Determining Which Contracts Are Right For You
- February 10, 2009
- by ServeNow Staff
- Business Tips
Part 2 of 3: Not all government contracts were created equal. Knowing which contracts to bid on and which ones to pass on.
If you are a process service or private investigation company, the benefits of winning a government contract are clear. However, since smaller investigation and process service companies do not have a lot of time and resources, you should perform the due diligence before setting aside the time to respond to an RFP.
Responding to an RFP can be a lot of work in and of itself. Just because the RFP is there, doesn’t mean you need to respond to it. One of the most important steps in acquiring government contracts is deciding which ones to pursue and which ones to pass on.
You will want to ask yourself the following questions before taking the time to respond to an RFP for ongoing contract work.
Do I have the resources to manage this contract?
Many RFPs are vague or only provide a range of how much business a contract will generate. It is important to have a clear understanding of what the potential volume will be on a monthly basis. If this contract meets its potential, will you be able to handle the volume?
Conversely, you need to decide whether the financial return is great enough to distract your organization from other endeavors.
Do the numbers add up?
Perhaps the most important aspect of a government contract you need to examine is the profit margin. Sure, a contract may estimate 200 serves or background checks per month, but if you can only expect to make $5 per case your resources may be better spent elsewhere.
Unfortunately, most RFPs don’t mention a budget so this can be difficult or even impossible to determine. During the Q and A time period, it may be possible to get a rough idea of how past contractors have been compensated.
If you are unable to get a clear idea of what the budget for a particular contract is, the best way to proceed is to offer a proposal that makes financial sense for your organization.
You should have an idea of what you need to earn per serve for a contract to be worthwhile. If you don’t know what this number is – figure it out and bid accordingly.
Are the terms realistic?
Make sure you understand what a government agency is willing to pay for, and more importantly what they will not pay for.
Using process serving as an example, some agencies will not pay for a non-serve regardless of the diligence put into the job. Be careful of the no serve / no pay clauses and similar provisions that may consume lots of time and money. Read the RFP's carefully.
“If the terms of a contract ask you to change the way you would normally do business, don’t do it,” says Norman Hogan of Wolf Process in Dallas, Texas. “If taking a contract means spreading your resources thin or adding stress to your organization without being compensated adequately, pass on it. Low Price equals low profit.”
Do I have a realistic chance of winning?
It is important to know that some agencies send out RFPs and requests even when they have no intention of hiring new service providers. They may be distributing an RFP because they are required to even though they are satisfied with their current provider. The agency might be trying to keep their current service providers prices competitive, or they may need to send out RFPs to qualify for specific funding.
When contacting the agency during the pre-bid question period find out if the agency is already using a specific service provider and whether they are satisfied with that provider.
You will also want to be leery of RFPs that don’t have a firm award date – although most do. Lastly, you will want to understand the difference between an RFP and an RFI. An RFI is simply a request for information. RFIs precede the RFP process and don’t lead to the contract actually being awarded. An RFI is distributed for the intent of gathering information so the agency can develop a budget, and subsequently an RFP, for a particular project.
Government contracts can have a major impact on your organization – but this is not the case with all RFPs. Responding to multiple RFPs blindly can consume your internal resources and potentially earn you a contract that is not the best fit for you. It is important to study each and every RFP closely before bidding to assure that if you do win, the contract will make sense financially and you have the resources to support the contract.
Continue to Part 3: Responding to Process Serving and Investigation RFPs
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