Government Contracts May Put Struggling Companies on Road to Recovery

(TMA International Headquarters)

One of the initial fact-finding tasks for a turnaround manager of a company experiencing declining sales in the commercial marketplace is to conduct an analysis of the company’s customer base that identifies the competition and assesses how the client stacks up against them. If the company’s customer base does not include agencies and departments of the U.S. government, the turnaround manager has identified not only significant lost opportunities, but also a potential key building block on the road to recovery.           

The idea of selling to the government usually conjures images of the Department of Defense’s acquisition of major weapons systems from well-seasoned and experienced defense contractors. But those types of contracts are relatively small in number compared to the total number of acquisitions conducted on a government-wide basis for commercial items and services.            

With passage of the Federal Acquisition Streamlining Act of 1994, federal acquisition policy strongly encouraged government agencies to procure commercial items and services that were available in the commercial marketplace and to require their prime contractors and subcontractors at all tiers to use commercially available items and services to the extent possible. This policy was implemented under Part 12, Acquisition of Commercial Items, of the Federal Acquisition Regu lation (FAR), which establishes uniform policies and procedures for U.S. government acquisitions.¹           

To encourage the marketing and sale of commercial items to the government, FAR largely eliminated the use of its numerous, and often complicated and very detailed, contract terms and conditions, and developed procedures to conduct acquisitions in a manner that more closely resembles processes used in the commercial marketplace. The results have been impressive:

• FAR’s contract terms and conditions for buying commercial items and services are generally clear, concise, and phrased comparably to the contract terms found on a typical commercial purchase order.²
• The government adopted a significantly less cumbersome acquisition system for the solicitation, evaluation, and award of contracts for commercial items and services.
• In the government’s evaluation of an offerer’s price for commercial items and services, it is not permitted to require the offerer to submit cost or pricing data to support the prices of its commercial items, subcontracts for commercial items, or contract modifications for commercial items. It may, however, request information other than cost or pricing data to support the reasonableness of the commercial item or service (e.g., commercial price list, catalog, schedule, or other document published or otherwise available to the general public).
• Many of the contracts for commercial items and services are multiyear, indefinite delivery, indefinite quantity (IDIQ) contracts, with one base year and four one-year option periods.

This FAR approach to the acquisition of commercial items and services is in addition to the well-established Federal Supply Schedule (FSS) Program operated by the General Services Administration (GSA). There, under the terms of a Multiple Award Schedule (MAS) contract, a company may offer its commercial products and services for direct sale to government agencies at prices that represent “most favored customer” discount prices from the contractor’s commercial price list. The company can sell these products and services through its own direct marketing and sales efforts, or through dealers and distributors.           

In addition, a complete listing of all commercial items and services under GSA contracts is readily available to all government procuring activities on the GSA Advantage!™ ³ Web site. In fiscal year 2007, GSA had almost 18,000 MAS contracts that offered nearly 12 million supplies and services to government agencies—far exceeding any commercial business in the world. And the U.S. government purchased $34.8 billion in commercial products and services from private industry through GSA’s FSS Program.           

To learn whether government agencies are purchasing the type of commercial products and services a company sells to the general public, one may search business opportunities at the government-wide FedBizOps Web site, www. FedBizOpps.gov under “vendors.” There also are a number of online procurement tracking services, which for an annual fee will provide daily “alert notices” of government solicitations seeking proposals for specific commercial products and services.           

Commercial products and services that are procured by the government through GSA’s FSS Program can be reviewed—and the competition as well—by conducting searches at www.gsaelibrary.gsa.gov/ ElibMain/ElibHome. The government typically defines commercial products and services expansively so that those that might not initially appear to be commercial would qualify, either as they currently are sold or with minor modifications.           

Establishing a marketing and sales plan for sales to the government may be the business opportunity a company needs to turn around lagging sales or expand the scope of its marketing footprint. To be eligible, the company must be registered online in the government’s Central Contractor Regis tration (CCR) at www.ccr.gov/.  

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¹ FAR is available at www.arnet.gov/far/.

² These provisions may be viewed at www.arnet.gov/far/current/html/52_212_213. html.

³ This can be found at www.gsaAdvantage.gov. GSA describes it as follows: “With over 10 million state-of-the-art high-quality commercial products and services at your fingertips, GSA Advantage! provides the most convenient one-stop shopping source to meet all your procurement needs.”