Compiled by Vincent Dajani
Photography by Rachel Smith
Government contracting is a complicated and ever-changing market that can be tricky to navigate with competition from both small and large companies. Many smaller companies have difficulty trying to branch out and still bid for contracts. SmartCEO gathered the top experts in government contracting to share their experiences. These contracting competitors share their success stories and insights into expanding markets and growth strategies.
- Moderator: Marissa Levin, founder and chairman, Information Experts; founder and CEO, Successful Culture
- Sponsor: Gehrig Cosgray, principal, CliftonLarsonAllen LLP
- Jay Challa, chairman and CEO, Ace Info Solutions, Inc.
- Carol Davis, senior vice president, Gryphon Technologies
- Chad W. Davis, president, Red Rock Government Services
- Kathryn B. Freeland, president and CEO, A-TEK Inc.
- Lilly Harris, president and CEO, Man-Machine Systems Assessment
- Art Richer, president and CEO, immixGroup
- Carlos G. Rivera, president and CEO, Vysnova Partners
- Scott Semple, COO, Dynamic Integrated Services
- Sonu Singh, president and CEO, 1901 Group
- Brian Stygar, chief technology officer, Eagle Ray, Inc.
- Hai Tran, president and CEO, Veracity Engineering
Click here to listen to the entire Roundtable discussion, or read highlights from the conversation below.
How are some government contractors growing in spite of federal budget cuts and increased competition?
Challa: Wherever there are challenges, there are also opportunities to make use of those challenges. You have to have different ideas and different techniques to grow in this environment. You can take ownership of a solution. The key ingredients for growth are having a great infrastructure, good past performance ratings, and having a good capture plan and proposal team. If you develop a culture of good performance, the opportunities to grow are there.
Chad Davis: [We] completely did away with titles within the company. No business card has a title. Basically, we said everyone here has the exact same responsibility. Clients have expectations, but as far as the business goes, we’ve given everyone the same responsibilities.
Freeland: Everybody sells regardless of what position they’re in, especially if they’re customer-facing, because we are in a tough competitive environment. How do we compete with large companies but also be classified as a growing large business? That is what we have to concentrate on.
Singh: These companies that are mature large businesses …, a top-down culture will help with that. The CEO has to be flexible and do whatever it takes to help the company. If they have to make a plan, go meet the client and do that. We are in the same boat. We’re too small to be a large company and too large to be small company.
Semple: As a small [business], you really need to rethink your entire business strategy and the culture of your organization has to embrace the concept, all the way from the individuals to the CEO. We’ve got to persuade the large [companies] that we’re going to make you better than you ever thought you could be.
Transition to commercial
As many traditional federal contract revenue streams dry up, some contractors are seeking work in other markets. What trends have you seen when companies move into the commercial space or state and local governments?
Tran: We’ve made the biggest terminal … that’s been used for runway safety purposes. We realized that it could be helpful when we market it to the airlines. We have about 13 airports that are using our tool for American Airlines. My suggestion is not to suddenly decide, “I’m going to do this.” You have to come up with a plan to migrate a product more effectively. I can’t say for all commercial work, but we gave American Airlines the tool two years … for free before they signed a contract with us. Our tool was not that expensive but it required a lot of resource change and training. They didn’t want to take the chance in buying it. That was the hurdle we had to overcome. The key thing to commercial is bottom line.
Richer: When you’re looking to transition to a new market, the best plan is to look for the adjacencies near your core business. We’re largely federal but we do some state and local business. We had to look at that adjacent market. It was a growing market compared to federal, and we see tremendous growth opportunities. We’ve had great success early on in penetrating the markets.
Rivera: We are being forced to be very aggressive with pricing on the government side, [so] we look like a great deal on the commercial side. One of our units provides medical services. We sell [one product] for $6.25, but on the commercial side that’s a $25 product. The second thing we discovered is the state market is something that we don’t pay attention to, but they’re huge. We get daily emails, requests from Maryland, Delaware, Virginia, all the way out to [Texas]. That’s a whole market we’ve never looked at before. They don’t take 300 days to work like the federal government does. Our strategy is to work with partners. We’re not going to go into this thing alone. We don’t know what we don’t know. We’re looking for strong partners. It’s about 5 percent of our business right now, but we’re hoping to grow. You don’t want to throw away your whole federal strategy because you want to be a state service provider. It’s a matter of a team strategy. You team so that you can do it in addition to what [you’ve been] doing.
