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The Importance of Federal Market Research

The federal contracting process is complex and not for the faint of heart.  Determining how to establish or expand a footprint in federal can be a tough investment decision for industry executive teams.  While many contractors have some government business through “being reactive,” responding to RFPs/RFQs that pop up in SAM or eBuy, they lack a comprehensive strategy to support sustained intentional growth.  The first step of building out a strong federal BD strategy is market research, because you can’t be successful selling into a market that you don’t understand.

Market research should answer questions such as:

  • What is the size of the addressable market?
  • What are the potential market catalysts and inhibitors (e.g. legislative mandates, OMB policy, IG/GAO investigations, etc)?
  • How is the agency buying the product/service today (e.g. contract vehicles)?
  • What are the agency’s pain points and how does the solution address them?
  • Who is the competition, how much federal revenue does each competitor have, and who are their agency customers?

Ultimately, you need enough information to identify your target market, define the fit of your products and services, outline your pricing strategy, describe how your products will be distributed or how a customer will access your services, develop a promotion strategy, review your competition, and prepare a marketing budget.  Market research will provide you with the foundational information needed to create a business development strategy.  Elements of research include:

  • Understand the rules — The federal government operates under a complex web of regulations and compliance standards. Contractors must understand these regulations to ensure they meet the necessary criteria for bidding on contracts and conducting business with the government. Familiarity with regulations such as the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) is essential.
  • Determine how the agency buys — Government contracts are typically awarded through a competitive bidding process. The primary contracting methods used by the government are simplified acquisition procedures, contract by negotiation, and consolidated purchasing programs (GSA schedules, Government Wide Acquisition Contracts, and other multiple award vehicles). Knowing how contracts are solicited, evaluated, and awarded is necessary to successfully secure contracts.
  • Understand the sales cycle – Branding and positioning for work happens in the pre-RFP development phase and market research phase.  This can begin a year or more before an RFP is released. Once an RFP is issued it can take several months or a year (or more for very large procurements) before an award is made. Familiarity with the sales cycle will allow you to better resource your federal growth function and manage expectations.
  • Understand post-award cycle — Most government services contracts include an initial period of performance of 12 months (base year), with four 12-month option periods, for a total of five years.  The government has the authority to exercise these option periods based upon its satisfaction with the contractor’s performance, the availability of funds, and agency on-going requirements/needs.
  • Identify market dynamics — The federal market has its own unique dynamics and trends. Understanding the current landscape, including which agencies have budget allocations for specific projects, emerging priorities, and upcoming opportunities, is vital for positioning oneself as a competitive contractor.
  • Understand contract types and requirements — Federal contracts can vary widely in terms of scope, duration, and requirements. Contractors must understand the different types of contracts (e.g., fixed-price, cost-reimbursement, time and materials) and the specific requirements associated with each. The government may also require federal-specific certifications such as FedRAMP, ATO, or CMMI.  Knowing the needs and requirements of government agencies is necessary to tailor proposals and develop solutions to meet those needs and requirements.
  • Identify competition — The federal market is highly competitive, with numerous contractors vying for contracts. Identifying the key players, their capabilities, and their strategies can help contractors identify opportunities for collaboration or differentiation.
  • Know the players –Building relationships with government agencies, procurement officers, and other contractors is necessary for long term success in the federal market. Cultivating strong relationships can help contractors identify opportunities and teaming partners, navigate challenges, and ultimately win contracts.

A thorough understanding of the federal market is important for anyone seeking to become a government contractor. It involves knowledge of regulations, the bidding process, market dynamics, contract types, competition, and relationship building. By understanding the target market, contractors can position themselves for success in the complex and competitive world of government contracting. 

Jefferson provides Market Assessments for clients looking to enter or expand in the federal market.  View our Market Research capabilities.

About the author:  

MJ Sivulich is a Senior Vice President and leads Jefferson’s business consulting practice.  MJ provides federal business development, capture, proposal, government affairs, and marketing support to industry clients.  To contact the author or learn more about Jefferson’s federal business development services, please email contact@jeffersonconsulting.com.  

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