Public Sector Procurement 101: Selling Innovation to State and Local Governments
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For just a few seconds, imagine you’re a fly buzzing around City Hall. You happen to land on a conference room wall during a tense meeting.
You, a fly, overhear a conversation between a government technology manager and a city procurement liaison.
The conversation probably goes something like this:
Technology manager: “Listen, we looked high and low. There’s only one start-up that meets our requirements. Putting out a competitive bid is a total waste of time. There’s no competition out there!”
Procurement liaison: “I hear you, but we still need to keep this procurement competitive. It’s state law. I’m sorry, but if your requirements exclude the competition, then you’ll just have to reconsider your needs.”
…Talk about two ships passing in the night, you think to yourself as you buzz off.
Public procurement has a reputation of being strict and complicated. It’s also often blamed for stifling innovation and keeping government from modernizing.
While there’s some truth to that, it’s helpful to understand why public procurement exists in the first place, so we can recognize how useful procurement can be.
The National Association of State Procurement Officials defines public procurement as “the legal authority that advises, plans, obtains, and evaluates a government’s expenses on goods and services that are used to fulfill any government activities, obligations, and objectives.”
In short, public procurement is the well-defined process that controls how governments make purchases.
These processes are designed to keep the government buyer accountable to the taxpayer, while also keeping organizational goals and budgets in check.
On the other hand, public procurement rules were originally developed to facilitate large purchases to build schools, pave streets, and buy new fire trucks.
Procurement officers probably never considered governments needing to purchase cloud security, SaaS solutions, or AI.
This exchange between a govtech and a procurement professional brings to light a few key questions at the core of selling innovation to the public sector.
How do governments balance competition and efficiency in the ever changing civtech marketplace?
And how do vendors navigate strict procurement rules to ignite government innovation?
Read on to learn the basics of public procurement and strategies to get the most out of them.
Government buyers go beyond the sales pitch and into procurement.
When selling to the public sector, your product or service may be of value to an agency, but at some point the decision to purchase will travel up the government hierarchy.
To successfully do business with the government, you should be familiar with all players that have a say in purchasing decisions.
If a government buyer is legitimately interested in what you have to offer, they’ll send it up the chain and out of their agency to purchasing experts in procurement.
From there, all the pizzazz and personality you invested into your sales pitch doesn’t mean much compared to the nitty-gritty details procurement is looking for.
Whether you meet the procurement team or not, knowing the basics of public procurement will help you in the long-run.
Procurement 101: The basics of selling to government agencies.
Your product or service may qualify as a small purchase.
It may sound demeaning, but qualifying as a small purchase can actually be a good thing. Small purchases don’t require the government buyer to go through a formal bid process, which saves staff time and delivers results more quickly for the end user. Definitely a win-win.
The definition of a “small purchase” varies by state and locality. Upper limits typically range between $50,000 and $100,000 for a one-time purchase, depending on the product type. State policies typically inform the locality’s definition of “small.”
But take note: this doesn’t mean that there’s no oversight of the purchase. In fact, in many states, state agencies and localities are still expected to maximize competition at every opportunity.
For example, in Virginia, the Virginia Public Procurement Act states that local governments are free to define their own guidelines around making smaller purchases, but “small purchase procedures shall provide for competition wherever practicable.”
While you may still need to work through local procurement processes, qualifying as a small purchase can save both you and the agency a lot of time.
2. If your product or service is a larger purchase, the public procurement process is more strictly defined in order to protect taxpayer interests.
Like small purchases, what qualifies as a large purchase is typically determined by the state.
If your product or service is over the small purchase threshold and constitutes a large purchase, there are several procurement methods you could follow to land a government contract.
Here are two of the most common public procurement starting points: invitation for bid and request for proposal.
Invitation for Bid
Invitation for bid, or IFB, is when the government lists the scope and details of their agency’s need and publicly posts the IFB for interested contractors to respond to. Once all responses are in, the government selects the most competitive bid.
With such a strict scope, government procurement officers look at metrics to determine which bid is more competitive. They look at things like responsiveness, responsibility, and, of course, price.
