Lobbyists seek to broker deals with agencies

When an organization called Republican Mayors and Local Elected Officials met in Washington this month, the invitees included House Government Reform Committee Chairman Tom Davis, R-Va., and Reuben Barrales of the White House Office of Intergovernmental Affairs.

If you were a business executive who wanted the chance to rub shoulders with Davis, Barrales, and the local lawmakers, it may have helped to be a client of the government-affairs and lobbying firm Dutko Worldwide. The reason: The mayors hired Dutko to manage their group, as did the National Conference of Democratic Mayors and the Democratic Lieutenant Governors Association.

The groups are basically forums where elected officials talk about issues or policy changes they share. They also discuss policy challenges or best practices for government management. Corporate guests are not there to sell anything, said Pat McCrory, the mayor of Charlotte, N.C., who heads the Republican group. "It's an opportunity to interact with us. They can introduce themselves and help educate mayors on issues. No promise is made of anything else."

Dutko executives say that attendance at the meetings is not limited to their clients, and that the firm's role is simply to manage the sessions and make sure that the attendees are not selling "junk" to elected officials.

For Dutko's clients, it's a networking opportunity to get to know key decision makers -- and potential customers -- at the local level, who may advance in their political careers and become players at the state or federal level.

Welcome to the world of "government marketing," or "federal marketing," a nebulous but rapidly growing practice area on K Street. As the value of government contracts has ballooned, lobbying firms have pitched this marketing assistance to help their clients sell products and services to the public sector.

According to the General Services Administration, the value of federal contracts has grown 50 percent over the past five years. Several reasons explain this growth. First, the creation of the Homeland Security Department in late 2002 spawned a giant new bureaucracy with needs for goods and services.

Second, the government is still trying to integrate into its operations the information-technology revolution that has transformed the private sector since the mid-1990s. And third, the Bush administration's emphasis on competitive bidding for services traditionally provided by government has created billions of dollars in business opportunities for private firms.

All of this has set off a scramble for government contracting business. Today, articles by this magazine and other news organizations listing the "top 10" or "top 20" K Street firms almost invariably include a quote from a company executive explaining that their government-marketing practice is partly responsible for their success. Everyone, it seems, is doing it, and doing more of it than a decade ago.

Even Michael Brown, the former Federal Emergency Management Agency administrator who was pushed out of the agency last fall, is in the federal-marketing business. Brown says he has about a dozen clients, including a firm with a product that he says could solve some of the communication problems that dogged FEMA during its response to Hurricane Katrina. The firm already does business with the Defense Department, Brown said, and "I am going to try to get other departments to adopt it."

But no one can offer a single, clear definition of "government marketing." Firms use that term to describe an array of practices ranging from getting earmarks into appropriations bills to inviting clients to meet with the Republican mayors of midsize cities.

Dutko is a good example. The firm has had a state and local practice since 1994, but in 2004 it broke out a separate government-marketing practice to help clients sell to the feds. That practice saw a 50 percent growth in revenue last year, and Dutko CEO Mark Irion said that the firm is planning to increase government marketing "at a pace that will exceed the growth in our traditional federal lobbying business."

But marketing to the federal government involves more than just knocking on agency doors and trying to sell widgets.

George Thompson of the PR firm Fleishman Hillard -- which opened a government-marketing practice in June 2004 -- likened selling to the private sector to "planting a wheat field": You lay seeds in the spring, harvest the wheat in the fall, and start over the next year. But marketing to the government "is like planting an orchard: You plant the seeds, and in a couple of years they end up bearing fruit that will sustain you for a long period of time."

Firms come at government marketing with different strengths and philosophies, but they generally agree on several elements. Most practitioners interviewed for this article expressed some skepticism about a strategy that relies on getting an earmark into an appropriations bill that directs an agency to buy a product or invest in research with a specific firm. It's not that such earmarks are impossible to get or are undesirable. But they tend to be all-or-nothing propositions, and if they don't pass for whatever reason, the client is back at square one.

That leads to Plan B, which seems to be the larger part of this growth industry -- building relationships with decision makers within government agencies.

The first step is establishing a reputation for government officials to take note of. Companies can do that by placing advertisements in media aimed at government officials; by filling exhibit halls at government conferences; and by trying to get their executives placed on panels discussing policy issues. Lobbyists help plan these sophisticated campaigns.

Beyond building a client's reputation, practitioners say that the most important part of government marketing is getting to know the needs of the agency to which the client wants to sell.

Robert Perreault, a vice president at health care provider Health Net, said that the Jefferson Consulting Group, a pioneer in federal marketing, helped his company land a contract to provide health care coverage to the Veterans Affairs Department -- but the process took years.

Jefferson introduced Health Net to VA officials around the country, looking for ways to expand on the company's work of providing health care to the Defense Department. At the suggestion of some regional VA officials, Health Net developed what amounted to a preferred-provider network for veterans' health care delivered outside the VA system.

The VA, Perreault explains, sets a price that it will pay out-of-network providers for a procedure -- say $1,000 for a minor surgery. But Health Net, using its provider network, can get the same service for $700 and split the savings with the VA. The company is paid only for the savings it generates, and Perreault said that the arrangement has saved the VA $56 million since the system was launched at the end of the 1990s.

Federal-marketing lobbyists emphasize stories like these, in which a company sells a product that helps the government do a job better. The lobbyists argue that building relationships with purchasing officials is as important to government as it is to private companies, because agencies can't purchase what they don't know is available.

So federal marketing involves a lot of schmoozing. Greenberg Traurig hosts a breakfast session every month or so, where it brings in a federal procurement official to speak with about two dozen Greenberg clients. Speakers have included the head of the White House Office of Federal Procurement Policy and a top acquisitions officer at Homeland Security.

Bethany Noble, who heads the seven-person practice at Greenberg, says it is not a sales opportunity for clients, "but they get a lot of face time and Q&A" with top purchasing officials.

For lobbying firms, expertise in federal purchasing also opens the door to a lucrative consulting practice -- namely, market forecasting for venture capitalists. Someone considering investing in a company that makes picnic tables, for instance, may ask Dutko or Greenberg to conduct a quick-turnaround study on the potential federal market for picnic tables.

Lobbyists emphasize that none of their marketing practices establish any direct link between contact with government officials and the actual sale of a product to the government. Ultimately, any vendor has to clear the various legal and procedural hurdles to win a government contract, or to be approved as a vendor by the General Services Administration.

But the growth of the marketing business worries watchdogs. They fear that it creates incentives for a revolving door that lets government procurement officials retire into the private sector, then go back and sell their products to former co-workers. Moreover, the practice is not nearly as transparent as other lobbying activity.

In general, under the Lobbying Disclosure Act, contact with a federal agency counts as lobbying only if it involves repeated contacts with top officials on behalf of a single client. The bulk of government-marketing practices won't rise to this level, so firms don't have to disclose what they are paid to contact agencies, as they do when they contact Congress.

Charles Tiefer, professor of government contracting at the University of Baltimore Law School, said nothing is inherently wrong with companies meeting with government officials to explain technologies or products that could make agencies more efficient.

The danger, he said, is when a purchasing officer who wants to be innovative meets a lobbyist representing a company with a new or exciting product, and together they hatch a purchase that may have little value to the government and that operates outside of any meaningful oversight.

"Junk gets sold," Tiefer said, "and services that shouldn't be bought get bought."