The intricacies of state government bidding

WHAT does it take to successfully do business with state government procurement offices?

Joe O'Neill could give a seminar on it. In fact, he has. O'Neill, executive director of the National Conference of State Fleet Administrators, has provided his views at the National Truck Equipment Association's Economic Outlook Conference and various other gatherings across America.

He believes if you really want to sell a product to a state government, it's very important to start your marketing process before the government's procurement office ventures out to ask for something.

“You have to create knowledge, a demand for the product at the level where it's going to be used,” he says, “because the person you're dealing with in the contracting office doesn't necessarily know anything about that particular product. They're dealing with hundreds of products, and they're trying to deal with the specification or the requirement that's given to them by somebody within their organization, and they try to go out and find out who can fulfill that requirement.”

O'Neill defines an Invitation For Bid (IFB) as going out and asking for something specific. He says it's “no time to be creative, because people who try to get creative will lose.” Adds O'Neill, “All they want to know is, ‘Can you do this or can't you?’ ”

He defines a Request For Proposal (RFP) as telling how you would go about doing what you want to do. Creativity is encouraged. He said it needs to be educational and, most importantly, used only when it is asked for.

“If you're responding for something they asked for, you're really too late, because you failed to go in and educate the specification writer and the actual end user as to what it is you can provide for them, and why it's better,” he says. “That's what you need to do outside the bid process. Then when they go out and ask for something, you have an opportunity to respond. If they're asking for something, the best you can do is get in there and fight the crowd.

“The problem with government contracting is that once they go out with a Request For Proposal or an Invitation For Bid, you really can't talk to the people who may or may not know exactly what the requirement is. That's why pre-bid conferences are so important. It's the one opportunity you're going to have to talk to the person who actually wants the product.

“It's also an opportunity for the procurement people to change their mind, to make some modifications to the contract. People are kind of at cross-purposes. The people in procurement live and die not by whether or not they get material in. They live and die by whether or not they break any state or local rules with regard to contracting. Whether they buy your product or not is really immaterial to them.

“I'm not saying that's bad. Their job in part is to supply agencies with the things they need. But their job also in part is to protect taxpayers' dollars, because that's all they're dealing with. They don't have any other sources of funds. They're doing their job — they're trying to conserve resources. I don't want to come off as criticizing the contract people. They simply have a higher responsibility to the taxpayer than they do to their own customer, because they'll get punished more severely for breaking the tax-dollar rules than they will for giving you the wrong thing.”

Don't go “shooting blind”

O'Neill says that because you are not able to talk to the person who actually knows what the state government wants once the bid is out, you have to know who they are to do it right. And if you don't, you are “shooting blind.”

“If you want to sell to the state, then you have to go in and market one by one,” he says. “That's not to mean that you can't do mass mailings, but you have to talk to the right people.”

He says that before the process starts, you should:

  • Find the mission statement. This frequently can be found by accessing the Internet and going to the state Web sites and to the agency pages for contacts.

  • Find the agency with the lead contract, whether it's a city that writes for the suburbs or a state that writes for other state agencies.

  • Find the specification writer, who is the person who actually starts the process. “Visit them if you can,” he says. “If not, call often.”

  • Go through the educational scenario. The spec writer will listen and the procurement office will not, because by the time the procurement office is involved, everything is cut and dried.

  • Join regional and national interest groups, such as the National Conference of State Administrators, Rocky Mountain Fleet Management, Southeast Fleet Managers, or the National Association of Fleet Managers.

He says that within most states, there are one or two agencies that write contracts that all other state/county/municipal agencies may use. Usually, the Department of Transportation is designated by their legislature as a lead agency. But in New York City, for example, all boroughs can use the contracts written by the city.

“The federal government uses the same thing: General Services Agency will write a contract, but then the military command, the FBI, and CIA can buy off of that contract,” he says. “It saves them the trouble of hiring their own specific writer.

“Let's say somebody wants to buy a paint striper. That's a very complex piece of equipment to spec out. You need an engineering staff to do it properly. If every little municipality had to hire a consultant to come in and do that, it would be terribly expensive and they quite frankly couldn't afford that. But they have a lead contract between the Department of Transportation, and the state will allow all of the municipalities, all of the counties, all of the cities … any public agency that wants to buy that piece of property can use that same contract. They do the same thing for automobiles and trucks. All of those prices will be negotiated in advance.

“One of the reasons why they always end buying in the spring, at the end of the production run, instead of in the fall, at the beginning of the production run, is because it generally takes states three or four months to get through the contracting process.”

Restraints

He says there are some restraints on state fleets right now:

  • Most state fleets are buying OEM because they don't want to deal with full conversions.

  • They don't want to buy an alternative-fuel vehicle that has been converted,” he says. “With an OEM, you get an OEM warranty. With a conversion, those companies are out of business before your truck is out the door. Unfortunately, that limits you in your vehicle choice. The Dodge Ram, in the next few years, is coming out with a hybrid. In the last impact legislation package that went through Congress, hybrids now are recognized as an alternative-fuel vehicle and are able to collect $2,000 per vehicle of federal tax credit.”

  • Budgets are being slashed.

    “I had hoped last fall that we were bottoming out, but now it looks like we won't bottom out until next fiscal year, with revenue projections being even lower for the next fiscal year than for this year, in some cases,” he says.

  • Due to the recession, tax revenues are down. In 28 states, vehicle budgets are set by statute and not affected by budget cuts elsewhere.

    “There are formulas built into statutes that say, ‘OK, you have to get rid of your vehicle at 120,000 miles or six years,’ or, ‘You will have to have X-number of vehicles for X-number of employees,’ ” he says. “But in those states, those fleets are more protected than they are in other states. Arizona is now considering selling the entire state fleet and leasing it back, which is really mortgaging the future, but their need is for instant cash. I don't think they are going to do it. I think they might sell buildings and lease them back, but I don't think they will do it with fleets. Fleet is too fleeting a product, whereas a building has maybe a 75-year life span.”

  • Several states are raising taxes, which, O'Neill says, “just demonstrates how bad the situation is.”

Decision drivers

O'Neill lists these decision drivers in state fleet purchasing:

  • Conformance to specifications. He says this is the biggest factor in getting the bid.

  • Cost, which is the second-biggest driver.

  • Life cycle cost. “Even though it is something we all talk about and would like to use, unfortunately initial purchase cost is still a huge driver,” he says.

  • Quality. “When I was talking to states to find out how many vehicles they were going to buy, I also asked them, ‘Do you have any issues with manufacturers?’ They complained about quality, especially coming out of upfitters. The OEM quality is pretty good. Generally, they have a good quality-control process. But an upfitter is somebody who buys all kinds of pieces and puts them together to give you a special deal, and they all complained about the quality of upfitters.”

  • WADILT. Or, We Always Did It Like This.

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