Responsiveness - Does the bid meet the need illustrated in the IFB document?
Responsibility - Does the government buyer have reason to believe that the bidder can deliver on the promises made in the bid?
Price - What is the total price of the bid? Oftentimes, local or state government buyers may be required by administrative guidelines to choose the bidder with the lowest price, full stop.
In such a structured process with so little room for personalization, price is often the one variable that allows one bid to stand out from the rest.
Due to the structure of the process, you’re far more likely to see a government use an IFB for projects like concrete pouring than cloud virtualization.
There is virtually no two-way communication between the government buyer and service provider throughout the IFB process, meaning it’s ideal for goods or services that are cut-and-dry and rarely personalized.
Request for Proposals
If you’re looking for a detailed (some might even say arduous) process that delves into the particulars of a bespoke solution, then a request for proposal, or RFP, is the procurement method for you. It’s the first step in a public procurement process called competitive negotiation - and for good reason.
An RFP is exactly what it sounds like: an opportunity for potential sellers to propose detailed solutions to the stated need.
RFPs differ from an Invitation for Bid, because while the government outlines the scope of work in IFBs, an RFP also includes the opportunity to incorporate unique evaluation criteria.
Government agencies typically evaluate responses to RFPs not only by price, responsibility and responsiveness, but also with additional criteria unique to the project scope.
Criteria can include feasibility of proposal, history and experience of bidder, financial security, and more. Perhaps most significantly, an RFP does not require the government buyer to select a vendor on price alone.
Once RFP responses are in, negotiations can begin. Rather than blindly choosing the bid that meets the requirements at the lowest price, the RFP allows governments to ask vendors for follow up information, challenge certain elements of the project proposal, and even ask bidders to return to the drawing board.
It may sound more challenging for the buyer and seller alike, but the highly competitive process rewards teams that think big.
3. Your product or service might qualify for non-competitive procurement methods under special circumstances.
Sole source
Sole source procurements, sometimes referred to as single source procurements, are reserved for products or services that are so singular that they can only feasibly be provided by one entity. Therefore, in theory, competition is impossible.
What qualifies as sole source can differ from one agency buyer to the next. For instance, while some government buyers would view Canva and InDesign as two digital graphic design services in competition with one another, other buyers might see a distinction between a browser-based and desktop software-based service.
Emergency
Emergency procurements are pursued when the duration of the competitive bid process is simply unfeasible, typically because resident health and safety are in the balance. These exceptions may not have been written with technology in mind, but govtech is certainly eligible, if the case can be made.
In accordance with the Virginia Public Procurement Act, the state’s IT agency has defined emergency information technology procurements and granted the head of IT to make those purchases as needed.
Where do you fit in the public sector sales puzzle?
This short overview of potential procurement methods, competitive and non-competitive, for small purchases or large, should give you an idea of where your solution falls in the purchase puzzle.
Once you’re more aware of the journey ahead of you, you’ll have a better idea of where to invest valuable time and resources.
For example, if you can make a case that your solution is one-of-a-kind, you may be positioned well for a sole source procurement. Knowing that, your research time is best spent exploring which customers in your target market have championed the sole source method in the past, because they’re more likely to do it again.
You’ll also know what your arsenal should look like when entering the procurement process. If you’re a sole source solution, then come prepared with the legal language verifying your offering as unmatched in the market.
If you are entering the RFP game, bolstering your B2G sales strategy with an experienced, knowledgeable public sector copywriter can help you get your foot in the door.
Successful, competitive B2G procurements require empathy and education.
At best, government procurement processes protect the taxpayer, ensure purchases are aligned with objectives, and provide helpful guidance for public sector buyers.
At worst, they can reduce government efficiency and limit the public sector’s adoption of innovative solutions.
But the reality is, strict procurement guidelines are the way of the public sector and can’t be avoided.
As a company that wants to do business with state or local governments, consider the procurement department your ally and not an obstacle.
Successful procurement starts with understanding both your expectations as a vendor and the strict expectations procurement officers are held to.
Once you gain empathy for the government buyer’s circumstances, you can confidently set off toward your common goal, implementing solutions that drive innovation.
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