Life as a Government Contractor in America
By Gary A. Dunbar, Managing Partner, ClientView LLC
Several decades ago I was managing a $168 million, five-year contract and the Government was operating under a Continuing Resolution (CR). This is a situation where politicians cannot agree on a budget for running the government and, rather than shutting down the Government, agree to allow operations to continue at the current spending levels. In those days, just like today, politicians found this to be fertile ground and distinctly to their career and party advantage to drag out rather than resolve. The program that contained my contract began to run low on funds and my Government client called me in to explain the problems and the options. Basically, funding had to be reduced for my contract while keeping it operational at a reduced level of activity. Either that or the contract would be terminated.
My Financial Officer and I scoured our overhead, operating expenses, contract tasks and the original objective of the contract. We went back to the client with a proposal to reduce the costs by more than 18 percent until the CR was resolved and then to resume the contract performance at the original levels. There was no plan to recoup lost funds.
The client was stunned and immediately protested. Our proposed cut was too large. They sent us back with instructions to design a plan with only about 12 percent in reductions. We did. They were happy.
During the next three and one half years, we won over $1 billion in new multiyear contracts in this program.
Bottom line, we had the same choice that many government contractors are facing today as the American government attempts to reduce spending and resolve financial dilemmas. We could become a part of the problem or a part of the solution. We opted for being part of the solution and, thereby, established a very valuable and very trusting relationship with our client.
For many Government managers and their contractors a similar situation exists today. Government contractors must make a choice, either be a part of the problem or find a way to become a part of the solution.
If you now have active contracts, your search for the path to solution value delivery includes:
- Meeting with your Government managers to create a collaboration in the effort to reduce costs and save the program
- Scouring your chart of accounts and past expenditures to find items to eliminate or delay in reducing Overhead and General & Administrative costs
- Reviewing each project with your project managers and technical experts to discover ways to achieve program and contract objectives with a lower level of effort and/or direct expenses.
If you are proposing on a new contract, realize that the Narrative in your Price Proposal is now more important than ever. Not only must you present all of the price and accounting information that were part of your previous proposals, you must now explain in very clear language precisely how you plan to be part of the solution. You must explain how you, as the project contractor, will reduce the cost to the Government.
If on the other hand, you choose to be part of the problem, call your lawyers and all your political friends and get ready for tough negotiations and hard fought confrontations. Also, develop a strategy for going into some other business.
Underlying this experience is a basic business tenet that is, most likely, true in all countries. Business success is determined by your ability to deliver what the customer perceives as value. What was defined in the 1990s as “Value Delivery Strategy” by Michael Treacy and Fred Wiersema in “The Discipline of Market Leaders.” The wisdom of their work is that value is determined by what the customer sees as value and not by what the business sees as the value of their products and services. Many businesses cannot let go of their egocentric view of the value and see the world as their customers see it.
We have tuned these principles to the Government marketplace, defining the three principal modes of delivering value as:
- Product - Leaders grow revenue by investing in research and development that enables them to continually bring new products and services, the “next big thing”, to their customers.
- System - Leaders grow revenue by investing in delivering a reliable level of quality and with greater and greater efficiency and/or lower and lower cost.
- Solution - Leaders grow revenue by investing in achieving a deep and comprehensive understanding of the objective, problems and obstacles of their customers and delivering effective solutions.
In America, the vast majority of the spending that is consumed by private contractors working for the Government is in the category of Solution Value Delivery Strategy. Most of the largest companies in the Government contracting arena excel at delivering effective solutions to their Government customers.
Recently I consulted to a research firm that described their challenge as potential new customers not understanding what they do. They wanted me to help them improve how they explain what they do. So they told me all about the services they provide, the methods and tools they use and the quality of their personnel. It was all cutting edge and very impressive. Then I did a quick telephone survey of several of their customers. The customers, when defining the value they received, did not want to talk about services, methods and tools or personnel but rather about their own ability to make major decisions on policy, strategy and programs; decisions that could have tragic and/or costly consequences if wrong. For their customer, the value delivered was the enabling of critical decision action by the customer.
Seeing value in exactly the same way your customers see value is, in my opinion, the most important leadership attribute a Chief Executive Officer can posses to achieve consistent, long-term revenue growth.
About the Author
With over 40 years of experience, Gary Dunbar, an MIT graduate, is an expert in the field of government contracting and management consulting. He is a partner and management consultant of ClientView LLC. He and his wife Claire live in New England. They have three grown children, four grandsons and one dog. Dunbar plans to write three follow-up books on marketing, positioning, and proposing for government contractors.