Sunday, March 8, 2009

Government Sector Business

In 8th grade, we were required to take a course in “Civics” (how our government works in the U.S.). Although much of what we learned bordered on the mundane and was kind of boring, that course was taught by a very interesting teacher, so in the scheme of things, that made the course not all that bad.

Even before that, and I don’t remember exactly when, I read the “Gettysburg Address”, a speech given by President Abraham Lincoln. The Gettysburg Address was one of the most famous speeches ever given in the U.S. In that speech, President Lincoln said these words…..

“……and that government of the people, by the people, for the people, shall not perish from the earth.”

Well, I don’t know how or why it happened, and, perhaps I took those words out of context, but I’ve always taken it seriously, my entire business life, that we, the people, own the government, and, therefore, government agencies are accountable to us, the citizens (and I’ve also used the word “taxpayers.”)

Because of that, it became my habit, over the many years I was in the reprographics business, to stick my nose (sometimes very deeply) into procurements put out by government agencies for reprographics services (and any other procurements related to our business.)

There are some companies in our industry who do not compete for government sector business. Perhaps this is one reason why - - - when I joined NGI in 1997, Nick Korman, one of the founder-owners of the company, said “we don’t go after government business because the prices are too cheap, making the work not profitable, and, besides, government customers are slow pay.”

I’m going to digress for just a minute: Nick Korman, for those of you who never met him, was a veteran in the reprographics industry; before co-founding NGI in Tampa in 1986, he was involved in Trukmann’s Reprographics in New Jersey (Trukmann’s is a ReproMax partner and owned by Paul Korman, Nick’s younger brother.) Nick, was a truly wonderful person, great guy. Sadly, Nick passed away in 2007, at a very young age.

To get back to the story ….. I said to Nick that my experience in doing business in the government sector was extensive (that’s because I was first in business in the Washington, DC area, where lots of government agencies are, of course, located) and that, based on my experience (what I learned over a period of many years), government sector work can be profitable, and, besides, government agencies don’t typically go bankrupt (meaning, virtually no credit risk.) Not long after than conversation, NGI did begin to get involved in government sector business, generally through bids and proposals, and our government business, over the years I was with NGI, was not insignificant. (This is not to imply that I’m smart, for I’ve never considered myself to be smart. Like many of your, I’ve made my share of good decisions and suggestions as well as my share of bad decisions and suggestion (and some were absolutely stupid.)

Many of you in the reprographics industry who have “played” in the government sector, know that some (based on my experience, most) bids can be “played with” to your advantage, if you know how to play with numbers and if you take the time to play with the numbers. Also, sometimes it’s not just a matter of playing with numbers, for there are times when playing with the terms and descriptions and evaluation processes (as expressed or set forth) in the bid document is (are?) equally important.

It is not uncommon for people who work at Purchasing Departments at government agencies to compile procurement (Bid or Proposal) documents that are out-of-date, inaccurate as to terms, inaccurate as to estimated quantities and, yes, sometimes, just plain stupid (!!!) with regard to the services the government agency is intending to buy or with regard to how the bid is structured. And, when a procurement is stupid, that allows one to take advantage, if one knows how to do that.

I’m not the type of person who would walk up to another and throw a sucker-punch. When I found a government procurement to be lacking (in one way or another, referring back to the previous paragraph), I often took it upon myself to send a letter to the government agency to critique the procurement. And, sometimes, I sent several letters, Most of the time, my letters were either ignored, looked upon with disdain, or both. Government agency purchasing people do not like to have their procurements criticized! But, the fact of the matter is that very rarely will you ever find a government agency purchasing person who has expertise in the field of reprographics. One would think that government procurement agencies would ask for assistance in putting together their bid documents – to get up to speed on current reprographics processes being offered and to determine which reprographics processes are obsolete. But, rarely does that happen. One would also think that government agencies would do the homework to come up with realistic estimates of quantities. But, rarely does that happen. Anyway, getting back to the letters I sent to “help” government procurement people put out smarter Bid and RFP documents, that was how I justified later taking advantage of the procurements we bid on. If they are not going to listen (kind of like an advance “fair warning”), then why should I not take advantage? In other words, my letters were, in essence, a warning that I (or someone else, one of my competitors) was going to throw a punch. If, after that warning, they were not interested in putting their guard up, why should I care?

