Contracting

Smart contractors are preparing for what could be a solid fourth quarter

Only a couple of weeks until that magic date: The start of the final quarter of the federal fiscal year. It is now or never for contractors to make their sales ...

Tom Temin@tteminWFED

June 21, 2023 12:56 pm

8 min read

Only a couple of weeks until that magic date: The start of the final quarter of the federal fiscal year. It is now or never for contractors to make their sales goals. For some advice, Federal Drive with Tom Temin spoke with Larry Allen, a long-time federal sales and marketing consultant.

Interview Transcript:

Larry Allen Tom, the big thing that contractors need to be doing right now is to make an effort if you’re going to be successful from now until the end of the fiscal year, you and your company have to both feet firmly in the federal market. And while that might sound obvious to a lot of companies, I can assure you, from my experience, that it’s not. Amazingly, the companies that come in, particularly around this time of year, who haven’t really participated in the market. They’ve got one foot in, one foot out. They have great solutions, products that have high visibility in the commercial market, Tom. But they don’t really have that federal presence and they don’t have the relationships. Yet, these are people that want to succeed in the last quarter of the year when so much money is being obligated. But you’re competing against companies that have been here all along and who themselves have both feet in this market. So if you’re not making a commensurate effort, you’re going to find this to be an uphill battle.

Tom Temin Right. You can’t really come into the market thinking, oh, this is when they spend all their money. Let’s join in, because you have to do spadework that sometimes takes a year to be able to get any agency attention at all.

Larry Allen That’s exactly right. The time to have a successful fourth quarter is based on largely what you’re doing in the first quarter and second quarters, Tom. That’s when you are out talking to people about what your new solutions are, introducing yourself if you haven’t already done so, making sure that you’re strengthening those relationships so that agencies know what you have and know who you are, and also they can trust you as part of the federal business market. Whereas if you’re coming in from outside the market, you have to remember this is a very risk averse marketplace. And new market entries, sometimes they succeed, but very often they find themselves lacking that element of trust and reliability that so many federal buyers are looking for.

Tom Temin And what about the vehicle strategy? I mean, it used to be you had to have a [General Services Administration (GSA)] schedule contract as kind of a ground stakes to be able to get into the market. Now, there’s all of these big IDIQ’s, they’re all being renewed. So how does someone that is new to the market even begin to approach it? Since you may not be able to get a slot on those IDIQ’s or they have open season, some of them, some don’t, so that you’re at least positioned for the next buying season.

Larry Allen Tom, You’re exactly right. Contractors, especially newer market entries, have to be prepared to answer the How question. How do I buy from you? And you mentioned that a lot of times that’s an indefinite delivery, indefinite quantity contract IDIQ. And if you’re not on a GSA schedule, the best way to sell through those is to partner with somebody who has a contract. So, for example, if you have a federal client that says, Hey, I really want to buy from you through NASA SEWP, if you’re a technology company, the best thing to do is try to go to find a company that has a NASA SEWP contract that you can partner with. They’re the prime, but you sell through their contract and you’re able to get the business. That’s really the route that’s open to you through pretty much all of these IDIQ contracts right now. None of them really have on ramps between now and the buying season. I’m not expecting that we’re going to have any major ones come online unless all of the protest problems on the [National Institutes of Health (NIH)] contract mysteriously disappear, which I’m sure NIH and its buyers would be happy to find. But otherwise, as a contractor, you want to have at least two or three ways. And if it’s not IDIQ, are you a small business? Can you talk about a small business set aside? Can you partner with a small business or how well-versed are you in simplified acquisitions so that you can sell and promote the simplified acquisition option to an agency?

Tom Temin We’re speaking with Larry Allen, president of Allen Federal Business Partners. And by the way, you’re pointing out that there are several audit issues for scheduled contractors to be prepared for. So even once you get that schedule, it’s not exactly Adult Swim all the time.

Larry Allen Tom, It’s not. And I think that it’s important that scheduled contractors know what’s coming for them in the event of a pre award audit. Very often you get these during a renewal period, although you can get an audit at any time depending on what’s going on. So there are three things that I’m telling people that GSA inspector general auditors are focusing on right now. One should not be surprised, Section 889 B compliance. This is the provision that prohibits contractors from using covert telecommunications and other technology anywhere in their enterprise, not just in support of federal contracts, Tom, but anywhere in their enterprise. So these are companies like Huawei, ZTE, but there are others. So contractors are required now to make a reasonable inquiry to see whether or not they have any of that type of equipment in their enterprise. And if they do, they’re supposed to take steps to either remove it or mitigate it in lieu of doing a federal contract. That’s now becoming an audit area where the IG really wants to see that you conducted that reasonable inquiry in what you found. Another area is cost buildup information. And Tom, I have to tell you, this one blows my mind. Anyone who knows anything about schedule contracting knows that it’s a commercial item acquisition contract that’s entirely or almost entirely price based. So the idea that an auditor would be asking you for a cost buildup information, it’s not even really an apples to oranges comparison. It’s more like apples to a Chevrolet Impala type thing. So if you’re a contractor and you have an IG that’s requesting cost buildup information, that would be a time when I would recommend that you get some outside help, either qualified consultant or experienced government contract counsel to help you push back on that, because I’m not sure that’s a reasonable request.

Tom Temin And what exactly do they mean by cost buildup?

Larry Allen Well, cost buildup Tom, is where you have to go and show as a contractor how you arrive at your labor rates and or the other rates that you’re charging a government customer. So instead of your price being based on what you’re selling in the commercial market for what you’re selling to other entities for, it’s based on you building up your costs, what’s your overhead, what’s your direct labor, what are your indirect costs? And you put all of those components together and then you arrive at a price. You got to put some profit on that most of the time, but it’s an entirely different way. And typically we see cost type contracts in the noncommercial item arena and a lot of companies straddle both. But regardless of whether or not a company can do both cost or pricing information, what really should control is the type of contract it is, and then the schedules arena that’s price. So cost based build up could generally be out of bounds with some very limited exceptions in the schedules program.

Tom Temin Right. Those are not cost plus contracts to begin with.

Larry Allen That’s right.

Tom Temin All right. And just a final question on your call that you’ve made public for a stand down day in acquisition training.

Larry Allen That’s right, Tom. One of the things I’m calling for is the GSA have a stand down day, specifically in the schedules program, for training on all of the new or newer issues that are coming out in the program. GSA, I will tell you right now, I think is doing a much better job, in terms of training both contractors and the acquisition workforce than they were doing ten years ago. So they’re to be applauded for that. But Tom, there’s nothing like a stand down day to get the attention of your organization to say, wait a minute, we’re stopping everything we’re doing, because this is really important. So whether it’s the guidance on allowing contractors to easily obtain inflation related price adjustments, whether it’s a discussion of how companies can and cannot achieve labor rates to the contracting officer satisfaction, what type of information the contracting officer should be asking for, all the things going on with the Trade Agreements Act and some of the other things that impact schedule contracting, not to mention GSA’s news sustainability initiatives. It’s time to have a stand down day to stop and focus. While contractors generally aren’t wild about their contracting officers being taken away from training. I think in this type of situation they might welcome it, because it would bring some more cohesion between the stated policy and what actually happens in practice.