The Government Market

In most countries, government organizations are a major buyer of goods and services. The U.S. government, for example, buys goods and services valued at $200 billion, making it the largest customer in the world. The number of individual purchases is equally staggering: Over 20 million individual contract actions are processed every year. Although the cost of most items purchased is between $2,500 and $25,000, the government also makes purchases of $25,000 and up, sometimes well into the millions of dollars.

Government organizations typically require suppliers to submit bids. Normally, they award the contract to the lowest bidder, although they sometimes take into account a supplier's superior quality or reputation for completing contracts on time. Because their spending decisions are subject to public review, government organizations require considerable documentation from suppliers, who often complain about excessive paperwork, bureaucracy, regulations, decision-making delays, and shifts in procurement personnel.

Consider the experience of ADI Technology Corporation. The U.S. government has always been ADI's most important client, accounting for about 90 percent of its nearly $6 million in annual revenues. Yet managers at this professional services company often shake their heads at all of the work that goes into winning the coveted government contracts. A comprehensive bid proposal will run from 500 to 700 pages, and ADI's president estimates that the firm has spent as much as $20,000, mostly in worker hours, to prepare a single bid proposal.

Fortunately for businesses of all sizes, the federal government has been putting reforms in place to streamline buying procedures. Now the government is moving all purchasing on-line, with the use of Web-based technologies such as digital signatures.4 Several federal agencies that act as purchasing agents for the rest of the government have already launched Web-based catalogs, allowing defense and civilian agencies to buy everything from medical and office supplies to clothing through on-line purchasing. State and local governments are following suit: The city of Fort Collins, Colorado, for example, announces its buying needs, posts requests for proposals, and offers downloads of standard supplier documents on its Web site. Internet-based purchasing has enabled Fort Collins to more efficiently buy computers, flooring, and an ever-widening range of goods for city use.

A number of major companies, such as Gateway, Rockwell, Kodak, and Goodyear, make a special effort to anticipate the needs and projects of the government market. In this market, success comes to firms that participate in the product specification phase, gather competitive intelligence, prepare bids carefully, and produce strong communications to enhance their companies' reputations.

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