Podcast Show Notes
2025-02-28 Federal Market Insights Episode 3 — Session Overview
Items in the News
There were two general news related topics discussed at the beginning of the podcast.
One involved Federal IT – upgrades, cloud computing, open source, AI. The discussion point centered on the idea “skate to where the puck will be” an old hockey maxim. In other words, attempt to identify indicators of future needs. The idea discussed was, are these articles indicating future information technology needs or potential shifts in technologies used to support federal operations. If these articles and others are signaling a shift, then companies in this area should conduct additional research to validate potential shifts and take appropriate steps to be ready.
A second article also signaled potential changes. The article discussed an Army initiative to develop and ultimately field Autonomous Vehicles. This effort is still underway. However, it is likely that Autonomous Vehicles will require technical talent capable of maintaining the vehicle, software, robotics and communication systems. It is also likely that the Technical Data Packages (TDP) associated with such vehicle will in whole or in part contact Controlled Unclassified Information (CUI). Therefore, companies will need to ensure that they have complied with applicable cyber security requirements. Companies in the DIB should also maintain awareness of situations in which there may be FOCI – Foreign Ownership Control or Influence concerns. FOCI concerns can arise from investments, acquisition and a company’s supply chain.
Read the articles:
New Research: Feds See AI, Open Source, Cloud Driving Software Innovation – MeriTalk
Review of Episode 2
Budget issues – budget issues could affect autonomous vehicle programs. Also, budget issues – priorities could affect DoD budget as money may be redirected. The discussion also reviewed the impact of complex regulations especially for entry level companies and how customer needs drive procurement frequency and quantity of materials procured. Companies need to understand these factors to make informed decisions related to how to enter the Defense Marketplace.
Creating a strategy is the focus of Episode 3.
Episode 3
Many companies take too broad of any approach when entering the Federal Marketplace and even when attempting to sell to DoD.
They say, I want to sell to the government, or I want to sell to DoD. Other businesses will say, they can sell anything the government wants or needs. These approaches may yield contracts, but they are not the strongest approach.
Contract award depends upon the contracting officer determining a business to be Responsible (see FAR Part 9). There are seven elements that are considered. If the contracting officer cannot determine that a business is Responsible, then by the FAR, a contract should not be awarded. An exception to this is if the contracting officer requests the SBA perform a Certificate of Competency (COC) review. The outcome of a COC can provide the necessary documentation needed by the contracting officer to make an award.
Federal (DoD) awards are not just given away. Like commercial customers, Federal customers are more hesitant to award a contract to a recently formed company since there is little to no past performance history. Companies should have one to two years of past performance history. Their history should be consistent with the type of federal work they seek. Companies should capture their corporate history in a Capabilities Statement.
A Capability Statement is a concise statement of the company’s history, capabilities, key achievements and other relevant information. Capability Statement should be provided during events, available at the companies website and included in the company’s SBA DSBS page. A major decision is will one Capability Statement suffice or are the prospect customers different enough so that tailored Capability Statements may be needed.
Creating a Strategy
Over a long period of time it is reasonable that the entirety of the federal government – the more than 2,000 buying offices – will buy “everything.” However, as the time frame is shortened this buying activity will narrow. What is purchased will be further reduced based on the number of buying offices involved and the timeframe. Procurements are made to support the needs of the buying office’s customers.
When attending a conference or trade show companies often provide information about their products/ services and capabilities; they provide a Capability Statement. Some make deliberate sales pitches and expect to transact business. If this approach leads to a contract, it’s the exception not the rule.
As previously mentioned, the following are the four criteria necessary to create a contract –
- Bona fide need – “in writing”
- Budget – appropriated funds must be available in the budget category
- Maximum Practical competition; exceptions exist
- Contracting Officer – to ensure the necessary process has been used, has the authority to contract
*restrictions on the use of P-cards are less rigorous but P-card purchases also have rules.
A typical piece of market insight is the NAICS code. A NAICS code is used to categorize the purpose of the procurement. Procurements for a broad array of items will normally only have one NAICS code assigned. That NAICS code will be representative of the line Item of largest value. While there is this association between NAICS codes and either the goods or services, the fundamental use of the NAICS code is to identify the Principal Purpose and size standard of the procurement.
