RDG Consulting, Inc.

Competitive Intelligence in the Federal Market

Written by Robert D. Grimm, CPCM, Fellow

In today’s ultra competitive marketplace, can any firm, large or small, afford to overlook a significant market niche? The answer is obvious, yet many firms ignore the world’s largest consumer of goods and services—the United States government. Each firm has a reason – or an excuse – for doing so. Some contend it is too difficult to penetrate, or it is so large they do not know where to start, or the government is so complex it cannot imagine where to begin locating potential buyers for its products or services. These are excuses because the contractor simply has not taken hold of the opportunity to learn about this customer. The fact is, there are more data available to opportunistic contractors about Uncle Sam’s buying habits than any other market segment in the world.

Lots of companies have determined what their domestic market share is through a variety of means. Some purchase professionally researched data that reports sales dollars or units sold by each company within an industry. Others rely on self-reported data provided to a trade association, which masks the identity of individual companies but is reliable in terms of overall sales. These data are useful for global market trend analysis but not necessarily helpful to quantify the market share of one’s competition. Still others depend on sales tracings provided by the middle man or distributor to a firm that rolls up all the sales data and sells it back to the manufacturers. But very few firms know with any degree of accuracy what their market share is in the federal government. They can make sweeping assumptions that their federal share is larger, smaller, or equal to the overall market share, but how do they really know? The answer is that they “probably don’t know”, despite an abundance of information available to support the hypothesis.

For example, do you know which of your competitors have a Federal Supply Schedule contract that simplifies selling to the government? If so, do you know what their federal prices are and how much they are selling to Uncle Sam? Many a company would be willing to pay a considerable ransom to obtain a key competitor’s price list for a specific large customer, or to learn the magnitude of its competitors’ sales to that customer.

The fact is, answers to these and many other questions are readily available directly from the government. Moreover, the information is free for the asking pursuant to the Freedom of Information Act (FOIA). It should be noted that the Act itself lays out what can be charged, e.g. amount of time spent retrieving info times the hourly salary of the Government employee(s) and a per page copying charge. Normally, the first 100 pages and the first two hours of research are free. The Department of Veterans Affairs (VA) has become more aggressive in charging than it used to be. It could be anticipated that other agencies may follow suit as budgets constrict. Notwithstanding, the nominal cost is well worth the benefit as long as the request is specific enough that it can be correctly fulfilled.

Making a FOIA Request
By law, agencies must respond to FOIA requests within 10 working days of receipt. Agencies may extend this time if necessary, but they must send the requestor written notice of the extension. One needs to know how to file a FOIA request and to whom the request must be sent. FOIA requests must be sent by mail or fax directly to the agency that has the records you want. If you are sending a letter, mark both the letter and the outside of the envelope, "Freedom of Information Act Request" to speed its handling by the agency. Normally, email requests will not be accepted.

There is no single government office or clearinghouse assigned to handle or route all FOIA requests. Each agency has one or more official FOIA contact offices to which requests should be addressed. Larger agencies have separate FOIA offices for each bureau and some have FOIA offices in each region of the country. Contact information for the FOIA offices of just about all agencies can now be found online. An excellent portal that links to many of the federal FOIA sites can be found at http://usgovinfo.about.com/library/foia/blfoiacontacts.htm?iam=dpile_1&terms=federal+FOIA+clearing+house. For an alphabetical listing of federal government websites, see http://usgovinfo.about.com/blindexalpha.htm. Remember that a great deal of information about the government and its many agencies already exists on the Internet. Before taking the time to write a FOIA request, visit the agency website you are interested in researching to see if the data you want is already available. If not, visit http://usgovinfo.about.com/library/weekly/aa120599a.htm to guide your efforts in making a FOIA request, and to http://usgovinfo.about.com/library/weekly/aa120599b.htm for assistance with whom to file a FOIA request. A sample FOIA request letter can be found at http://usgovinfo.about.com/library/weekly/aa120599b.htm.

The government buys almost anything imaginable. Many commercial, off-the-shelf products are procured by all federal agencies. Examples are computers, monitors, copiers and fax machines, office furniture and supplies, telephones, tools, janitorial and maintenance services. More sophisticated products such as diagnostic reagents for analysis and detection of chemicals in blood, pharmaceuticals, and myriad medical supplies and devices are bought primarily by the Department of Veterans Affairs (VA), National Institutes of Health, and the Department of Defense medical centers. If you happen to specialize in hi-tech electronics, eavesdropping equipment, radar jamming equipment and technology, or “smart” bombs – your potential government customer base may be narrowed to Defense, FBI, Justice, CIA, etc. No matter the product, there is an abundance of data available to the savvy contractor for the asking. If you know where to direct your questions, the level of detail you can obtain is remarkable.

Competitive Intelligence
Most contractors have developed matrices that enable its sales representatives to properly position each product in its portfolio against the corresponding competitive item. It will list all the features and benefits of its products in order to highlight the differences. This is the easy part. Most data of this nature can be gleaned readily from product literature or websites. But what about data such as, “what institution buys Brand X or P/N 135?; how much does it buy?; the exact price paid?; how often they order? the FSS contract number, if applicable?; where it was procured—either direct or through a distributor?, etc.