Let me give you some real-world examples of how I took advantage of bid procurements in the government-sector reprographics market:

Back in the early1980’s, we won a major bid for a very large, long-term, multi-year project. Our bid-price to staple-bind large-format print sets was $3.00 per set. This was at a time when we did not, nor did any of our competitors in that market, charge for staple-binding large-format print sets. We got to charge for that service simply because they listed that service as a line item in the bid procurement. They did not have to do it that way, they could have written the bid specs to say that binding was to be included, not extra. Most of our competitors bid “no charge” for that line item, since that practice was customary at that time in our market area. This customer submitted a lot of orders, and, aside from the occasional big orders, we would get orders for lots of sets of just a few drawings – progress prints if you will. There were many orders where our charges for staple-binding sets exceeded the charges for printing services!

In the late 1990’s, we won a good-sized bid with a different government agency. I still remember (and will probably never forget) the phone call I got (about our first “small-format” order) from one of our sales reps in that market; she called me to ask me “is this right?, I don’t think so, it looks ridiculous, so that’s why I’m calling to check with you.” I asked our sales rep what the order was for, and our sales rep replied, “we received a floppy disk that contains a spec book with 800 8 ½ x 11 pages, and our customer has ordered 10 sets, black & white prints on plain white bond paper. According to the information you sent us about the bid we won with this government agency, we are supposed to (allowed to) charge $4.00 per page for “processing” and then $.10 per print for all of the 8,000 prints. Joel, that’s going to come to $4,000!, that seems outrageously expensive, is that what we are supposed to generate the invoice for?” She also asked “how in the world did we get this work at those prices?” I told, her, “yes, your calculations for what we are to charge (what we are allowed to charge) for that order are correct, but don’t forget to add charges for collating, covers and binding.” If a customer called to get a quote for a job such as that one, our quote, back then, would probably have been around $.05 per copy = $400, plus covers and binding. We got $4,000 instead of $400. How did that happen? Well, it happened because the government agency put out a completely ridiculous bid document. As I recall, more than 100 different line items, most of which would never be ordered, were listed in the bid document, the estimated quantities, we were sure, bore no resemblance to reality, and the line items, themselves, were written as though the bid document writer had no clue as to how to call for reprographics services. That bid was easy to play with. After the bids were submitted, I requested copies of all of the bids that were submitted, and I noticed that one other bidder, like me, “played with” the bid. But, the other bidders did not. Let me reveal to you just a couple of the completely ridiculous line items that were in that particular bid document. Sepia paper prints, 8 ½ x 11, estimated quantity 5,000. Sepia paper prints, 8 ½ x 14, estimated quantity 5,000. Another section of the bid document contained xerographic services, 8 ½ x 11, 8 ½ x 14, etc. To include small-format “sepia” print services in a bid document in the late 1990’s was moronic. But, they did, and, after “fair warning”, we took advantage.

About three years ago, a government procurement agency in one of our markets put out a bid for “blueprinting” services and approximately 75% of the line items in that bid were for “blueprints” of various sizes (and some of the sizes were very odd.) There was also one line item for large-format digital bond prints on plain paper. I wrote a letter, three in fact, to the procurement department, explaining that “blueprints” were obsolete. My letters were completely ignored. We played with that bid. We won that bid.

In the decade were are now in, one of the government agencies in one of our markets put out a bid that used a “point score” system to determine the “most responsive bidder” rather than use only “lowest total cost” as the evaluator for selecting its contract vendor. So, one not only had to be concerned with total cost, one also had to figure out how to maximize one’s point score. In that particular bid, you got 5 points for bidding on every line item of service listed in the bid. One of the line items in that bid was for “Bubble-jet color prints.” Some of you younger people will not even know what that line item meant, for a Canon large-format Bubble-jet copier has long been obsolete (I haven’t seen one since 1998.) We got our 5 points, because we inserted a price for that service, indicating that we could provide the service (we really could not, but there was, of course, a completely acceptable substitute for that service). Our competitors indicated “service not available.” They did not get their five points. It was really stupid for the government agency to include in that bid an imaging technology that was, by then, well obsolete, and, had the government agency paid attention, it would have called for the “correct” current imaging process and all of the bidders would have scored the same 5 points. Sometimes, the little things do matter. You have to be aware of that.

