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Should You Compete in a Price War with an Incumbent?

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Can you win a government contract when you are bidding against an incumbent that has been entrenched with an agency for many years?

The answer is a qualified yes. It is possible to unseat an incumbent in the federal marketplace if you submit the right type of proposal. The bottom line is you will need to present the agency with a solution that is innovative, creative, and viable, and that represents a better value than the current provider.

That said, be keenly aware of the fact that discretion is often the better part of valor. Winning the bid and executing the work are two different things. Proceed cautiously and thoroughly to determine if bidding against an entrenched incumbent is worth your while. Is capturing this work likely to build your business, or is the risk too great? 

The honest answer to this question determines what you do next.

If you feel the RFP represents a good opportunity for your firm, the next step is to determine what the government agency wants as reflected on paper. Read the Request for Proposal carefully. Determine precisely what the agency is requesting. Identify and list these requirements and prioritize them. Rank what you determine to be the customer’s key requirements from least to most important.

Now figure out what skills, equipment and materials each item will require, and assess your capability. Identify the incumbent’s strengths and weaknesses against your own.  Pay particular attention to equipment. Is it GSE or CSE? If the incumbent already owns specialty equipment to do the job, competitors will almost always come in higher on price. Factor that into your decision whether or not to move forward.

Read any Statements of Need and draft RFPs, but don’t forget to reach out to the customer directly. You may often be able to get access to the chief engineer (when appropriate), the government program manager, technical staff leads or even the agency’s contracting officer. If so, establishing relationships through meaningful discussions over a long period of time is important. Focus continually on what the customer is actually telling you and not what you or your team thinks is important. 

It is important to remember, however, especially when talking directly to a customer, that it’s not unusual for an agency to overstate their dissatisfaction with an incumbent to stimulate more competition. Make no assumptions and take nothing for granted with regard to how likely a customer is to continue with an incumbent.

After you have done your due diligence and gathered all the information you can, revisit your initial decision about whether or not to bid. Can you do the work for the price at which you will need to come in to win? If you still feel that the benefit of bidding/winning this job exceeds the risk, develop a bid strategy that includes clear, innovative details on your: 

  • Approach. What will you do to implement your strategy and deliver the goods or services requested?
  • Benefit to the Customer: What is the value of your approach to the customer both qualitatively and quantitatively?
  • Substantiation. Provide evidence that will prove to the customer that you have the bandwidth to fulfill their requirements in a way that surpasses the incumbent.
  • Cost. Review the RFP to be sure you fully understand how cost will be evaluated. 

Your best bet for unseating an incumbent without engaging in a price war is to provide the government customer with a compelling approach to change. Do that by focusing on the RFP’s written requirements, and differentiating yourself from the incumbent by proposing strengths and strategies that will benefit the customer in new and progressive ways.