Winning Public Sector Business Bid by Bid
As a supplier, there are three compliant sales options you have when pursuing public sector business: responding to bids/request for proposals (RFPs) one proposal at a time, establishing piggybackable state term contracts, and/or winning a piggybackable contract award from a public sector group purchasing organization (GPO).
For the next four weeks, we’ll walk through each of these options highlighting how each individual option works, the primary advantages of that sales option, and any disadvantages you’ll want to consider. We will begin with the bid-by-bid approach, but before we dive in, let’s level set by defining a few terms:
- Request for Proposals (RFP)/Bid – a solicitation issued by a public sector entity through a public sector procurement process seeking to procure a product, service, or asset. The RFP/Bid defines the specifications, any additional requirements, and the exact structure and format of a supplier’s response.
- Public Sector Entities – includes counties, municipalities, towns, cities, villages, K-12 schools, community colleges, public colleges and universities, special districts, state agencies, etc. This Guide does NOT focus on sales to the federal government.
- Public Sector Procurement Process – a formal process established under governing law or other applicable guidelines for the procurement of products and services by public sector entities above a defined bid threshold.
- Bid Threshold – typically, the specific procurement process an entity must follow depends upon the annual dollar volume the entity expects to spend on the particular product or service being procured. For example, it is common for public sector entities to secure a minimum of three informal quotes for annual purchases under $25,000 and conduct a formal public sector bid or RFP process for annual purchases over $25,000.
What are the advantages of the bid-by-bid approach?
- Customization – when responding to bids/RFPs one proposal at a time, you as the supplier have the opportunity to customize your response to fit the specific needs of each individual customer. The needs of a large university are very different from the needs of a small village. The bid-by-bid approach allows you to accommodate for those differences.
- Influence – depending on the relationship that you as the supplier have with the individual developing the RFP specifications, there may be an opportunity for you to influence, or even write the RFP specifications. It doesn’t get much better than that.
What are the disadvantages of the bid-by-bid approach?
- Time –the amount of time is takes to respond to a bid/RFP varies from one organization to the next. However, as a general rule, bids/RFPS are lengthy, time-consuming, and downright expensive. There are more than 92,000 local governments and educational institutions in this country… how much would it cost your organization to respond to every one of them, or even to every bid/RFP in any particular state?
- Contract Length – once you have won a bid/RFP, the length of time you hold the contract award is typically very limited, as are your renewal options to retain the business if your customer is happy. As a result, you are left with minimal opportunity to build a lasting relationship with that customer, thereby significantly lowering your chances to retain the business.
- No Cross-selling – more often than not, when an organization conducts a bid/RFP, it is for a narrowly defined scope of products or services. The unintended consequence is that if a public sector customer who awarded a contract to you for products A, B, and C would like to purchase products D, E, and F, which you also provide, you cannot simply cross-sell to that customer. Instead, your customer has to conduct a completely separate RFP, which you have to spend the time to respond to and you may not win.
The next segment in this series will focus on the advantages and disadvantages of using state term contracts as a means of winning public sector business. Stay tuned.