The Deltek Summer Party attracted close to 1,000 people in the government contracting space this week. Sandwiched between two great networking opportunities was a two-hour overview of the government contracting landscape, and a non-sugarcoated assessment of what companies have to do if they are to survive the current environment.

Robert Lohfeld, President of Lohfeld Consulting and a capture management expert, gave his assessment of  7 market drivers, and how businesses should manage them to stay competitive. Jim McCarthy, Owner of AOC Key Solutions which supports $3.4 billion per year in client wins, and also a capture management expert, outlined 6 key trends that business owners must accommodate to keep moving forward.

Market Drivers

1. Enormous uncertainty. Sequestration, uncertain political outcomes, a military drawdown, and a congress “that is playing chicken with the industry” are all contributing to instability. The result? “We’re watching all major players lower sales projections,” said Lohfeld.  Major staffing reductions are in play as companies try to lower overhead. Business owners will select one of three strategies to cope:
   – They’ll do nothing, and try to ride out the storm with no strategy changes (not recommended)
   – They will “cut and run” – meaning they’ll look to dump their company in a sale
   – They’ll “double down” and commit to the long haul by investing in people, technologies, and new markets.
2. New markets. Companies that went for a pure federal play will now venture into three new markets: state/local; international; and commercial.
3. Government Wide Area Contracts. While GSA Schedules still comprise 20% of the government buying vehicles, GWACs continue to grow at an unprecedented pace. Currently there are 600 GWACs in the market. This will increase competition, and require companies to have clearly defined capture strategies.
4. Strong emphasis on capture management. Capture is the key to survival in the market. Companies need to get out in front of a procurement, rather than chase it. “The spray-and-pray strategy is pervasive and it has to stop,” said Lohfeld. This entails chasing anything that remotely fits into a sweet spot, and then hoping that opportunities come to fruition.
5. Strong emphasis on open communication. Those that are proactive with their communications with decision makers and influencers will prevail. Now more than ever, people will buy based on relationships. Meeting with procurement officials face-to-face at the pre-RFP phase is critical to strong positioning for a win.
6. Task order capture strategies. Companies require documented, repeatable processes for task order wins – not just for proposal efforts. There has never been so much competition for individual task orders. Companies need to be able to respond quickly and in a compelling, compliant way to be considered for a task order award.
7. New writing/design requirements. Companies must develop proposals for skimmers instead of readers. Procurement officials need to be able to grasp a company’s story in a glance. They don’t have time to read in-depth proposals at the outset. If they can grasp a company’s qualifications through a first skim, then the company will be able to move to a further down-select. Precise writing is becoming essential.

Trends

1.  Lowest price, technically acceptable (LPTA) requirements. This is the thorn in the side of the whole world of government contracting. Companies that competed on value in the past will no longer be competitive. Price drives everything now, and “technically acceptable seems to have no floor,” said Lohfeld. This means that standards for technically acceptable have dropped inviting “bottom feeders” that previously never would have been able to compete.McCarthy’s advice? “Do not gold plate bids. Do not show them the bells and whistles. In LPTA it doesn’t matter. Only incorporate as extras value added options, but don’t price them.” Give them exactly what they request.
2. More reliance on firm fixed-price (FFP) contracts than ever before. Companies that have strong processes in place can make a lot of money on FFP contracts if managed well.
3. Protest propensity. Award and bid protests are all the rage now. While a protest used to stigmatize a company, now companies that protest are practically rewarded. Incumbents that protest are automatically granted a 100-day extension on their contracts. This is very bad for industry as it increases costs for the affected companies, it requires them to hold onto unbillable resources, it delays them from recouping investments, and it increases government costs.  Nothing good comes from the protest process. How can a company prepare? “Companies need to prepare for protracted procurement cycles,” said McCarthy. They need to do whatever they can to “bullet-proof” their bid from being protested:
   A: Be 100% compliant
   B: Do not act as a front or “ostensible subcontractor.” Small businesses that align with large businesses but allow the large business to manage the contract are “ostensible subcontractors” and will immediately raise possibilities for protest. Legitimate small businesses get hurt because they are falsely accused.
   C: Do not make contact with procurement officials once a proposal has been released.
   D: Follow all rules.If a small business is priming a contract, it needs to write the proposal and drive the process.  The small business must present the key people in the proposal, and never let the large business put forth the program manager. This is a serious red flag for “ostensible subcontracting” and will result in a protest.
4. Multiple Award IDIQ Contracts.
   McCarthy stresses that companies must develop the discipline and market focus to “bid on things they can win and make money on.”
5. Virtual proposals/virtual capture efforts. Companies will move to a virtual proposal and virtual capture model, where teams are distributed, and consist of both 1099 contractors and employees. McCarthy does not recommend this model. “Eventually quality suffers, and ultimately win rates suffer…. companies will go to this model, but the pendulum will swing back.”
6. Past performances receiving more weight than ever before.  In the past, many of the proposal pieces held equal weight. Now, past performances are seen as the only reliable indicator of how well a company will perform in the future.”Past performance is so important that a rating of a 3 or 4 is actually a kiss of death. A company really needs all 5’s to get an award. So before submitting a past performance, it’s important to ask your customer if they are in a position to give you an outstanding rating, ” said McCarthy. “Do not take it for granted. Perform current work as if your future work depends on it – because it does.”

That’s the wrap-up from the market outlook. While things may be challenging, it’s important to remember that all of these patterns and events are cyclical. Doubling down now and working to run lean will position you well for the future.

While we can’t change the events happening around us, we do have control over our decisions and our attitudes. Commit to being in it to win it, and you’ll make it happen.