Approximately $6.5 trillion is spent by government agencies each year in the United States and hundreds of thousands of vendors compete for their piece of that spending. Out of the $6.5 trillion in annual government expenditures, nearly half of $3.2 trillion comes from state, local and education (SLED) agencies. The opportunity for businesses to sell into the SLED market is much greater than federal, as actual procurement dollars (purchases of goods and services from vendors) spent in SLED averages $1.5 trillion annually, about 3x more than annual federal procurement spending, which is estimated at $480 billion annually.
Those are big numbers, so we’ll assume that we’ve got you intrigued. If your business is currently only dabbling in the SLED market, or you have yet to get your feet wet, Onvia wants to help you gain a piece of SLED spending and maximize your slice of the pie. To help paint a clearer picture of the enormous opportunity that the SLED market presents to your business, we’ll bust 5 of the most common myths among skeptical vendors.
State and local agencies only buy from the big guys
It’s a common misconception among vendors that the only firms winning government contracts are the big cats. However, many factors drive a SLED agency’s choice of vendor including an agency’s small business or minority-owned contracting targets.
Federal agencies have a goal of reserving 23% of contracts for small businesses. In the SLED market, small business goals are determined at the agency level; many agencies publish their small business goals on their websites. Some agencies seek to exceed the federal target either in whole or in specific areas, such as disabled veteran-owned businesses. The State of New York’s target is 30% for MWBE state contracting and New Jersey has a goal of 25%. Others, like the State of North Carolina and the State of Rhode Island, have business certification programs for disability-owned businesses but do not have a formal set-aside or pricing preference program. At the city level, one example is the City of Chicago that offers a business certification process for disability-owned businesses for municipal procurements.
Another option for vendors, if these types of agency goals or set-asides are not available, is to seek teaming partners. Many successful SLED vendors approach the market by identifying contracting/teaming partners who are capable of fulfilling large contracts. Most SLED agencies work tirelessly to serve the local economy but often have to ensure deliverability that only larger firms can offer. If your target agency is issuing large scale contracts, take the “if you can’t beat them, join them” approach by seeking out subcontracting arrangements with large partners.
State and local agencies only order in large volumes
Vendors may not be aware of the many smaller, year-round purchases made by state, local and education agencies. Regional suppliers have an opportunity to be relied upon for these types of purchases.
A vendor should establish their business as a reliable partner to provide these smaller purchases through relationship building efforts. Staying “top of mind” with key agency influencers means your business may show up as the vendor on their next purchase order, even if the purchase order is not part of a traditional bid, RFP or public award.
A vendor should also aim to be awarded a term contract from the targeted agency. With a term contract, the awarded vendor will supply products on an “as needed” basis over the length of the contract.
In addition, many state and local purchasing agents have discretionary power to spend without approval and/or going through the official bid/RFP process – sometimes at a significant spending level.
State and local agencies are risk-averse and aren’t open to the latest technology
There’s a common belief that technology in the public sector often lags behind the private sector because of an inherent bias against being the first adopter. While that may be some truth to that statement, in recent years SLED agencies have shown that they understand the long-term value of investing in technology based solutions.
Many technology products and services that are hot or trending in the private sector (like 3D printing, mobile devices and smart city technologies) are already picking up steam in state and local government. Vendors should recognize that SLED government agencies are often more open to change and quicker to adapt than the Federal Government. If you’re offering is innovative, SLED agencies are likely to be intrigued earlier on than federal agencies.
Published bids & RFPs don’t give enough time to respond
By the time an agency has published a bid or RFP online, vendors might see the public bid deadline (often 21 days out) and conclude that there’s not enough time to respond.
However, the most successful SLED vendors know where to learn about upcoming projects long before the bid or RFP is published. They do this by leveraging agency spending and planning data such as past procurement history, agency budgets, capital improvement plans and term contracts to uncover upcoming opportunities for work months or years in advance. Researching agency demographic information can also help to identify key agency contacts such as the procurement officer, buyer or decision maker on the project – allowing a vendor to connect with these individuals by email or phone to build relationships and increase their chances of being aware of a project before it goes to bid.
State and local agencies only purchase according to the fiscal year
Unlike the federal fiscal year, the agency fiscal year schedules of SLED agencies are varied. SLED agencies also have different needs throughout the year, meaning a steady flow of available projects year-round.
The most successful SLED vendors use business intelligence tools that track government spending at the agency level to help identify the real buying patterns of the target agency. Some agencies front-load spending at the beginning of the fiscal year once the budget is approved and some back-load, save their cash and make the majority of their purchasing decisions in the final quarter of the fiscal year. Others spread their spending evenly across the year. Vendors should seek to build a profile of their target agencies buying habits to pinpoint the right time for sales and marketing efforts.
Ignore the Myths and Focus on Building Meaningful Relationships Instead
State and local government agencies all have their own purchasing guidelines and practices. One common theme throughout these five myths is that the most successful vendors build meaningful relationships with agency influencers, buyers and decision makers long before the bid or RFP is published. Vendors who work hard to become a trusted and informed partner with their targeted agencies will win more government business.
The SLED market offers significant opportunity for vendors in all industries. But before you can compete, you’ll need to know the basics of how to begin selling to SLED buyers.