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Reboot the Business: How Agency Pricing Arms Can Attract New Tech

They’re ubiquitous. Startups and technology companies are changing every facet of the US economy today, with one glaring exceptionthe Government.  

However, tech firms want to engage. Recent surveys of angel investors, Venture Capital (VC) firms, and startups themselves indicate strong interest in innovating for Agencies. 

 Several blockers keep them from following through:  

  • A Contracting process that takes much longer than commercial deals 
  • Lack of transparency and clear instruction on how to connect financially with Agencies.  
  • An overwhelming sense that it’s impossible to break into the Agency arenaThere’s the perception that the same, entrenched vendors are awarded Contracts again and again.   

 What follows, are reasons why the Agency/Tech Firm combo can be especially lucrative, as well as steps Agencies can take today to attract startup talent during the proposal process.    

 

1. Many tech companies are already VC-funded, so top talent is available for a reasonable bid price.  

Startups and technology companies are notorious for attracting Venture Capital (VC) funding to the tune of $2 -3 million during their initial funding round. Many raise much more in subsequent rounds. This gives financial padding during the early product revisions required to perfect their tech.    

As a result, these companies can be affordable partners for the Government. Since quite a few already have backing, their proposal submissions tend to be, initially, on the mid- to low-end of the pricing spectrum. 

 

2. Find tech firms where they live 

Government Agencies currently expect companies to approach them, through FedBizOpps.gov. To increase the chance of acquiring true innovation, Agencies could approach them where they hang out   

Technology companies traditionally connect with potential customers online. Virtual pitch competitions and online trade shows, or through incubators, such as Y Combinator to name a few places 

 Agencies could try targeting venues primarily oriented to the private sectorfor example, advertise on TechCrunch.com or through digital signage at a virtual eventAgencies could significantly increase the engagement with startup and promoting through these channels usually comes at a reasonable cost.  

 

 3. Focus on cost outcomes, not cost  

During the acquisition process, Agencies dictate what products and prices they need and how offerors will deliver. These mandates don’t sync with how tech companies operate. They’re used to innovating wherever they can, including in their proposals. 

 The major challenge? The lack of a transparent dialogue between Industry and Agency. New Tech claims the formalities of Government make it tough to know at a base level what’s required of them—and the perception, real or not, that opportunities are slanted towards providers who have pricing dialed in.   

 Better: Agencies could focus exclusively on the pricing results they want to reachEt al, if an Agency wants to become more economical at substituting Incoming Explosive Detonation (IED) systems, it should focus on this outcome in its RFP 

 Companies could then come back with diverse perspectives on a solution:  a fix that encourages user warning at the slightest detection of danger, tracking device that mitigates detonation according to path, or a solution that economizes repairs to a detection device once deactivated 

Widen the guardrails of an RFP by first issuing a Request for Information (RFI) or hosting a government-industry day—and get the word out by advertising both. These approaches will help you learn how these companies operate and let you tailor your next RFP to cost outcomes, not approaches. (1)    

 

4. Speed Contract proposals & pricing analysis through state-of-the-art software. 

Tech companies both use and invent software platforms nearly every minute of the day. It’s what they do. And they expect any financial partner to be just as savvyincluding Government Agencies. One example of these platforms is ProPricer’s Contractor EditionIt was specifically built to help simply and speed up the cost preparation and submission process for both industry and government  

The platform’s database architecture stores all estimates, formulas, and qualitative information related to developing cost proposals, delivers real-time visibility into indirect and direct rates, and lets users manipulate data to create customizable cost breakdowns and roll-ups. 

Bonus points: ProPricer integrates with startups’ Enterprise Resource Planning (ERP) systemsCommercial Off-the-Shelf Items and Services (COTS), Windows appsand their own proprietary software, all to streamline business processes. (2)  

 See the power of ProPricer in action. Register for an online demo now.   

5. Be Okay with Failure

Tech companies are built on the premise that you must fail in order to innovate. Though the goal is always to create stellar product, there’s also huge value in the knowledge gained from even serial failures.  

This isn’t how the Government works. There’s little perceived value in what can be gained from a loss, such as team cohesion, institutional contribution, and content development. 

But why not try modeling your RFP process after the commercial sector?  This could place a much higher “remnant value” on knowledge, capabilities, and materials developed during even a losing Contract submission. Lowering risk on both sides and opening doors to new ways of thinking, just may increase the number of submissionfrom startups—and decrease research spends—as a result of this process innovation.           

 

6Shorten cost analysis time through Simplified Acquisition Procedure (SAP). 

By taking advantage of SAP’s expediency, Agencies can initiate engagements valued at less than $150K that go much faster than a typical Contract. Yes, this would be considered a miniscule Contract in the commercial realm, however it’s in the range where many startups would still be interested. 

Model your SAP after a commercial RFP template, then advertise your opportunities. It’s a win/win: Both agencies and industry can dip a toe into new services and engagements, respectively.     

 

7. Use challenges to simplify pricing. 

Award incremental challenge grants of $10K - $50K to companies whose product or service matches the Agency’s technology needs. 

Though the award amounts are miniscule compared to private sector, challenges are usually finished in one to three months. Also, the application process is simple, so filling out a contest form isn’t a gating factor. 

Give each applicant a healthy amount of feedback, whether they win or not. Mirror the processes of commercial events, so companies don’t have to create all-new documentation at each challenge. Consistently communicate expectations and milestones.        

 

8. Treat these companies as investments instead of price candidates. 

Agencies usually buy products and services through definitive, serial events: Issue RFP, select winner, purchase prototype, award contract. 

Why not view a tech company as a longer-term investment? When an agency finds a good fit, offer that company incrementally larger contracts that will cement the relationship and secure more value for the agency. It is creating a pipeline of tech companies to choose from. Over time, less money is spent and more innovation is accomplished. (1) 

To help seal the dealalways highlight the Agency’s mission in written communications. Make sure it is done eloquently. Tech companies tend to sign up for work that empowers them to become a part of something bigger than themselves. (3)  

 

Whether you’re an Industry Tech Company or an Agency, there’s a ProPricer software edition that will help you expedite costing, automate legacy data, analyze models, and ratify awards. All in a fraction of the time a typical proposal process requires. Contact us for an online demo   

 

 

 Sources:  

 

  1. BCG Blog: Why StartupsDon’t Bid on Government Contracts 
  2. ProPricerwebsite 
  3. Nextgovarticle: Hiring Tech Talent is the Beginning, Not the End 

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