Tran: The federal government predominantly uses the same strategy. Every state has a different regulation. You can hire someone who knows one state but has no idea for another state.
As the market shifts, government contractors must transition staff to new, more profitable projects. What practices have you (or your peers) used to ease the transition?
Richer: It is important that you recognize the investments you need to make. One of our strategies is to take the best and brightest and putting them on the growth opportunity because if you’re in a flat market, you need to put the resources in a market that can grow. You have to be able to make those decisions. It’s difficult because it’s an evolution, but you have to be firm in your commitment to those new markets.
Tran: On the bad side, I’m seeing federal contractors move away from certain markets to a more profitable market but the client feels like they’re bailing out. Like you’re taking the best resources and moving them away for money reasons. They lose the trust and the culture doesn’t match your actions.
Challa: You’re working on a client for five or 10 years. You need to keep the program folks happy by having experienced people in the proposal [and] you need to keep the contract folks happy by having the lowest price. We’ve made those people available at the beginning of the project and slowly transitioned them to other projects, but made them available as contractors after that. You try to balance the program needs by having the qualified people, and that type of strategy has been helping us in the transitioning of qualified people from one project to another.
Semple: There’s tremendous need for upgrade, changes and innovation, so [recognize] where the new technologies will be and move your resources over to that. Upgrading massive systems and moving those to the next generation is an increase in capabilities, and so a key staff transition strategy can be understanding where those changes are going to take place and what skill set is going to be required over there. Take your key people … and put them into positions onto a new project at a reduced cost for the last two years of your contract so that they can transition the network over to a new capability. Your people are [then] the only [ones] who have that experience. You’ve got the capabilities and it’s your staff. Very few of us are out at billable projects making the day-to-day changes occur. It’s those people that are out there doing the day-to-day work. If they have skills or are provided the opportunity to pick up those skills, they create their own transition capabilities and that becomes part of the culture of the enterprise.
Freeland: In our organization, the program managers are the ones who are the closest to selling. We ask them to work with us. They’re the eyes and ears on the street. They’re working directly with the clients. They know what the requirements are. We’re asking them to let us know what’s going on. We have these bi-weekly meetings to find out what’s happening. I do quarterly quality requirement meetings with my clients.
Carol Davis: It’s definitely a self-sell. You have to make them believe that they can do it. We focus on, “What is our culture?” We never move away from our culture. We’ve been a very close group of people and we are a large business. We team with any small businesses with a renewed rigor from the government. We’re actually seeing more work going to small businesses now. We feel that it might be easier for small businesses to be out there because you’ve got that 36 percent average that government is trying to give to small business. We’ve also had to deal with the market shrinking.
Harris: We put in incentives for everyone to sell. But it’s been a challenge finding the work. Incentivize the people and really have them share your mission of what you’re trying to do and how we can all celebrate the successes together as a team.
Freeland: Additional responsibility requires additional training. If you don’t take the time to walk them through the process, then you won’t get the results that you want. Know the keywords; know the things that you want to say. That training piece cannot be understated.
Semple: That has tremendous value. It’s not just selling new business. It’s selling the client to understand what your company is and why you’re better at what you do. It’s selling your company within your own teams. Your experienced folks have to help the new people … understand why you’re such a great company.
Rivera: I’d rather work with my client and develop a solution that makes sense, and then you become the solution. If the client added costs, they’re going to know it’s there. They’re going to work with you.
Challa: We have to be careful on when to upsell and when to not upsell. I have seen negative perception from the contracting officer. The perception is that we’re costing a lot more than we came in as. It has to be new projects rather than trying to add on to another project and charge more than you said you would do at a lower cost.
