Commentary: How to make money in the age of federal spending cuts

March 10, 2013

There’s an old saying in Hollywood: “In confusion there is profit.” Here in Washington, there is no doubt that sequestration has sowed confusion. The question before the local contracting community is how to survive, and even profit, in its aftermath.

The task won’t be easy. A recent Wells Fargo study estimates that Uncle Sam’s spending represents 20 percent of the greater Washington region’s gross domestic product. Some discomfort is inevitable.

But many companies are changing how they pursue federal business in the age of austerity. Here are a few tips that could help contractors survive and even thrive in 2013 and beyond.

Bigger isn’t always better. The federal government has failed to hit its small-business contracting goals for 11 consecutive years. That’s about to change. Starting this year, compensation for senior agency officials will be tied partly to their agency’s small-business contracting performance. New rules also make it easier for small businesses to team with one another on large contracts. With salary bumps on the line, you can bet federal buyers will look at small contractors in a more positive light. Line up your small-business partners now to take advantage of the new rules.

Work the contract’s total life cycle. The release of a government request for proposals, or RFP, is often the culmination of years of preparation within a federal agency. Businesses that wait for the RFP’s release before taking action do themselves a disservice. Smart contractors use the “dark time” before the RFP’s release to track the program, study the incumbent and other likely competitors, build relationships within the federal agency and even influence the RFP’s contents.

Be an idea incubator. Great contractors not only excel at their work, but also become a wellspring of good ideas for how government can deliver better results on time and under budget. The more you talk with federal buyers, including sharing and implementing best practices that make them look good, the more indispensable you become to that agency.

Justify yourself. Bid protests are likely to rise this year as competitors fight over the rapidly dwindling federal pie. Likewise, federal agencies will increasingly hold contractors’ feet to the fire to justify past and future costs. Consider an internal audit of your cost structures before someone else does it for you.

Better communication. Like any healthy relationship, communication between an agency and contractor matters. Identify a system to routinely communicate with your contracting officers to fully understand their needs and eliminate problems before they spoil a relationship.

Diversify markets. When saving for retirement, we don’t put all our money in a single stock. Likewise, federal contractors should consider diversifying into new areas. Niche markets routinely emerge in the federal, state, commercial and international markets, and business development teams that seize on them fastest could prosper.

Our region has been mired in sequestration’s confusion long enough. With a few changes in how we develop and retain federal business, smart local contractors can survive and even profit in sequestration’s wake.

Rick Harris is executive director of the Association of Proposal Management Professionals, a District-based association for professionals dedicated to the process of winning business through proposals, bids, tenders and presentations.

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