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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.

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Recency and Relevancy: Gaining a Window Into a Competitor’s Past Performance

Earlier this month, we discussed the federal source selection process, including how proposals are reviewed, evaluated, selected, and ultimately awarded.

To recap, we talked about how government officials use multiple sources of information when making award decisions. In this blog, we’d like to address one of the most common factors: Past Performance. Simply put, Past Performance is an assessment of a bidder’s likelihood to successfully perform the contract, based on its history with similar contracts. This is important not just for your own bid, but also for understanding how your competitors will likely score on their past performance, and how you can better counter that with your own approach.

In evaluating a bidder’s past performance, government officials use the Contractor Performance Assessment Reporting System (CPARS). Exclusively available to the government, CPARS includes detailed information on how the bidder has delivered on their previous contracts with the government. This includes their record of meeting requirements and conforming to standards of good workmanship, forecasting and controlling costs, and adhering to schedules. CPARS also evaluates what FAR part 42.1501 refers to as a contractor’s “commitment to reasonable and cooperative behavior and customer satisfaction” on previous government contracts.

Federal decision-makers evaluate contractors’ past performance based on two standards: recency and relevancy. “Recency” refers to how long ago the work was performed, and “relevancy” has to do with how similar this work is to what the current RFP is asking for.

Because FAR 42.1503(4)(d) deems all past performance data as Source Selection Sensitive; information contained in CPARS is not releasable (unless expressly directed by the agency who submitted the data). However, contractors can gather a surprising amount of information on their likely competitors just by leveraging various open-source tools and their industry contacts.

Evaluating Recency and Relevancy

Requests for Proposals typically give specifications for what they deem to be a valid past performance reference. Typically, a good past performance reference is similar in size and scope as the contract you’re pursuing and within a 3–5 year window. Section M of the RFP discloses how these references will be evaluated.

Your analysis of the relevancy of a competitor’s past performance starts with determining which category it is in. For example, is this a product-based contract that involves the development of an item or low to full-rate production? Or is the opportunity calling for a service-based solution such as mission-based support or systems integration and engineering? Especially when the solicitation is looking for a service to be performed, be sure to get a good handle on the contract requirements by breaking them down into simplest terms. For an IT contract, for example: is the agency looking for cloud-based services support? Help desk support? Cybersecurity? The same applies to any product-based procurement.

Good sources of information for competitor past performance analysis include databases like GovWin, DACIS, GovTribe, and BGOV. These databases should be augmented by searching press releases and other news articles for announcement of awards that may not have been captured (or easily found) in one of the above databases. GlassDoor and other social media platforms can be excellent sources of data for contractors that are performing poorly, but a good analyst will always guard against potential bias by taking negative press with a grain of salt.

Finally, as you examine your competitors’ past performance, there are a few questions that are good to consider:

  • Are the contract requirements well within their capabilities, or does their contract record suggest they have “gaps” in their ability that they must fill via teaming?
  • Do they have sufficient experience in designing and manufacturing the product in focus?
  • Have they recently won a large number of programs, and might struggle with bandwidth for the upcoming bid? Will they need to expand their manufacturing capabilities because they are currently performing at max capacity? Or will they need to go on a hiring spree to fill the required positions because this is a new contract type?

All this information is geared toward a single goal—providing your capture team with information that will inform strategy. It gives you the best possible chance to prepare for – and hopefully outmaneuver—your competitors and enhance your win probability.

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Understanding the Federal Source Selection Process

When the federal government issues an RFP asking companies to submit proposals to manufacture goods or supply services on a contract basis, the application process is complex and highly detailed. Likewise, there is an equally specific way through which the winning bid is selected. This selection process is defined by the Federal Acquisition Regulations (FAR) system, a group of uniform policies and procedures that guide the acquisition of goods and/or services by all executive agencies. 

Found in Title 48 of the Code of Federal Regulations, FAR consists of 37 chapters, each hundreds, if not thousands, of pages long. (Chapter 1, which applies to all government agencies and covers cost accounting standards, is more than 2,000 pages long.) Fortunately, familiarity with the entire document is rarely necessary. Part 15 of FAR that deals with the selection process, although other sections do come into play in rare circumstances.

Why is understanding the selection process important? Simply put, knowing what steps the agency will take in making a decision will help you organize and write your proposal. Most would-be contractors know that considering “What does the buyer want?”, “What are their critical needs”” and “How does this potential customer define value?” will benefit them, but understanding the steps through which their proposal will be vetted before a final decision is made is equally important. 

After the government receives the proposals and the deadline passes, pricing is stripped from each submission. The bids are then processed through three distinct steps as outlined in FAR:

  1. The agency convenes a Source Selection Evaluation Board (SSEB). Typically, the SSEB is made up of a small group or team of individuals, but it may also be a single person depending on the size and circumstances of the agency. The SSEB evaluates each proposal (again, without pricing information) separately. Each submission is evaluated for general strengths and weaknesses; any pluses or minuses that are particularly significant are identified and highlighted. 
  2. A Source Selection Advisory Council (SSAC) is chosen. Its function is to take the information the SSEB has given them, bring in the pricing information, and provide the ultimate decision maker, the Source Selection Authority (SSA), with a recommendation as to which contractor to choose.
  3. An SSA’s sole responsibility is to select the winning bid. While the SSAC’s recommendation is carefully considered, the SSA is not required to go with its recommendation.

Most often, however, the SSA will agree with the SSAC’s recommendation and make the award in that applicant’s favor. Occasionally, however, the SSA will either send the SSAC back to the table to provide more justification and back-up information on their choice or opt to go in an entirely different direction—in which case, they take full responsibility for the decision.

When an SSA deviates from the typical federal source selection process, there are inherent risks. This is why it will be important for the ultimate decision maker to be able to clearly articulate their reasoning for going against the advice of the SSAC. For example, if there is a protest over the award, the SSA will need to justify and explain its actions thoroughly. If they can show that their decision clearly provides the government with added value, as long as it doesn’t contradict the rationale given in the RFP, the GAO will side with the SSA. 

In addition to understanding the source selection process, it’s also important for would-be contractors to know who is likely to be involved in the information-gathering, evaluation and decision-making process. Very rarely, the customer will disclose who these people will be, but far more likely, it is up to those submitting to try to discern the likely players. Look for contractors who have had a close working relationship with the agency in the past. Examine the historical patterns in previous procurements. See if you can determine which agency position has typically been the SSA in the process. Along with your primary research, this sort of information can guide your assumptions and help you write your proposal more effectively.

Our best advice is to understand the process, know your customer, and write your proposal accordingly. Having as much information as possible on the decision-making process will be an important factor in winning the award.