May 17, 2016
Going after that Big, Public Sector Client? 4 Steps to Make it Profitable
Working with government clients is very different from working with private companies. Here are four things to consider to battle the red tape and bureaucracy that can ruin a public sector project's profitability.
In my previous business, a web design agency, we always had at least one government contract on the go. Everything from universities, tourism and economic development agencies, social awareness groups, and a wide range of other public-sector clients based here in Canada.
Some projects were meaningful, rewarding, and profitable, and the clients were a pleasure to work with. Others were miserable and made us lose money.
A couple of months ago, a commenter on this post named Tricia asked:
“...lately some large public sector organizations have approached me.
I have concerns that could affect pricing in working with these different organizations. For example, the expectations around number of meetings, and dealing with different types of bureaucracy that isn't seen as frequently in small business. There are also policies and procedures that have to be understood and followed in a more structured environment.
Those are some things I can guess will influence pricing but to what extent I'm not sure. Then there will be other unforeseen issues that will come up that might compromise a project, or derail it. I'm trying to brainstorm and learn from others to help avoid problems.
Do you have any comments about these concerns since you have worked with public sector organizations?”
The simple answer to Tricia’s question is: Yes. You should definitely charge a public sector organization more money to account for the additional layers of bureaucracy.
To be more specific, here are four main ways to make sure that seemingly lucrative government project doesn’t turn into a cash bleeder.
Also check out this episode of our podcast where Kevin and I discuss this very topic.
Be selective with RFPs
This could be a whole topic unto itself, in fact, we’ve written about it before. We’ve even debated it on our podcast, discussing the pros and cons of responding to RFPs (request for proposals).
I won’t get exhaustive here but the bottom line is, are you sure this is a client you even want?
The RFP process can be a very rigid and uncompromising one in which everybody loses — the “winner”, the client, and especially all the other companies that sunk time into responding but came up empty handed.
Here are a few important questions to ask yourself before responding to a government RFP:
Will they let you call or meet before responding and/or present in person?
Sometimes in the interest of “fairness”, a public sector client won’t allow bidding companies to talk to the key stakeholders and ask questions before submitting a proposal. They’ll only accept questions by email and then send answers to all the bidders at once.
This may seem impartial, but it’s a terrible way to kick off a new relationship with a client. Hiring a service agency is different than purchasing chairs or pylons. How can the client know you’re the right company for them if they can’t have a conversation first?
Alternatively, the client should allow companies that have been shortlisted to present their proposal in-person or via web conference so questions can be answered right then and there, and both parties can get a feel for each other before signing on the dotted line.
Does the RFP prescribe solutions or require spec work?
A good RFP should outline the main objective of the project, and the key business problems they need to solve.
A bad RFP (and there are many of them) will either prescribe their own specific solutions (‘make the button red’), ask bidders to submit speculative work (like designs and wireframes), or waste time making bidders jump through unnecessary hoops (resumes of all staff, financial reports).
If a bad RFP comes across your desk, politely decline it and take all that valuable time you would have spent on the proposal to instead, oh, I don’t know, build up your lead gen system.
Sell an upfront discovery project
In this article on quoting app builds, I laid out a strategy for selling an upfront project before committing to a fixed scope project.
The same strategy can apply when you’re selling to government. Government clients want all the answers up front, so instead of putting your business at risk by overcommitting when there are too many unknowns, sell them on the idea of a smaller discovery project (small enough that it doesn’t need to go to tender) where you’ll create an in-depth scope document that lays out everything you’ll do and how much it will cost.
Then the client can shop it around or put it in an RFP. And you’re more likely to get the work if you’ve helped them get to this point.
Invest in a tight contract that specifies everything
If there’s one thing to take away from this post it’s this: don’t expect government employees to think like entrepreneurs.
If you’re working with a small business owner on a project, they’ll likely understand the concept of time = money, or that if you want more you have to pay more.
Many government employees (bless their regulatory souls) often think more in terms of black and white, on or off.
For instance, I once worked with a head professor of psychology & neuroscience at a university on a big, complicated project. She was obviously a brilliant academic, but she didn’t understand the concept of how scope change affects budget.
What seems obvious for a business person is not always obvious to someone who has regularly collected a pay cheque all their life and not had to consider where that money comes from or how it is generated.
That said, be sure to outline everything included in the contract:
- How many meetings/calls are allowable in the scope of work?
- Who pays for travel time to and from the client’s office?
- How many rounds of revisions are included per phase?
You may include this already in your contracts, but if you don’t, now is the time to start, regardless of the type of client you’re engaging with. Government clients often expect that if something isn’t directly stated then it’s included by default (weird, I know).
Hire a lawyer
Hiring a good lawyer is going to save you more money than he/she costs.
It’s especially a good time to bring in a lawyer when you’re closing a large government contract. You’ll need them to vet your contract and make sure you’re protected should the proverbial shit hit the fan.
Watch the hilarious and crusty Mike Monteiro and his lawyer talk about the importance of lawyers and contracts.
Kill fee/delay fee
You’ve probably experienced this before, when somewhere in the middle or near the end of a project, the client suddenly goes quiet.
You email, call, and leave voicemails — nothing. There’s no response and you can’t move the project forward without speaking to the client.
One year later the client emails you: “Hey, sorry for the delay. We finally have content finalized (or whatever was holding back the project). When can we launch?”
This can happen with any client, but it can especially happen with government clients. I’ve seen it, I’ve lived it.
Make sure your contract includes what happens if the client delays the project, and how much they’ll need to pay to resurrect it if it goes dormant past 30, 60, or 90 days.
A client can’t get you to commit your resources to a project, abandon it halfway through, and then show up months or years later expecting you to drop what you’re doing and carry on as if nothing’s changed. This needs to be clearly spelled out from the beginning.
Specify when invoices are to be paid
Whatever you do, don’t say you’ll invoice the final amount when a project is “complete” or “done”.
“Done” is extremely subjective. Does “done” mean the client is fully, 100% happy with the project, it has fulfilled all their wildest fantasies, and their mom has had a chance to review it and supply feedback?
I once had a client try and hold back the final payment because social media buttons weren’t in the footer of his new website. The catch? He didn’t have any social media accounts set up, so we couldn’t add the buttons.
Instead, state in your contract that you’ll send the final invoice after a certain event happens that you can directly control, like when you make the final presentation to the client. That way even if there are changes afterwards, or if the client straight up decides to delay launching it for whatever reason, it’s clear you get paid.
Find an internal ambassador
My final suggestion is to find someone who can be your champion.
Most of the time these are internal or external consultants whose job is to help government departments find and hire the best contractors.
I’ve had a number of these relationships over the years, and these people made our agency hundreds of thousands of dollars without ever needing to pay us a dime out of their own pocket.
They gave me the inside scoop into what projects were coming down the pipe, what the budget was, and what we needed to do to win the work. Sometimes they just directly handed us projects that didn’t need to go to tender.
To find these people, it’s important to get out there and network yourself.
If you happen to meet one of these rare gems, it’s important to nurture the relationship (dinner and drinks never hurt), and there needs to be substance behind it. They have to legitimately like your company and honestly believe you can deliver the best results when they recommend you to someone else.
Conclusion
RFPs and public sector clients get a bad rap that’s often well-deserved, but there can be diamonds in the rough. Some government clients have awesome projects with generous budgets, and their internal people “get it”. But you should still take the steps outlined above to protect your business — and your sanity.
What has your experience been like dealing with public sector/government?
