Outsider Perception: Selling products and services to a federal prime contractor is easier than selling directly to the federal government.

Reality: Selling services and solutions to a prime contractor can be as frustrating as selling directly to federal agencies.

Lesson: You must sell your products and services to prime contractors in the same way you would to your prospective federal customers.

Background:

As discussed in the previous newsletter, most small businesses start out in the federal market by serving as subcontractors to federal prime contractors. These companies are forced to do so because they don't have ways to close their sales. In fact, most small businesses don't know about pre-approved price list contracts until they have been in the game for six months or more.

Prime contractors are required by law to subcontract a percentage of their federal work to various types of small businesses (e.g., small disadvantaged businesses, veteran-owned businesses and the like). This is a major element in the federal government's small business advocacy program and it works. Most people believe that mandatory subcontracting is a good approach but small businesses beware. There is an inherent flaw in the system in that prime contractors agree on paper to use good faith efforts to use small businesses but do not do so in practice. The way to keep the primes honest is to force the prime contractor to sign an airtight teaming agreement which obligates the prime contractor to send small companies the work outlined in the bid proposal.

Selling services and solutions to a prime contractor can be as frustrating as selling directly to federal agencies. The primes usually have a plethora of varying types of small businesses under their umbrella and making cold calls to a prime contractor is like any other cold call. Your first task is to find the key decision makers in the organization and most are buried deep within the inner layers of the prime's bureaucracy.

If your primary contact directs you to the prime contractor's Diversity Department or Small Business Advocacy Group, you have been given the kiss of death. These departments will ask you to submit your capabilities statement for entry into their small business capabilities database. Your proffered statement will most probably wind up in the department head's circular file and it is not likely that your business will hear back from that prime. In contrast, there may be limited scenarios under which the prime contractor will welcome you with open arms. They are as follows:

1. Your sales staff has sold your company's services to an end user at a military base near your hometown. The end user wants to do business with your company and has money to spend. You don't have a closing mechanism, such as a GSA Schedule contract, so the base referred you to the contract manager for their favorite prime contractor. Under this scenario, the prime will embrace your company because you have brought an unforeseen opportunity to its attention and also because it will make a handsome profit by marking up your fees and costs.



2. You have a unique capability that the prime contractor needs and therefore can't find elsewhere.



3. Someone in your network of contacts knows a decision maker in the prime contractor's organization and has provided an excellent reference for your company.



4. Beginning as a subcontractor to a prime is a good way to get your foot in the door because it is fast and relatively painless. As mentioned in previous newsletters, the major drawbacks are that the prime contractor will try to insulate your company from the customer, take credit for your staff's superior performance, and attempt to grab the bulk of any new work you uncover.

Installment Series:

Installment 1: The Best Offense is a Good Defense
Installment 2: Make the World's Biggest Customer Your Own
Installment 3: Market Research in the Federal Sector
Installment 4: Become an Insider in the Federal Market
Installment 5: Competition and Price Sensitivity in the Federal Market
Installment 6: Are Federal Bids Wired?
Installment 7: Fundamentals of Federal Contracting
Installment 8: Making a Federal Sale
Installment 9: Closing a Federal Sale
Installment 10: Start with the Credit Card and Quick Buy Markets for Smaller Transactions
Installment 11: Consider Starting as a Subcontractor to a Prime
Installment 12: Selling Directly to Prime Contractors
Installment 13: Pre-approved Government Price Lists
Installment 14: Getting a Pre-approved Federal Price List for Your Company
Installment 15: Small Business Preference Programs
Installment 16: Distinguishing Messages Win in the Federal Market
Installment 17: Selling to Federal Agencies Located in Your Backyard
Installment 18: Getting Started in Federal Sales
Installment 19: Don't Get Caught Up in Red Tape
Installment 20: Steps to Take After Winning Your First Federal Contract 
Installment 21: Learn How to Write Federal Proposals
Installment 22: Prosper in the Federal Market

Fedmarket has been helping companies win government business since 1995. We have been featured in the Wall Street Journal, the Washington Post, and other trade publications. Our customer testimonials speak to our competence and expertise in helping customers win federal business. We have been singled out by public and private organizations -- including the Small Business Administration and federally-funded Procurement Technical Assistance Centers -- as the most comprehensive government contracting resource in the industry. Our web site's free content includes informative newsletters on GSA Schedules, Proposal Writing and Federal Business Development.

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