Price to win
Conventional wisdom suggests that an incumbent with deep knowledge of the customer would be favored for a new contract, but in today’s environment, low-price bids are winning more often. How are you changing your approach in light of this shift?
Stygar: You have to follow the money. If the customer has budget increases then certainly spread within that customer. If you have strategies solutions within that customer set, it obviously makes sense to bring that solution to other companies. We’re certainly trying to sell with some of our customers, but we’re also trying to bring that to new agencies.
Carol Davis: We’re branching out within each service and the different centers. We’re bringing similar services to a new core of clients. We’re also taking this opportunity during a changing market while trying to be very careful to not lose our incumbency.
Semple: It’s important to understand who you are within the space in which you exist. For us little fish, there’s the greener pastures theory. You’ve got to remember the agency that you’re working. Let us not forget that you have to drive past a lot of business to get to the [greener pasture]. The piece of work that you think is so nice … they’ve got well-entrenched competitors there. Any small [company] that’s working more than three agencies is out of their mind. You write over 42 proposals and win less than your fair share. You want to write 12 proposals and win 9. That’s in your [area]. Accept the fact that our budget is diminishing. We’re also 5 miles from the only billion-dollar IT market. Stick with a strategy and you do a lot better.
Chad Davis: You have to adopt both strategies. We looked at it as a necessity. Our pool is very limited to resources. We looked at it from a commercial standpoint and … realized that we have to do business in those areas. We have to continue to earn revenue while doing that. We learned that our customers were looking at us to bring experience to the table.
Types of contracts
Are you seeing more business being driven through government-wide area contracts (GWAC) or through agency-specific contracts?
Freeland: I’m seeing more from the GWAC, and there are a lot of opportunities there. Using those vehicles to identify new opportunities is what we’re trying to do. The GWACs are the norm and the way of the future. You’ve got to pick and choose which ones you really want to do. We’ve got to determine which vehicles are best for us for the areas in which we operate.
Stygar: A lot of it depends on the lifecycle of the agency. If it’s coming to an end or it has ended, and they’re waiting for the new contract, there is a really good opportunity to leverage your GWACs as a bridge. As soon as those big agency contracts are awarded, it’s a big process to have that agency go outside of that.
Challa: We are not really large enough to compete with the large companies. We have multiple GWAC vehicles. Driving the work into those vehicles, we can still compete and give [ourselves] a little more time to compete in other markets. Those GWACs are very handy for us to drive work into them.
Freeland: We went into the 8(a) program thinking it was a business development-type program. We started with the objective of planning for graduation from the beginning and not waiting until you’re [older] to figure out how you’ll transition out of the program. … Our strategy went around what we needed to graduate successfully.
Tran: A lot of companies become very complacent and they price themselves very high. I was terrified to get into the 8(a) and graduate. We wanted to make sure the price was consistent so we could bid on the small business side.
Rivera: The 8(a) was just one more way of contracting. Never more than 10 percent of our revenue came from 8(a). We would develop customer intimacy and then once we were in there, we worked very hard to be a competitor. We swam in three or four swimming pools and that was it. Other agencies are great, but we’re not going to chase every car.
Freeland: What is a CEO’s strategy long term? If that strategy is to grow and then sell, then the 8(a) strategy has to be that by the end of graduation, you can bring the greatest value to the company.
What other advice would you give to government contractors?
Harris: Stay focused and drill deep.
Tran: Brand yourself and brand your company.
Freeland: Reinvent and reinvest.
Challa: Know your client. That will solve a lot of problems.
Richer: Look for a great valuation to really build your business.
Stygar: Know when to say “no.” There’s lots of opportunities and you can’t chase them all.
Singh: Change up your business model in response to the market.
Semple: Strategic partnering is the key to the future of the business. Everything in the federal government is going to be in the partner business. You have to seek out those best partners and you’ve got to be the best partner possible.
Chad Davis: Only focus on what you can control and don’t let the negative get to you
Rivera: Before you protest, you should attempt to communicate with a contracting officer and give them an opportunity to correct their mistake. Once you do it, you have to live with the consequences.
Carol Davis: Continuously re-engineer your operations, marketing and strategy. CEO
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