Why You Need a Strategy

The Nancy Byerly Show

Some time ago, I read an article by Deltek regarding Government Contracting Industry Study. I will put a link to the article in the description for you to refer too. Now as a disclaimer, Deltek is not sponsoring this video nor am I affiliated with them. Frankly, I enjoy reading their articles. They put out a lot of great articles on the government contracting industry. If you have not subscribed to them, you may want to consider doing so. Although this article is almost a year old, I believe that the report is still spot-on for the government contracting industry. Especially, after the downturn in the economy. Nothing this year is going to be business as usual. I believe that the Government will have a ton of solicitations that they want to post but will not have time to do so. As a result, this year is going to be an off year for government contractors. We can see this in the chart which I will put up on screen. Government contract spending has been reduced for the last three months. As you can see the last three months the number of contracts award is down significantly compared to the same months in 2019. I expect this to continue for the rest of this fiscal year. Even though the states are slowly lifting the restrictions, the government does not have the manpower to get six months of solicitations out on the street, proposals reviewed, and contract awards made. Especially, when everyone knows that the Government spends most of their contracting dollars in the last quarter of the fiscal year which is July through September. Now let’s get into the article because it does have useful information for government contractors.

In the report, Deltek has identified essential trends, challenges, and benchmarks.

The first Trend is Increased Growth and Competition for businesses

Government contracting has always been a great way for businesses to increase their market share. We can expect that trend to continue at least for the couple of years. Now in the Deltek report it states that the procurement spending will continue to grow and is an excellent opportunity for businesses. Specifically, if they utilize profit-maximizing strategies. I believe that you will see an increase in businesses entering the government marketplace due to the economy. It will take a few years for the economy to turn around. With thousands of businesses seeking ways to stay afloat, you can bet that they will turn to government contracting. We saw this in 2008 and 2009 when the last recession hit. As a result, there will be more competition than ever before competing against fewer contracts. That means that in order to be successful a company needs to have a great strategy in place.

The Second Trend is Businesses will Seek New Customers & Agencies.

As competition increases, and less opportunities available to bid on, companies must seek new agencies and customers. This is truer today than it was just a year ago. Government Contractors seeking new customers will be exposed to new and unfamiliar contracting vehicles. These new vehicles will make it difficult to identify when the government will be releasing new contracts. Especially, if these small businesses are wanting to find the best teaming partner in order to capitalize on these contracts. Remember that your strategy is going to influence the contracts that you go after.

There are three things that businesses must do to be successful besides finding the right strategy.

1. Research New Agencies – get familiar with the mission of the agency. How can you help that agency meet its mission requirements? Can you reduce costs? Can you perform the work faster due to technological advances?
2. Perform a SWOT analysis not only on your business but also the top competitors. remember that these competitors already have relationships with these agencies. Your differentiators are more important now than ever.
3. Research the spending patterns for the new Agencies you want to do business with. Become familiar with the contracting vehicles they use.

The Third Trend is finding Qualified Talent and Retaining Top Performers

Before the downturn in the economy, it was challenging to find, hire, and retain high performing talent. Now it may or may not be the same depending on the industry in which your business operates. Open employee positions have been a challenge to many small businesses. This might be a good opportunity to find those high performing employees to fill those key positions. You need to be able to adapt to current conditions. For instance, teleworking is something that is not going away and will be used by more and more businesses. It will be the new norm. So, make sure you have the resources in place in order to allow for teleworking. Teleworking can be a nightmare for a small business. How to you protect your assets? How do you ensure that employees are productive? How do you manage employee’s workflow? How do you improve the employee experience with new technology, continuous performance management and top of the line career development programs? These are things that must be addressed now not later.

The fourth Trend is Cybersecurity Concerns

Unfortunately, Cybersecurity is not going away anytime soon. We can expect to see an increase in malicious software, and hackers. This means that businesses need to be consistently updating their systems

Businesses seeking DoD Contracts will need to ensure that their IT systems can meet the new Cybersecurity Maturity Model Certification (CMMC). Meeting the new CMMC will be more complicated for those businesses who have transferred their business functions to the cloud. Some companies report a 37% increase in cybersecurity incidents compared to the year before. Government contractors are being introduced to new compliance standards, increasing costs, and regulatory burdens.

Compliance cost for Contracting Purchasing System Review (CPSR) Audits are rising.

As more CPSR audits are taking place, this is putting a high cost on the government contractors. Many contractors are stating that it is moderately or more costly to meet the compliance requirements. With increased costs, we can expect to see increased pricing on contracts. We all know that the government prefers to buy at the lowest cost possible. There must be a balance between the government requirements and the costs that must be absorbed by businesses. Sooner or later these costs are going to result in higher costs to the government.

Summary

It will be interesting to see which companies continue to perform government contracts in the future. The compliance requirements may be too costly for many small businesses forcing them to go to other agencies or even move into the commercial marketplace. Ultimately, giving up on government contracting. These costs are not only limited to government contracts but grants also. Many small businesses get a start in the Small Business Innovation Research or Small Business Technology Transfer programs which are funded through grants. These programs also are experiencing the same regulatory burdens as the contracting side.

The increased regulations almost always have a negative impact on business. They result in increased costs which must be passed on to the consumer. The result is higher prices. As DoD gets ready to implement the Cybersecurity Maturity Model Certification while also increasing audits due to the Contracting System Purchasing Review, it will have an impact on some businesses. Yes, the businesses that it will impact will be micro businesses. However, any business that is forced out of a market not due to a competitive nature but due to increased compliance requirements is not right. There must be a balance. I find this especially interesting since five years ago the push was to reduce government burdens yet here we see the government increasing regulations. We all know that this is a cost to do government contracting. But for many businesses wanting to get into government contracting it can be difficult to overcome.

I have seen many businesses that haphazardly make the decision to go into government contracting. What do I mean by haphazardly? Well, they don’t have a strategy. They have not performed any research for the industry that they are in. They have not performed a SWOT analysis on the competition and basically, they have not performed their due diligence.

Ten years ago, you could go into government contracting without a plan. That is not the case today. More than ever you need to have a strategy in place.