations. Kendall mentioned cyber, intelligence, surveillance, reconnaissance and space as areas that DOD will invest in.
Management support cuts
Agency acquisition officials will have fewer people to help them as they cut back on management support services.
During the past decade, agencies' spending for management support functions has quadrupled, far outpacing the growth in overall contract spending, OMB wrote in a memo late last year. Now it is demanding a 15-percent reduction in spending on services. So expect service providers to feel the cuts in areas such as IT, acquisition planning and program management.
Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.