Want More Business from State and Local Government Agencies? It May Be in Your Best Interest to Secure a Pre-Negotiated “Open” Contract

Jan 07, 2020
Bidsync Industry Blog

We’ve talked at length about the unmatched value of government business over the years, and you know that state and local government contracts are the fastest way to jump-start business growth and secure long-term income stability. Just look at once-regional companies such Spectra Property Management, Proforce and DQE that have exponentially grown their revenue streams – and quickly expanded across the national market – thanks to their intensive focus on securing state and local government contracts.

However, many companies trying to break into the government sector have expressed frustration with the lack of relevant bid opportunities on the open market. That is because leading procurement organizations strive for a minimum of 70% of their purchases to be “under contract,” especially when it comes to commodities and services.

What Does That Mean?

Though government agencies will publicly post tens of thousands of IFB, RFQ and RFP solicitations each year – the kind that BidSync aggregates and automatically delivers to your inbox each day, for example – many state and local jurisdictions either require or highly encourage agencies to try to buy off of a pre-negotiated statewide contract first. This best practice (from a buyers’ perspective) relies on a set of pre-approved vendors that have been added to “open” or “managed” contracts. These could include multi-state co-op contracts, such as the popular NASPO ValuePoint awards, or statewide co-op contracts, such as Pennsylvania COSTARS. Alternatively, they could simply be a portfolio of managed contracts defined by the categorical needs of each state, such as Texas’ SmartBuy or DIR contract sets.

Regardless of the structure, these “open” yet competitive contracts are intended to simplify common buys for state, local and even tribal organizations and minimize risk of impropriety, waste, purchase approval delays, etc. You’ll most commonly see open contracts used for the purchase of office supplies and equipment, computers, software, industrial supplies, temporary services, laboratory supplies, advertising services, and the like. 

How Do I Become A Pre-Approved Vendor On These Various Statewide And/Or Co-Op Contracts?

Unfortunately, you can’t simply request that an agency add your company, goods or services to these open contracts. Each individual state and co-op organization will define its competitive solicitation, review and approval process. For example, you can learn about the process that NASPO uses to establish, solicit and award its ValuePoint contracts here. However, not every agency is going to offer this information in a cut-and-dry manner online. That means that you are going to have to do some research. Start by reaching out to agencies that may use your product/service to see if you can meet with the procurement officer to discuss your offerings and learn about the agency’s process. From there, you will need to proactively watch for notifications of competitive opportunities when new contracts are established or expiring contracts are re-solicited and new vendors are invited to submit bids – no matter which online and offline channel(s) you’re using to stay in the loop.

Alternatively, if you have channel partners or resellers that have already secured these contracts in certain categories, you can ask for them to “sponsor” your company’s goods and services. This basically means that they would request approval to add additional products to their original contract, as long as they are in the same category for which the original contract was awarded (i.e. computer hardware). It will be up to you to negotiate the pricing with this third-party so that they get a fair cut and you can maintain a competitive price point on the contract.

Is There A Way To Sell To Government Agencies If My Goods And Services Aren’t Available Through A Pre-Approved Vendor On These Statewide Or Co-Op Contracts?

The short answer is yes. There are some categories that don't have contracts like this, so the soliciting agency will always post an “invitation to bid” or “request for proposals” on the open market. Of course, there are many categories in which there is a great deal of market competition, but a statewide contract has not or will not be prepared for whatever reason. This is common for media purchases, medical services, or specialty equipment for example.

There are also scenarios in which agencies can solicit on the open market despite there being multiple vendor options on these open contracts. For example, procurement may authorize an exemption from use of the contract if the items on the existing contract cannot fulfill the customer’s needs.  In these cases, they will request that procurement grant a waiver from the existing contract and allow them to buy from an outside source. Just know this sales process will take much longer as there is red tape (and many stakeholders) involved in securing such a contract exemption.

Our Advice?

  1. Do your research and build relationships. If you fail to be consistent on either one, it is very possible that you will miss those rare opportunities when statewide or co-op contracts are opened up for public bid. (And, we know that solicitation close dates are firm, so there are no second chances until the contract expires – which could be a year or five years.)
  2. Price competitively. Remember that the government agency initiating and managing these open contracts will often make an award to multiple vendors, typically at multiple price points. That means that it will ultimately be up to the customer – the end-user – to define their purchase requirements and evaluate your product using a wide range of criteria. Price will be one of them. If you offer your lowest price in the proposal, secure a contract award, but find that you’re still not securing new sales, it may be that a competitor on that same contract is priced lower than you. At that point, there is not much you can do. That being said…
  3. Tout the quality of your products and services. Price isn’t the end-all, be-all factor for every government purchase. Yes, public sector agencies are focused on maximizing spend, decreasing waste and increasing value. However, service delivery is becoming an equally important consideration. That is one of the reasons why quality and “best value” are starting to be used more than “best price” when deciding on which product to purchase.

Most Importantly, Remember That – Unlike Bid Solicitations Posted On The Open Market – These Statewide And Co-Op Contracts Do Not Equate To Guaranteed Sales.

For the reasons noted in the last two points above, open contracts are multi-vendor contracts, which means they are still competitive contracts. Truthfully, securing your place on a statewide or co-op contract simply means that the oversight agency has confirmed that your company, goods and/or services meet their minimum quality, pricing and business standards. It also means that you’ve already completed many of the administrative tasks associated with doing business with their agency. This is appealing to buyers, and their customers, because it minimizes the work they must do to prepare, solicit, evaluate and award contracts for every single purchase. Many times, these open contracts allow buyers to shop and buy what they need online, much like an Amazon shopping experience. It is the speed and convenience of buying off these contracts that discourages customers from straying from this process.  That is why, in the cases where these open contracts are the preferred or required purchasing method, it's almost a guarantee that you won't win government agency business without being on one. Start doing your homework now to see which contracts will serve your business best. Then, once you secure a contract, be sure you market that contract to government customers. They cannot keep up with every company that’s awarded a contract in every category. If you want them to buy your goods or services, let them know that they can do so easily since you are a pre-approved vendor on an open contract. It will make their jobs easier, enable them to secure the goods they need faster, and ultimately help you close more sales.