After more than a decade on the buying side of the government/industry equation, I was fairly confident that I understood the costs associated with selling a product or service to the government. After all, I had evaluated thousands of proposals from companies of all shapes and sizes and had reviewed their most intimate proprietary details. I had negotiated billion-dollar programs for supplies and services; for major systems, research and development, sustainment, and professional services. I had seen a lot of cost information, but the majority of those proposals were from firms already entrenched in the government cost model. Only when I began to evaluate proposals from nontraditional firms, new entrants to the federal market, did I see the true cost of selling to the government.
New entrants to the government space need to understand the premium associated with selling a product or service to the federal government. Government-unique regulations, policies, processes, and systems, in addition to unique accounting and audit practices, can have a significant impact on the cost to sell a product or service. Prior government-sponsored studies have identified that the premium cost of government-unique processes and procedures can amount to 18%-25% or more of the standard cost of commercial transactions. Consequently, incorporation of government-unique accounting systems, estimating systems, purchasing systems, property accountability systems, quality assurance systems and so on can put a company in a situation where they either must split into separate business units, each with different systems and procedures, or apply heavy and complex government processes across all of their business units, potentially impacting their competitiveness in the commercial market.
In furthering Public Spend Forum’s vision of open government markets, we are continually working to provide equal access to data and information needed by suppliers to understand the challenges associated with selling to the government, and at the same time providing our government partners with the data and information needed to understand the impact of government-unique processes and regulations. The public marketplace can present a valuable opportunity for companies that come to it armed with knowledge. PSF, through its work in providing fidelity into the unique aspects of public markets, and through our free government/supplier intelligence tool, GovShop, is arming companies with the data needed to make those informed decisions.
Knowledge is your superpower.