“Between COVID-related mandates and burgeoning cybersecurity requirements and False Claims Act threats, is it still worth the trouble for companies to try and obtain federal business? Well there’s an irony here: if you are in fact secure, and you’ve got the best mousetrap, a contract is more important than ever. For one expert take, Federal Drive with Tom Temin turned to federal marketing and sales consultant, Larry Allen…”
“Tom Temin: Yes, because there is another irony here, too. And that is it can be more costly to do business with the federal government. And yet, for many companies, especially those in the product area, the government expects the best possible lowest price that you offer anybody else on the presumption that the government is always your biggest customer. And so you may have lesser margins, if you’re not careful in dealing with the government.
Larry Allen: This is a discussion I’ve absolutely had with some of my businesses lately, Tom, particularly smaller firms that tend to be more product based. And what I’m telling them is, look, when you’re looking at this deal, yes, the top line numbers seems like it’s really intriguing. But you have to ask yourself, what’s the margin? How many resources are you going to be dedicating to pursuing this lower margin business, versus some other piece of business that you could pursue, that maybe has some services attached to it, or maybe it’s going to be somewhat more complex anyways, so that you get that better margin, so it’s worth more to you? Look, if you’ve got $150,000 task border, but your margin is going to be 2%, you probably would rather pursue $125,000 piece of business, or you could get a 5% or 6% margin. I’m not very good at math, Tom, but it does add up. And you have to consider that. You have to consider where you expend your resources. But it also all gets back to the question of, alright, I’m thinking about this business, I am a smaller business. I’ve got this other new rule that I’ve got to require. And if I’m selling products, I’m thinking about the new Made in America rule that’s gonna affect the Buy American Act. How does that impact my business? Businesses are asking lots of questions. And what I suspect we’ll see is an exodus of companies that either can’t or won’t comply with some of the requirements. And you see that happen every year, Tom. But you know, if you start to lose some critical partners for the government, that’s a risk to government too. So it’s not like you can keep loading things up on one side of the scale. Eventually, if the relationship gets too out of balance, it’s going to impact the agency, too…” Read the full interview here.
Source: With all of the mandates and threats, should companies really “want” federal contracts? – By Tom Temin, October 12, 2021. Federal News Network.