Government Stimulus Effect on Professional Services Firms

Earlier this summer, Jeff Anderson, Huron Consulting, Patricia Pryor, Cherry Bekaert & Holland and Jeremy Silverman, McKenna Long & Aldridge - three experts in serving government organizations and dealing with government contractors spent time with a sub-set of professionals involved with The Rainmaker Council to discuss how professional services firms can potentially tap stimulus spending and work with government entities. The following key points emerged from the meeting:

• Being a government contractor means being in a unique industry. If you participate in the government sector seriously, you need to rethink of your services – you’re no longer an “IT Services consultant” or a “financial services consultant,” for instance, but rather you’re a government contractor.

• Taking the step to participate as a government contractor is an expensive one due to the lead time to win projects and also because of the compliance requirements involved. Firms that that do business with the federal government are subject to a variety of rules and regulations. Most notable among them, perhaps, is the Federal Acquisition Regulation (FAR) - codified at Title 48 of the Code of Federal Regulations - containing the uniform policies and procedures for acquisitions by the U.S. Government. Although many agencies supplement the FAR with their own requirements, the FAR represents an effort by Congress to create a uniform framework for contracting with agencies of the Executive Branch. Enforcement of these regulations has been highlighted and scrutinized recently due to negative incidents with U.S. contractors in Iraq such as KBR and Blackwater.

• The reason firms commit to government contracting is the large volume, long term annuity projects which can result. While government contracts can be terminated for convenience by the government at any time, 95% never are. The barriers to enter the government market are significant. As a result, firms with significant revenue from government contracts can command a valuation premium in an acquisition.

• You can’t just “run in and get your feet wet” in this arena – you need to demonstrate your firm’s long term commitment to it. Patience matters and you need to demonstrate to the bureaucrats that you and your firm have got it. Bureaucrats want to work with “government contract warriors who have deep experience” helping in their specific field.

• If a government project may pay over $100,000 to a service provider a bidding process is required. You can learn about government RFPs on www.fedbizopps.gov but by the time the information is available, you’re too late to get on the front end and shape the opportunity.

• To get in the door with a government agency the first time, some providers will offer to do a sampling of work or an entire project at no fee. Like with other areas of professoinal services business development, it is important to demonstrate your capabilities before an RFP process even begins. Offering training / educational opportunities.for a government entity is one good way to do this. Another is to offer what Ernst & Young calls “Accelerated Solution Events” which were essentially free consulting sessions.

• Responding to RFP’s or RFQ’s is not enough. Very specific expertise matters. The Government wants to work with providers who have experience doing the same type of work for government entities in the past.

• At the same time, to win you need more than “quals,” you need connections. When it comes to building relationships with government officials, however, you need to respect the “arms-length” requirements once a bid is underway and follow the rules to avoid compromising your government contractor status. You can’t, for instance, buy lunch for a government worker in an agency you’re wooing unless the lunch is under $25 and even then many government employees maintain a zero dollar tolerance policy.

• Small firms have a unique opportunity to compete as government contractors because of disadvantaged business set-asides. By definition, a Small Disadvantaged Business (SDB) or,sometimes, a Disadvantaged Business Enterprise (DBE) is a small business that is at least 51 percent owned by one or more individuals who are both socially and economically disadvantaged. SDB status makes a company eligible for bidding and contracting benefit programs involved with federal procurement.

• Disadvantaged businesses often succeed by being highly expert in a portion of government contract work that is complementary to the work done by the “big” contractors. These firms often team up with larger government contractors to offer full service solutions and provide the larger firm with the bidding advantage of adding diversity and unique expertise to their bidding team’s qualifications.

• Procurement advocacy through lobbyists or your own team members can help you gain advantage ahead of the RFP. When using Lobbyists, keep in mind there are two types: “access” (people who are primarily just connectors to the key government officials) and “substance” (strategic influencers who deeply understand the issues) ones. Know when and how to use them and be careful playing any political cards.

• If you lose a bid, you can get debrief intelligence including disclosure of the winning bid information in detail. This can be helpful information for your next approach.

• Protesting of an RFP loss is an option, although, before doing so make sure you have a very good reason because even if you overturn the decision and win the work it may be the last opportunity you get to work with that organization. Bureaucrats have long memories and don’t appreciate the hassle and embarrassment of being second guessed.

• The Stimulus package doesn’t mean much more than regular givernment spending with a twist. It will most likey take 12+ months before any “stimulus” spending is granted. Stimulus = Procurement

• At the same time, there will be significant opportunity for government work as a result of the increased budget allocations for healthcare, environment/energy and infrastructure projects. Also, there are opportunities to support the government in areas where it has now become part or full owner of key business assets such as in the automotive and financial services sectors.

• An example of how the government is hiring a variety of professional services firms to help with bailout situations is the FDIC Receivership Assistance Contractor program. The scope of work under Receivership Assistance Contracts (RACs), which have been awarded to the contractors encompasses the full range of financial institution closing support functions, including: Facilities, Asset Management, Claims, Investigations, Settlement, Employee Benefit Plans, Financial Closing Process, Personnel Administration, Franchise Marketing, Branch Marketing, and Trust.

• Beyond a professional services firm being a government contractor itself, there are opportunities for professional service providers to prepare clients to work with the government by helping them achieve transparency and have reporting, disclosure and compliance processes in place.

Conclusion:

With increased influence and money to spend, the US Government is an attractive business prospect for many professional services firms and their clients. Working with the government takes massive commitment and patience but it could offer lucrative pay off both in short and long term, especially with the right exit strategy in place.