At each Competitive Intelligence Bootcamp program, I discuss the importance of connecting the dots and understanding what the dots mean so companies can increase their chances of generating viable business opportunities. There are fewer than thirty days left in FY15, so let’s look at some of the dots that show how agencies do their spending from July through September, the legendary fourth quarter of the federal fiscal year. This should provide some insights as to the path(s) of least resistance for finding and winning Q4 business.
– The Chief Visionary
How Much Does Uncle Sam Spend During Q4?
In the case of fiscal year 2014, federal agencies, boards and commissions reported obligations of $146 billion during the fourth quarter, just one billion shy of exactly one-third of the contract dollars reported to the Federal Procurement Data System for all of FY2014. As a caveat, I’m only looking at obligations and not de-obligations so the actual net spend is lower. Nevertheless, this is a pretty big deal considering it took those same agencies nine months to spend twice that amount. The question is, how many of those dollars were accessible, and to whom?
Based On Where You’re Standing, Modifications Are GREAT!
If you are customarily on the ‘other’ side of this type of spending, then this next news will do nothing to bolster your confidence. Modifications reflect changes to existing contracts, delivery and task orders and contract vehicles and during FY14 they accounted for better than half of that year’s fiscal spend. Modifications can be used to make changes that have no impact on contract value or they can result in an increase, decrease or outright cancellation a contract.
That would be the setup.
During the fourth quarter of FY14 when agencies obligated nearly one-third of the entire fiscal spend, obligations resulting from modifications (just the positive ones) totaled $65 billion.The top five reasons for modifications (as described in FPDS-NG) accounted for nearly $62 billion of those dollars and included:
- Funding Only Action
- Exercise An Option
- Supplemental Agreement For Work Within Scope
- Change Order
- Other Administrative Action
The lesson here? If you were not already on a team with the companies getting those mods, you likely never had a shot at these dollars. For many, this insight has changed their outlook on partnering and caused them to place more emphasis on that activity.
Established Contract Vehicle? Standalone Contract?
Traditionally, obligations to federal contracts are sliced up nine different ways. Technically only eight result in modifications. These nine are known as Awards and IDVs (IDV for Indefinite Delivery Vehicle). If you visit FPDS-NG, USASpending or any other free or fee-based tool that conveys government contracting transactions, you will see these terms referenced (with the exception of some third party tools that rename these fields). These terms which are discussed in the manuals and data dictionaries for FPDS-NG are:
- BPA Call
- Definitive Contract
- Delivery Order
- Purchase Order
During the Competitive Intelligence Bootcamp sessions I offer up a scenario that starts with me as a contracting officer, a one million dollar contract, and attendees having an opportunity to tell me which ‘award’ type they could accept that day to secure the million dollar contract. Very few get the right answer short of a lucky guess (they tell me if they did!) yet it represents a big part of ‘Chasing Work You Can Win.’ Why? Many companies invest time and money pursuing work that in all likelihood won’t be awarded in a way that benefits them based on their current posture. Most of us don’t know the difference between an Award or IDV or why it matters, and that usually costs money.
With that said the overall FY14 spending resulted in a veritable tie when it came to obligations to ‘established contract vehicles’ and their awards versus standalone contract awards. During Q4 FY14, $60 billion of the $146 billion was obligated without the use of an established contract vehicle. If we go a step further and remove the dollars resulting from modifications, we’re left with $24 billion in Non-IDV obligations and $57 billion in orders placed against contract vehicles.
Although the hype surrounding contract vehicles is pervasive, the numbers show plenty of spending where Indefinite Delivery Vehicles were not the final procurement solution.
How about we peel back the layers on which contract vehicle types (IDVs) came through during fiscal year end?
Pick A Card! Any Card!
Let’s look at federal contracting as a poker game of the five card variety. Your objective, based on multiple factors that include what you sell, to whom you plan to sell and more, is to pick the right card or cards that result in your company’s pot growing. Those ‘cards’ (represented by items 1, 2, 6, 7 and 8 in my previous list) collectively accounted for half of the fiscal spend during FY14, so off the top, you could say the odds are in your favor.