I should also tell you that my criticisms of government procurements were not always done by letter. On several occasions, I went in front of boards at their public meetings. In one particular RFP procurement for a staffed copy center and hundreds of convenience copiers, the government agency released the RFP, received proposals, evaluated the proposals and recommended an award. My company was not involved in the first round of that RFP process (and there was not supposed to be a second round!) After all proposals were submitted, and during the evaluation period prior to recommendation for award, I requested and received copies of all of the proposals that were submitted. When I realized that the low bid was $6 million and further knowing that that cost was at least $1 million more than this government agency really had to spend on what they were going to buy, I was outraged …. after all, this agency spends taxpayer dollars. I wrote several letters, and I went to “speak” in front of the County Commissioners at their bi-monthly public meeting. Subsequently, the recommendation of the County’s Purchasing Department (to approve the $6 million award) was rejected by the Commissioners, the Purchasing Department had (was basically forced) to amend the RFP document, and, after the amended RFP document was issued, proposals received, and proposals were evaluated, the County did end up making an award that was for substantially less than $6 million. And, the award was made to a different vendor than the County’s Purchasing Department had originally recommended. (My company was a sub-contractor to the prime vendor that won the award.)

Since I was active in “government sector” bidding and proposing from around 1977 forward, I could go on and on and on about examples of what I observed in bid documents and procurement processes and what I did. But, that’s all for now. I might, at some point later on, expand on this post.

There are several points I would like to make about government-sector business:

• There are opportunities to make money in the Bid-RFP government sector end of our business. And, never assume that all government work is “low-price” work. Also, you cannot be a bidder or proposer unless you are aware that a bid or RFP exists. This requires active prospecting.
• Government agency business represents little, if any, risk on the collections end.
• Volunteer your expertise to those in government who are responsible for preparing procurements. Help them update their Bids and Proposals with respect to current imaging processes and the terms our industry uses to describe services and units of measure. Work with them to arrive at realistic estimated quantities. If they ignore your assistance, which they probably will, well, at that point you’ve given them fair warning, and you are then entitled to take advantage.
• For those of you who complain that government agencies are always slow-payers, you need to research how to provide your government customers with the paperwork they need to pay you within terms. Generally speaking, it is your fault that they are not paying you within terms.
• Before you bid (or propose) do your homework. The Federal Government and all state, city and county governments in the U.S. have laws or statutes that permit you to obtain copies of documents they have. Don’t ever let any government agency tell you that you can’t have something that you are entitled to have. (They are allowed to charge you for copies of documents, but that’s the price of doing your homework.)
• Read the entire Bid or RFP document thoroughly. And then again.
• When you have questions about a procurement or about the procurement process or procurement documents, put your questions in writing and submit your letter (or e-mail) to the procurement department. Don’t be hesitant to demand a response. Government agencies are obligated to respond.
• Do not be afraid to criticize a procurement (Bid or RFP) document. You have the right to do that and there will be times when you will feel the obligation to do that (on behalf of your industry, your competitors or your fellow citizen/taxpayers.)
• When you are not getting the attention of a Purchasing Department, don’t be afraid to go above that department’s head (unless that’s not permitted by the terms of the bid document.) You have the right to do that.
• When something smells foul, raise a stink! You have the right to do that.
• If you think SBE, DBE, MBE, WBE preferences in a Bid or RFP are unfair, unreasonable or whatever, then make your feelings known, don’t be silent.
• Always request copies of all of the Bids or Proposals that were submitted and keep them in your files for later reference.
• Last but not least, when there are things to play with in a Bid or RFP, play with them to your advantage.

Many people in our industry believe that it is “politically incorrect” to criticize government or government agency issued procurements. Since I’ve never been politically correct, I never let being “politically incorrect” bother me or get in my way. After all, they (government agencies) are owned by us and work for us… President Lincoln said, “government (is) of the people, by the people, (and) for the people”.

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