Unfortunately, while NAICS codes identify the Principal Purpose and size standard of the procurement this information is lacking from a sales or market research perspective. Viewing the description of various NAICS codes at https://www.census.gov/naics/ shows the breadth of the industry covered by a NAICS code. As an example, NAICS 236220 Commercial and Institutional Building Construction appears to very clearly identify the purpose of this NAICS code. Further review of the information reflects that this NAICS code corresponds to 101 different types of construction.
The question is, when a DoD buying office provides a handout or briefing slide with its top 10 NAICS codes, what does that information mean? It implies one thing but may represent something entirely different. When NAICS 236220 is listed as one of the top 10 NAICS codes used, which of the 101 subtypes is the buying office referring to? If the procurement spend does not align with a company’s focus area, time and effort could be expended on a customer that is less likely to have opportunities which match the company’s skills and experience. There will be opportunities but will they represent opportunities that will have high or low probabilities of success?
Ultimately, a company must determine does it make sense to move forward? Does the customer represent a good match? Are the majority of procurement funds being spent in an area where the company has either experience or past performance. If this opportunity is pursued, what is the probability of success?
Success in the Defense Marketplace requires companies to be highly selective of the opportunities which are pursued. Responding to RFPs/RFQs requires time, resources and effort. All are precious and limited resources. Additionally, competition is keen which requires a company to develop and continually refine its Go/No-go criteria for identifying potential opportunities.
Market research using freely available data can assist with such questions. Resources such as FPDS, USAspending and/or SAM Databank can provide additional information. These sites can help companies understand which Product Service Codes (PSC) have been assigned to past awards. PSCs provide additional information about the general nature of the work performed. In addition to the NAICS code, each solicitation also is assign a PSC. The PSC does not provide detailed information. However, it will indicate if the construction work involves a hospital or air traffic control facility. Additionally, there is data on the type of Award/IDV type(s) used, number of offers received, timing of awards, competition and more.
By identifying and selecting the proper information a company can create a set of filtering parameters which can be used to identify potential customers. A company cannot just search for awards under a specific NAICS code, it can search on awards for a combination of NAICS, PSC, time of year, award type and even notices issued by specific buying offices. The goal is to identify characteristics that can identify the most promising customers which can help increase your ROI.
Once these customers have been identified, further research can be conducted to better understand the customer and both current and future requirements.
In evaluating prospective customers, companies should determine future potential opportunities. Prospective customers should be evaluated for not only the amount of potential future work but the value of awards. Realistically, given the time and effort requirements, there may be some opportunities that do not merit the investment and on the other hand there may be opportunities that are interesting but well exceed a companies capabilities, ability to manage and level of available financial resources. In other words, a company may be classified as responsible for one opportunity but un-responsible for another. Note, these are consideration do not only apply to small businesses they also apply to major firms.
A part of a company’s process should be determining how many contracts are needed to meet its revenue goals. For companies that have not estimated the number of contracts required, here is one method.
- Establish a revenue goal – $150,000
- Estimate average contract – $5,000
- Divide the contracts into the revenue goal – $150,000/ $5,000 = 30
- Number of awards needed = 30
- 30 awards are needed if every submission is successful
- What if some responses are not successful
- Estimate Bid to Win ratio – say 10 :: 1; 10 responses required per win
- B :: W * Number of contracts — 10 * 30 = 300 solicitations
- 300 solicitations = about one per business day; does the customer base provide enough?
- Calculate effort to respond – 10 hours each
- Total effort = 300 * 10 = 3,000 hours bid and proposal effort
- Can the identified customers support this level of activity?
This planning process sounds time consuming. Why is it important.
Here is why.
The Department of Defense has more than 1,200 contacting offices. Additionally, in 2024 DoD used 941 NAICS codes and 2,104 PSC codes – Product Service Codes to classify procurements. Not all PSC codes were used equally. 13 were each used over 100 times and 367 PSC codes were only used one time.
There are many other considerations and companies need to identify those that are applicable to their efforts.
There are many similarities between the federal marketplace and the commercial marketplace.
Companies entering the federal market or Defense marketplace should tailor their SWOT analysis and business plan to reflect the unique requirements of these markets.