But are they really?
If you played the GSA Schedule hand during last year’s fourth quarter, you wound up with just under ten percent of the established contract vehicle spend for that period. For companies holding GWAC and BPA hands, each type realized five percent of the Q4 spend for contract vehicles. BOA’s came in at 3.5 % and that leaves just one card standing. IDC’s which include IDIQ’s took the pot last fiscal year end with nearly seventy-five percent of everything obligated to established contract vehicles during fourth quarter and that includes single-award and multiple-award IDCs. Which one’s do you or your partners have?
When you factor out modification dollars, the total drops by $30 billion but the proportions stay the same.
Extra! Extra! Read All About It!
Agencies use a variety of solicitation procedures to announce opportunities, or to announce purchases where there is no opportunity! A review of the $81 billion not resulting from modifications, nine solicitation procedures made the cut. In order of most to least spending they were:
- Negotiated Proposal/Quote
- Subject To Multiple Award Fair Opportunity
- Only One Source
- Simplified Acquisition
- Sealed Bid
- Two Step
- Architect-Engineer FAR 6.102
- Basic Research
- Alternative Sources
The top five accounted for $79 billion of that spend. Understanding which of these are relevant to your particular swim lane from an offering and customer alignment perspective can make it significantly easier to understand where to look for these opportunities as well as a plethora of other factors that can assist in the process of making a good decision.
However, my curiosity draws me to number three. How much of a factor did competition play in all of this?
I Coulda’ Been A Contender!
Buys made using limited or non-competitive processes come in several flavors. When the solicitation procedures were listed as ‘Only One Source’ agencies obligated $16 billion during FY14 Q4. When the competition type was:
- Follow-On To Competed Action
- Not Available For Competition
- Not Competed
- Not Competed Under SAP
agencies obligated an addition $2 billion bringing the total non-competitive spend to just over $18 billion. All of this is based on dollars not resulting from modifications.
What this means is more than $62 billion of the non-modified dollars were competitively awarded. That’s a ray of sunshine!
Set-Asides Are Not The Only Way For Small Businesses To Win Work!
I view set-asides as gifts that reduce the competitive field and allows small companies to go after opportunities not set-aside by federal agencies. Besides, set-asides account for fewer than half of the dollars obligated to small business concerns every year. Companies focused on small business set-asides take themselves out of contention for other opportunities with other customers where they might be the best athlete.
Unfortunately, in the scheme of things, end of fiscal year is not as kind to small business as other times of the year. Where small business set-asides are concerned, only twenty percent ($29 billion of $146 billion) of the total spend was set-aside. Things improve to 26% ($21 billion of $81 billion) when modification spending is removed and 27% ($17 billion of $63 billion) when competitive dollars not the result of modifications are considered.
Like I said, set-asides are only part of the story for small business. When you add in dollars obligated to small business not the result of a set-aside, we hit $45 billion of the $146 billion, or thirty one percent of spending.
What’s It All Mean?
Part of your plan should definitely be based on an understanding of how agencies buy. If you get sucked into the ‘established contract vehicle’ hype machine, assume you know how a specific department, agency or contracting office buys or not pay attention to competition trends, you’ll miss opportunities. All of this information is real-world and very easy to access and leverage. Adding in other elements such as NAICS Code and PSC Code will make the picture more clear and actionable.
Based on current spending, there is a lot left to be done for FY15 and chances are the buys will be competitive. Buys made using Simplified Acquisitions Procedures accounted for $8 billion of the Q4 spend in FY14, part of a record year for spending under that procurement method. Which solicitation methods matter the most to your company?
Do you know which contracting offices are buying what you sell in a way that you can sell to them?
Do you know how to find out quickly which office and what buyer in that office you should connect with?
The information you need is freely available and just a few keystrokes away. Paired with your relationships and pipeline, opportunity could literally occur with your next phone call.
Guy Timberlake, The Chief Visionary
“The person who says it cannot be done should not interrupt the person doing it.”