GSA Schedules and Sales Costs

We have previously discussed that a business may have to invest $25,000 to $75,000 (in terms of sales costs) to obtain a GSA Schedule. When discussing the matter with our GSA Schedules seminar attendees, many are surprised to l earn that the investment is so great. A frequent comment is "Why would a company invest such a substantial amount of money to obtain a vehicle that has no guarantee of producing income?" We will explain hereafter the reasons why such an investment is a sound one.

Compared to the investment necessary to enter the federal market, an expenditure of as little as $25,000 is an attractive alternative. Keep in mind that it may take your business more than a year to make inroads into the federal market. During that time, your company has to pay the salaries of its salespersons and management - some of which may easily range from $100,000 to $200,000. Furthermore, the cost of writing proposals in response to public Requests for Proposals (RFP�s) can become excessive. On the other hand, if your company had a GSA Schedule contract, it would not have to write expensive proposals in order to win government business. A GSA Schedule contract also reduces contract administration costs significantly - particularly if a "cost based" contract is the alternative to a GSA schedule order.

Many companies new to the federal sales market do not realize the sales costs involved with the business development process. By way of example, let�s look at a small, IT services company that has no experience in the federal market. The company elects not to obtain a GSA Schedule contract and decides instead to enter the market by bidding on public, information technology RFP�s. The company, which has lost on its first several bids, quickly learns that pre-selling the company�s services before the RFP is issued is essential in order to have any chance at success. The company also calculates that it has spent $10,000 - $25,000 per proposal it has submitted.

After its initial failures, the company spends months pre-selling several sales opportunities. Midway through the pre-sales process, the federal customers all ask if the company has a GSA Schedule contract. The federal buyers explain that a Schedule contract avoids the lengthy and expensive public bidding process. The answer to the inquiry is "no." Without a Schedule contract, the company has to respond to each public bid with an expensive proposal. If it had held a GSA Schedule contract, the company could have avoided most of the proposal writing costs (which can easily exceed $100,000 before the company wins its first proposal). The company, during the pre-selling process, could have sold the federal buyer on procuring the company�s services through its GSA Schedule contract.

It is worth noting that those companies selling products don�t realize as great a reduction in proposal writing costs since bids prepared in response to Requests for Quotes (RFQ�s) are less costly. Nonetheless, the reduction in savings is more than offset by the reduction in competition in using GSA�s pre-approved prices. In summary, the investment in obtaining a GSA Schedule contract can be recouped quickly since you have the potential to avoid proposal writing costs. Admittedly, obtaining a GSA Schedule contract is not cheap. However, businesses entering the federal market have to view market entry costs from a long-term perspective.


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