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Government contracts offer prime opportunities for technology firms
Austin Business Journal
Gail Taylor Russell, Contributing writer
Published: March 28, 2005
Over the last few years, one of the biggest areas of opportunity for technology companies has been in the public sector. In addition to normal government agency procurement, Homeland Security-related initiatives have pumped money into the federal and private sectors.
After 9/11, many government agency leaders believed that innovative solutions to our nation's most important problems, such as fighting terrorism and improving national security, might be found within small technology companies. The federal government is trying to make it easier for these smaller, innovative technology companies to acquire government contracts, but the reality is that it's still difficult for a small company to work directly with the government.
Yet, there are still opportunities for these companies -- if they know where to look.
Small companies can benefit from developing alliances with larger technology companies and system integrators who have established relationships with the government. But it's not as easy as riding another company's coattails. Only 39 percent of strategic alliances are considered an unequivocal success by both parties, and at least 30 percent are considered complete failures, according to a survey by Alliance Tactics Inc.
So, how do small companies select, develop and negotiate strategic alliances that will win government contracts?
1. Create demand by marketing directly to government agencies.
The best way to get on the radar screens of system integrators is to create "pull" through demand.
Two years ago, the small technology company that I work for was not well-known by government agencies or integrators. We tried to establish relationships and team with system integrators to respond to upcoming Department of Homeland Security proposals. The system integrators listened, but they were skeptical that a small technology company had the risk assessment technology that could solve some of DHS's major needs.
Our survival strategy? It is to market directly to the government agency -- particularly to the technical program people who write the proposals outlining the technology the agency is seeking. We submitted unsolicited white papers, did a lot of presentations and demonstrated a prototype system. We soon started getting calls from larger companies because the DHS agency heads were telling them that they should look at our company's products. This led to a contract with a large system integrator. This first contract brought us $7.5 million in revenue and has led to multimillion-dollar followup contracts.
The best way to create pull through demand is to find out what the key programs are, who heads them, and the schedule for procurement. Congressional budget items and press coverage can help in these areas. Research what products or services the agency needs, and then try to find someone to introduce you to the right people.
2. Enlist the help of your senator or house representative.
Don't overlook these important political resources. Senators and house representatives control government agency purse strings and want to promote their own local companies within those agencies. Contact their offices and ask for a meeting. You will almost always get a meeting. Once they are convinced, the senator's or representative's office often will make key introductions to target agencies.
3. Connect with larger technology companies and system integrators.
Responses to proposals from large technology business and system integrators are judged on the inclusion of small business subcontractors. Twenty-three percent of federal contracts are awarded to small businesses. Many system integrator contractors have developed in-house programs to improve outreach to small businesses, so start with the system integrators' small business ombudsmen. If they believe your products and services are essential to winning a government contract, they often will provide the know-how to navigate the government contracting process.
4. Take advantage of organizations like the AEA and the U.S. Small Business Administration.
They can connect small businesses with larger company partners. They often sponsor events with the specific goal of playing "matchmaker" between large and small companies.
Once you've found the right potential partner, you still have to ensure that the partnership is successful. Fortunately, there are things that you can do to increase your chances of achieving a successful strategic alliance with a government system integrator or large technology company.
When entering the government contracting world, small companies generally will need to adapt to the culture of the system integrator or large technology company. While small companies often are driven by the need for quick revenues and cash, a long-term focus is essential when entering the government contract arena. Large system integrators have been in this business for decades and also take a long-term view. Getting that first government contract, even if you are teamed with an integrator, can take an average of about a year. The timing is driven by planned government procurement schedules that routinely have delays.
Resource commitment is another important consideration for small companies seeking alliances, which can require a significant amount of manpower. Bid and proposal activity can encompass six months or more during system concept, design, proposal submission and contract award. Small businesses will have to fund these activities, because system integrators typically don't extend funds to companies to pay for bid and proposal preparation. In addition, integrators will want to see the highest quality technical staff committed during the proposal to be assured that the small company will be able to deliver once the contract is awarded.
Small companies also need to be aware of intellectual property issues, especially when dealing with a larger company where there is an imbalance of power and resources. All companies, but especially small ones, must be sure that they have intellectual property protection in place.
Developing the right strategic alliance is tricky. But when a strategic alliance is carefully thought out and executed effectively, it can bring significant benefits.
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