Comparing the Commercial and Federal Markets

The commercial and federal markets are more similar than some would think. In both the federal and commercial sectors, people buy products and services. Many tend to think of the government as a faceless behemoth. On the contrary, your company must establish a personal contact with the federal end users and buyers. The same could be said of sales made in the commercial market.

When selling technical solutions to buyers in either market, relationship-based sales are critical. If your company’s salesperson does not make sales calls to commercial or federal buyers, his or her success rate is going to be marginal at best. In order to have a chance at success, your company must establish a familiarity with the end user before the business opportunity arises.

The Different Federal Markets

  • The federal micro-purchase market (meaning the market for those purchases made under the $2,500 level) is identical to the commercial market. The federal buyer takes out her government credit card, selects the supplier, and makes a sole source purchase. Although the micro-purchase buy is easy from the agency’s perspective, it is not as simple from the sales perspective. The federal end user and his purchasing agent (both of whom participate in buying decisions) must know in advance about your company since the bid opportunity is not announced publicly.
  • The federal market for purchases between $2,5000 and $25,000 is also similar to the commercial market. The federal buyer approaches her known sources, requests quick and informal quotes, and makes the buy using a purchase order or credit card.
  • The two markets diverge in the over-$25,000 market. Let’s assume your sales staff has done its homework and made the necessary calls to the end user. As a result, the end user is convinced that your company’s solution is what she wants. In the commercial setting, some form of a contract would be executed to complete the sale. The process is relatively quick and simple. In contrast, the over-$25,000 federal sale is closed by a public solicitation or some form of pre-negotiated, multi-vendor supply contract.

Pre-negotiated, Multi-vendor Supply Contracts

Imagine if the federal government bought all of its products and services through the public bid process. The workings of the government could come to a virtual halt. Public procurements take far too long and require mounds of paper work. Vendor protests and lengthy vendor debriefings further delay the process. In an effort to improve its efficiency, the federal government introduced the concept of the pre-negotiated supply contract. General Services Administration (GSA) Schedule contracts are possibly the most well known of these contracts. Although the GSA Schedule program previously focused primarily on products, the program now includes commonly purchased commercial services such as management consulting and engineering. It is worth considering trying to obtain a pre-negotiated supply contract for your business since this method is quickly becoming the preferred procurement method for government buyers.

Reasons Businesses Find It Difficult to Crack the Federal Market

  • Established federal vendors know where the opportunities are and have built customer relationships with the end users.
  • The federal market is huge and it can often take a company one year or more to determine where the opportunities lie.

The moral of this story is that a vendor that has cracked the federal market and performs well can expect a solid revenue stream and the opportunity for rapid growth. The same can be said of the commercial marketplace - a business that invests and persists can find significant rewards.

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