Moreover, much of this data can be provided in an electronic format which allows it to be sliced and diced any way the recipient wishes. Imagine the power of knowing not only an agency’s overall expenditures for a commodity, but knowing the specifics of which sites buy its products vs. the competition. It is expected that every company knows where it sells products on a direct basis. It is a bit more daunting to know where the end users are if you sell through a middle-man or distribution network. You would be a hero if you could provide this kind of competitive intelligence to your sales force!

Let’s face it, the cost of having “feet on the street,” — whether in the form of direct sales people or through a distribution network — is one of the largest cost components of a sales operation, perhaps even exceeding the cost of the products being sold. Knowing precisely where to focus sales effort is extremely valuable information. The ability to rule out certain sites because they do not buy your product would cut down on dead-end sales calls and improve sales force efficiency. After all, isn’t that a goal of strategic selling?

Table 1: Is an example of the type of data that can be obtained from the VA through FOIA:


Further, imagine how powerful it would be to know how your individual product prices compare to their competitive equivalents. There are so many items that have become “commodisized” or generic, that price becomes the primary differentiator. You will always have to contend with brand loyalty or user preference, but astute sales people learn to deal with that. If you have a clear value message to convey to a buyer—by virtue of knowing all the aforementioned facts of his purchasing history—you suddenly have the buyer listening more attentively to your message. What sales professional will not be motivated – indeed excited – by the knowledge that can be obtained via FOIA? Additionally, you can arm your sales force with critical information that will enhance its productivity.

Table 2: Is a hypothetical comparison of Brand X vs. the competition and the type of conclusions that can be drawn from FOIA data

In the example above, the cost per case data provided via FOIA was converted to a unit cost. The raw data does not provide the quantity per case, but your competitive intelligence will help you fill in that gap. Although not shown here, FOIA data can also tell you the specific location that purchased the product, how much it bought, and the exact price it paid. By adding your unit price to the table and comparing it to the competition, you can see where you have an advantage and its magnitude. Such information should be pretty exciting to your sales folks!

The VA can even provide the regional groups of hospitals that buy each product. These regional groups, called Veterans Integrated System Networks, or VISNs, are geographic clusters of VA hospitals. Not every hospital buys every healthcare commodity. In general, the more specific or expensive a product, the fewer locations buy it. Generic products such as bandages, bed pans, pain relievers, wheelchairs, syringes, and catheters are purchased by all hospitals. Items such as surgical implants (hips and knees), coronary stents, and pacemakers are bought by fewer sites. It is no longer cost effective or practical for every VA hospital to have a resident orthopedic or heart surgeon on staff. Cost constraints have caused centers of excellence to emerge within the VA, thus limiting the degree of duplication among the hospitals in the most expensive and highly technical fields and products.

Knowledge of which sites buy your products saves time and eliminates dead-end sales calls. It also aids in developing a sales call strategy to deliver a message with a punch. Budgets are strained throughout the federal government, hence, knowing where your company enjoys a cost advantage and being able to translate that into a savings for the facility will make the personnel at that facility very glad to see you. If you can promote your products by differentiating the features and benefits – and save the government money in the process – you will be a hero in your customer’s eyes.

One can drill deeper into the data by knowing the products that are purchased off FSS contracts. Copies of FSS pricelists can be obtained via FOIA. These will show which products the contractor is selling, as well as the exact price it charges the government for those products. The pricelist also provides the Special Item Number, (SIN), which is a product grouping into which all like-items are categorized. The purpose of SINs is twofold: 1) to give the government an easy way to identify and track its spending by product type, and 2) to provide the buyers/users a convenient way to locate the products and services they wish to purchase.

The types of analyses that can be performed are many and varied when the data are provided in an electronic medium. Some examples are:

  1. Sort or rank total sales or units by region or location to see if sales are evenly distributed or concentrated in a particular geographic area or limited to just a few sites.
  2. Apply the Pareto Principle (80/20 Rule) to see which part numbers dominate the sales scenario. Often, roughly 20% of the products comprise 80% of the dollars.
  3. Compare the results in #2 above to the sales distribution of your company's products.
  4. Determine the range of prices at which each part number was sold.
  5. Compare your firm's price to its competitive counterpart and calculate the differential
  6. Calculate market share for each product or family of products, based on either units sold or sales dollars.

Everybody Wins
Armed with these types of data, you can devise marketing strategies to promote your products or attack competitive strongholds. Becoming familiar with how and where to request FOIA data can provide significant competitive knowledge to the savvy user. In the end, the government benefits from greater competition and potentially lower prices, while your company reaps significant new sales in a market heretofore untapped ä²µly a win-win situation.

This article appeared in the October 2002 issue of Contract Management magazine, published by the National Contract Management Association.

About the Author: Robert D. Grimm is President of RDG Consulting, Inc., a firm specializing in cutting the red tape" contractors to obtain, manage and derive maximum utility from their Federal Supply Schedule contracts. Bob is a Certified Professional Contract Manager, an NCMA Fellow, and is an Advisor for the Indianapolis Chapter of NCMA. Bob welcomes your comments and can be reached at grimmbob73@aol.com.

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