Off the Cuff: Good Enough for Government Work: Part 2 of 2

BUSINESS

Off the Cuff: Good Enough for Government Work: Part 2 of 2

January 04, 2010
By Mark L. Venit, MBA, Contributing Writer

In "Good Enough for Government Work: Part 1," we discussed the basics of bidding for government work, getting on bid lists and where you can get assistance to help get started with the process. Now, let’s turn to maximizing your chances of winning a bid that you can actually make money on, and whether (or when) to sharpen your pencil.

Improving Your Chances of Winning a Bid
You’re certain to win a few bids, although being the lowest bidder doesn't necessarily guarantee success — nor is it an absolute necessity in many cases. Your chances of success depend on how many other companies are bidding, the particulars of the bid (in terms of deadlines and other variables) and whether you qualify for any advantages in the process by virtue of your being classified as a preferred bidder in certain circumstances.

Preferential treatment, like it or not, is a means by which socially desirable ends are accomplished in the polity by giving a certain percentage of government work to companies and individuals who merit special consideration. Sometimes referred to as “set-aside provisions” (or simply “set-asides”), these covenants usually pertain to bidders that meet one or more of the following five criteria:

1. Minority-owned enterprises
2. Women-owned enterprises
3. Companies located in areas of high unemployment or enterprise zones
4. Firms owned by military veterans
5. Firms employing certain percentages of minority workers or veterans, or other specified conditions.

Where such provisions and classifications exist, they don’t guarantee work to any specific firms, only firms within those categories. This means if you qualify for such a distinction, use it to your advantage against other companies who may also be similarly classified, but aren’t on bid lists.

Preferential selection also often is extended to firms close to home. For example, if your town or city's governing body has a choice between doing business with a hometown firm and one from the other side of the state, and both are quoting a bid and are in the same ball park price-wise, the home team is likely to receive the award. It also can mean a bid from a local ad specialty distributor whose supplier is in another time zone may be at a competitive disadvantage to a local embroiderer whose firm employs seven local workers who live, shop — and vote — in your area.

Price is important, but many progressive procurement systems allow for the selection of a winning bid from among the three lowest bidders. This “Rule of Three” policy originated decades ago to enable decision-makers to recognize bona fide issues of quality, experience, reputation, locale and other legitimately subjective criteria for awarding bids. The practice derives from socially desirable ends, as well as the concept of not really wanting to send astronauts aloft in space capsules built by the lowest bidder instead of sending them aloft in equipment built by the most competent bidder.

You may occasionally hear about bid bonds, a procedure whereby bidders must post a certain amount of money with their bids to ensure their performance. Such bonds usually are mandated for building contractors, engineers, architects and high-tech providers; they are rare for apparel graphics contacts. However, if a bid bond is required for any job, they are refundable upon satisfactory completion of a contract.

Should I Sharpen My Pencil?
No! While conventional wisdom might suggest you must get down and dirty on price, experience suggests otherwise — as does common sense. If you win a bid, it should be worthwhile for your company to execute it. When firms in our industry win bids, it’s often because of set-asides, local preference, legitimate issues of quality and reputation or the fact that either no one else bid on the job, or the competition was from far away.

I usually counsel clients to calculate into their bid pricing the margins that they feel are credible and warranted to make the effort worthwhile. On rare occasions, you may want to take a bid for prestige reasons or to deny an ailing competitor some work at a critical time. There also may be circumstances where you may have excess inventory to blow out or other special considerations that could cause you to work a little closer, but as a general rule, stick to fair margins. And never sell at a rate below what one of your salespeople would have to charge, unless you’ve designated selling to governmental agencies as the exclusive province of the house. Even in this case, there's usually no compelling need to “give away” your work.

A major exception I’ll offer to this rule is getting around or working within “threshold” requirements. Most bids that go out for competitive responses do so because the soliciting source determines that the aggregate amount of the purchase will be in the arena where any purchases over a certain amount of money must “go to bid.”

The threshold on local bids can be any set amount in a given bid category. In many cases where you can adjust your bid to an amount under the threshold, the bid can be withdrawn. In that case, the source sends out a letter to everyone on the list notifying them the bid has been withdrawn.

During those years when I worked on your side of the desk, I developed a good working relationship with Philadelphia's director of purchasing, whose threshold for materials procurement was $2,000 (at the time) for purchases categorized under the "recreation" category. I might figure up a bid that that totaled $2,139, knowing that if I could knock $139.01 off the price, I’d assure myself of the bid. I’d call the director of purchasing and tell him I’d do the job for $1,999.99. For about 6% off my regular price, I could collect all kinds of jobs with very little selling cost and little effort. And each time I beat the system — or more accurately, worked within the letter of it, he graciously awarded me the job and sent out cancellation notices to my competitors.

I did this repeatedly and, after awhile, the director of purchasing would contact me before many a bid and ask me if I could come in at under his threshold. Sometimes, all I had to do to get under the wire was to throw in shipping, which involved having my driver make an extra stop on his weekly jaunt downtown to pick up goods. For many years, my relationship with the director of purchasing got me anywhere from $50,000 to 100,000 a year in totally legit, no-bid orders from the City of Brotherly Love, which was extra sweet since my company was located outside the city.

Everything you’ve read to this point is regarding bids vis-à-vis doing business with governments. But many of the larger corporations around the country — and in your own back yard — have bidding policies that, in many aspects, reflect those of their governmental counterparts. While you’re busy getting on governmental bid lists, also spend some time contacting the purchasing departments for major corporations in your neck of the woods. You’re certain to rack up a few more big orders in the process. And many of these companies have very definitive policies about doing business with local vendors and sending work to specially targeted entrepreneurs.

If your company wants to get a little dividend on all the taxes you pay, getting on as many bid lists as possible can only help you snag a few big orders while opening up even more doors to many smaller ones along the way.

Best wishes for a happy, healthy, and prosperous New Year!

Mark L. Venit, MBA, is president of Apparel Graphics Institute Ltd., Ocean Pines, Md., which provides management and marketing consulting and proprietary research to apparel graphics companies throughout the Americas and Europe. He also is the chairman of ShopWorks Software LLC, a provider of industry-specific business software. Venit teaches pricing, strategic marketing, salesmanship and other business management topics at the Imprinted Sportswear Shows. You can contact him at markvenit@cs.com.

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