For business development professionals whose experience is limited to the federal government market, contracting with governments at the state and local level can be a bit of a mystery. With fifty states and thousands of local governments, where do you begin? How do you properly size your market?

To help answer these questions I had the chance to sit down with GovBizConnect co-founder and CEO Tom Skypek in January 2016 to chat about strategic government contracting at the state and local level. This is Part I of a two-part series that originally appeared on the GovBizConnect blog here.

This re-post has been refreshed to reflect our latest analysis as seen in Onvia's State & Local Procurement Snapshot for Q4-2015

You recently sized the SLED market at $1.5 trillion. Do you see the SLED market contracting, growing, or remaining at that level in the coming years?

That’s correct, Tom. Out of $6.5 trillion in annual government expenditures, nearly half, or $3.2 trillion comes from SLED agencies. “SLED” includes all levels of government outside of federal: State, county, city agencies as well as school and special districts. $1.5 trillion of the $3.2 trillion represents the annual procurement spend from SLED agencies. For government contractors who are interested learning about how Onvia came up with these figures I encourage GovBizConnect blog readers to download our free report, “Sizing up the $1.5 Trillion State & Local Contracting Market.”

Annualized rate of change by quarter - Onvia

We have seen some growth in bid & RFP volumes in the SLED market. The nature of this growth is examined in our latest State & Local Procurement Snapshot for Q4-2015. Each quarter we track SLED bid & RFP volumes and analyze other developments in the market that may be influencing those volumes. The graphic below does a good job of illustrating how the market has steadily improved, a trend that we think will continue.

One notable aspect that has been affecting contracting volumes in the SLED market is the trend of cooperative purchasing which allows agencies to be more agile in their purchasing and is growing in popularity. Any vendor that is selling into SLED, or is considering it, should be aware of the potential positive impacts of participating in cooperative contracts for their business. To learn more about the cooperative purchasing trend, Onvia recommends GovBizConnect readers to download our free Leverage Cooperative Purchasing to Grow Your Government Sales report.

Let’s say that an established federal contractor is interested in offering their products and/or services to the SLED market. They have expertise in contracting with the federal government, but have no background in the SLED market. What’s the best first step for the company to assess their prospects in the SLED market?

This is a great question Tom. In March of 2015 we conducted a survey of 188 government vendors and found that most contractors sell into multiple levels of government. Basically, the typical and most successful contractors don't ignore SLED, they embrace it. Here’s an interesting graphic from that report that can help demonstrate the results of the survey:

Levels of government served - Onvia

The first step for federal contractors who are curious about entering the SLED market is to find out if their product or service in demand by SLED agencies. There are over 90,000 procurement entities in the SLED market that issue around 400,000 bids & RFPs annually. The likelihood is high that most products or services are in demand at some level in the SLED market.

Once the company has determined if their product or service has been purchased by SLED agencies recently, they should identify the buyers at those agencies to prepare outreach initiatives.

Like federal contracting, winning contracts is a lot of work in SLED. Onvia recommends doing the right research, performing outreach and sales pipeline building work that will ensure the highest level of success and awards. Our recent Building a Long-Term Sales Pipeline in the Public-Sector free report goes into detail about how to perform the necessary research and line up sales for years to come in the SLED market.

Since there are fifty states and thousands of local governments, what is the best way to analyze the SLED market?

The SLED market is certainly vast and fragmented – with around 90,000 purchasing agencies of all sizes issuing over 400,000 bids & RFPs annually across all industries. The market can at first be intimidating to some, but when you start really think about the market in a data-oriented way, it becomes easy to strategize your focus areas and capitalize on the $1.5 trillion spent annually by SLED agencies for your business.

Here are a few simple ways to help you analyze the opportunity for your business in the SLED market:

Find out which levels of government are most interested in your product or service. For example, if your business sells books, you may want to consider school districts as your target market and if your business sells streetlights, perhaps city agencies are where you should start. Here’s a handy chart that breaks down opportunity levels by industry and level of SLED government:

Click to view larger image
Opportunities by agency type

Once you’ve determined the level or levels of SLED that make the most sense for your business, Onvia recommends that you think about your ideal contract size. Can your business fulfil multi-million dollar, multi-year contracts? Or are you more able to serve one time contracts worth a few hundred thousand dollars or so? Here’s a chart that helps to break down the level of opportunity by industry and average SLED award value that could be helpful in performing this analysis:

Click to view larger image
Opportunities by award value

You should also be aware of how many opportunities are published annually on average in your industry. You should ask, how many opportunities should I expect to capture (and respond to) per month and does that meet the expectations of my business? Here are some annual bid & RFP averages for key SLED industries that we’ve compiled to help you get started on this research:

Appendix annual volume of contracting per industry - Onvia

What do you see as the biggest barrier preventing federal contractors from entering the SLED market?

Tom, we can see two big barriers preventing federal contractors from entering the SLED market.

First, there is a common perception that the SLED market doesn’t purchase products the federal government would. That is simply not the case. Outside of some highly specialized products and services such as heavy defense equipment, the SLED market purchases in almost all industries.

The second barrier relates well to your last question, and that is the perception that the SLED market can’t be approached strategically due to its nationwide fragmentation across many thousands of agency buyers. We think that with access to a government procurement intelligence database, such as Onvia, this fragmentation can be handled smartly through data-oriented decision making and strategy. Here are some key SLED market planning and strategy questions that companies who feel hesitant about the SLED market should consider to help alleviate that hesitation:

4 strategy questions for government vendors - Onvia

What’s the most common mistake you see made by a federal government contractor entering the SLED market?

This one is a harder question to answer as mistakes can vary greatly based on size of contract, regional scale, product type and service, etc.

One mistake that federal contractors entering the SLED market may tend to make is the failure to recognize the open-minded attitude towards innovation in SLED. For example, the smart cities movement has opened the doors for large vendors offering high-tech infrastructure solutions, smaller technology vendors and even start-ups to participate in a more innovative and willing local government environment. Companies may not be aware that local governments are testing and accepting technological innovations in government. Companies that offer these tech-related solutions may be missing out on a large piece of the market by only selling to the federal government.

Stay tuned for part 2 of our chat with Tom Skypek from GovBizConnect!