Welcome to our 7- part series on Why Startups Don’t Bid On Government Contracts. Along with our partners at the Boston Consulting Group, we interviewed 109 organizations made up of startups and venture capital firms to discover the deterrents, and identify the ways in which the United States Government can take action to lower the barriers to entry for startups and non-traditionals to the contracting community. Throughout this series, you will find survey data and quotes from startup founders that paint a picture of today’s contracting landscape, and the uphill battle these technologists face daily to try and make their country a better place.
Today’s pace of technological advancements is astonishing, self-driving cars are beginning to roam our streets, drones are being used as delivery mechanisms, the Hyperloop is becoming a tangible entity, the public is truly excited. Think back, when’s the last time the public was excited about and followed a government technology project? The Kennedy era space program, the exploration of the human genome? Whatever your answer I think we can all agree that the government no longer has the public’s imagination and interest when it comes to matters of technology and innovation.
Unfortunately, when America’s best technologists aren’t interested in government projects, and generally aren’t even aware of them, the whole country falls further behind strategic rivals that do value technologic innovation. In this post, we will use the data and comments from our survey to explore why the government isn’t effectively reaching the innovation community and what they can do to change this.
If the US government wants the latest technology, they send a government employee to a startup event. The government talks in circles with the startup, wastes a lot of their time, never really closes, and eventually an acquisition [through] a General Dynamics or Raytheon happens 3-5 years later. The defense contractor buys my company, at which point the federal government can buy our technology. Only one problem, by then our stuff is nearly obsolete, and China has already been using it to compete effectively against the United States [for years].- Founder
The Problem: Preaching to the Choir
While it may seem unbelievable to those of us that live in metro-DC, most of the country doesn’t check FedBizOps each morning and they definitely don’t read testimony from the House Armed Services Committee with a cup of coffee in hand. Yet FBO and other “insider” channels remain the primary ways that the government communicates their needs and the opportunities to sell to them.
From our survey we found that for traditional vendors (companies that frequently sell to the USG) and non-traditional vendors alike (companies that rarely sell to the USG), the top three ways that they discovered and researched customers were through interpersonal relationships or personal awareness.
We believe the reason [so few non-traditionals work with the government] is due in part to the challenges associated with identifying appropriate contracting opportunities and in developing the bid itself. Making contract opportunities more visible (e.g. advertising opportunities, a website consolidating opportunities searchable by field/keyword/application) may help with the identification component.- Founder
This wouldn’t be a problem if there was strong cross pollination between federal and non-federal buyers and sellers so that awareness was transmitted but instead we found the opposite. According to our survey, there is strong market clustering, which is not surprising. It takes significant time and resources to build the corporate capabilities needed to pursue any customer type and small businesses are tremendously capacity constrained, meaning that whether they invest in pursuing the federal or another market, they are unlikely to have the resources to pursue the other.
So if you don’t know any government oriented individuals, and aren’t already in the government space, you’re unlikely to become aware of government opportunities.
Additionally, we found that even businesses that are actively interested in federal opportunities don’t go to the “correct” channels (FBO.gov) and instead go to agency web-sites, or to people that they have met. Interestingly we found that there is a relatively narrow window of development when companies do go to FBO.gov between the $1M and $10M revenue marks. While our data did not identify why mid-maturity companies go to FBO more than others, after follow-on conversations, we believe that mid-maturity companies have had enough success in their first market and want to grow so use the low-cost federal options (FBO and agency websites). But by the time they reach $10M in revenue, they have stopped checking FBO and have instead shifted to more expensive options like using outside consultants and direct engagement.
Solution: Go Where The Startups Go
Solution: Share What, Not How
We received a lot of comments, a rare luxury for survey writers, and while there were a few strong themes perhaps none was stronger than the frustration with how the government actually articulates what they are buying. This may sound like petty criticism of writing style but it is actually critical for at least two reasons.
First, even a modest government solicitation frequently clocks in at over 200 pages, and while veteran contractors will quickly turn to the SOW and evaluation criteria to make a go-no-go decision, non-traditionals make the forgivable mistake of starting with page one and reading from there. In follow on conversations with non-traditionals, many shared experiences of getting excited by a federal solicitation with a promising titles and then became more and more demotivated after dozens of pages of progressively denser compliance language. If the government wants non-traditionals to engage, we recommend writing in plain english and separating the substantive needs from the administrative compliance sections to reduce the intimidation factor.
Second, many comments requested that the government focus on WHAT they need and WHY they need it rather than HOW they want the need met. For example, if the government said that they needed to reduce the expenses of replacing helicopter blades in Afghanistan, then a wide variety of companies could respond (those with new materials solutions to prevent them from breaking, those that measured blade strength to reduce the number of unnecessary replacements, companies with ideas on the replacement process itself). Instead, government solicitations tend to be hyper prescriptive, specifying not just what the government wants, but exactly how the vendor will provide it, which almost always precludes vendors who have novel solutions.
Create a portal where we can specify what we do so that government employees have an idea of what is possible. They might actually write an RFP that would match what we do rather than hoping we can miraculously fit into RFPs written with established products in mind.-Founder
In these posts, we intend to suggest solutions to any problem we identify, preferably ones that can be implemented without regulatory changes. Unfortunately, the solutions to this problem are broadly cultural, asking acquisitions officers to write in terms of outcomes rather than in terms of approaches, and would likely require changes to bid protest rules. As such we do not believe that the government will be able to change here and instead the best avenue for a solution is likely to outsource solicitation translation to a third party.
If you would like to read our full report, you may find it here, stay tuned next week as we tackle how the government can improve its marketing efforts.