Tech Insider: Story of a schedule
We humans have come up with some devilishly creative ways of initiating people into our various circles by testing their mettle, making sure that they truly belong among us. Fraternity pledges are forced to sit naked on blocks of ice and recite the Greek alphabet, backward and forward. Fresh military academy cadets have their heads shaved and are subjected to a year's worth of insult and servitude. Prisoners are forced to walk lines of cells to the hoots and hollers of their new roommates.
The government has its own special kind of initiation for would-be technology contractors, though it's not quite so colorful. For the past 10 years or so, giant and tiny firms alike have found it nearly impossible to sell in the federal market without first possessing a very special contract called a schedule. To get that contract, companies must go through a very particular rite of passage, namely a full inspection by the General Services Administration, which deems the corporation fit or unfit to do business with federal agencies. If the company passes muster, it's locked into offering rock-bottom prices to its future customers, and it agrees to pay the agency an amount equivalent to 1 percent of all its sales.
There are dozens of types of schedules. The one developed exclusively for technology goods and services, known as Schedule 70, is currently moving $9.7 billion in sales. Given the importance of this single contract to the future success of nearly 2,000 technology firms, it seems beneficial to consider the case of one company in the hunt for its own schedule, and in turn for wider access to a market valued at more than $50 billion.
Newark Electronics, based in Chicago, sells electronic components through a widely circulated catalogue. The most recent edition is about 2,000 pages long and offers all kinds of things, from connectors to switches. The dense tome is regular reading for corporate and individual buyers of electronics goods, whose purchases average $250 each.
The federal government is one of Newark's biggest customers. The average agency order is $350. Federal purchases from Newark total about $15 million each year. But most of that revenue is made up of small purchases under $2,500, for which federal employees may use agency-issued purchasing cards. In all the time it's been in the government market, Newark hasn't had a GSA schedule, and that was causing more harm than good.
Many goods the government wants-sophisticated laboratory equipment, for example-exceed the $2,500 cap, said Doug DiVenere, Newark's government business director. A schedule would let customers quickly buy expensive as well as cheaper goods from Newark's catalogue.
DiVenere knew his firm was missing opportunities. Sales people told executives they had to walk away from business because they couldn't offer the schedule as an option. Not having the contract was costing money.
DiVenere didn't have to convince Newark's decision makers that getting onboard with GSA was the right thing to do. His customers made the case for him. "Because they've been limited and restricted," DiVenere said, "they've been asking us for years to participate in the schedules program."
Newark took action, and one year ago the company trekked into the GSA wilderness in pursuit of the government's "stamp of approval," as DiVenere called it.
Newark's adventure starts with an odd twist. Although the goods the company sells are used in or with a huge range of IT equipment, Newark opted to apply for the Hardware Superstore, a schedule that covers such items as garden hoses and socket wrenches, after officials who manage Schedule 70 told Newark having all its products on that contract wasn't a good fit. Being on the hardware schedule wouldn't keep Newark out of competition with other resellers or manufacturers that hold Schedule 70 contracts. In fact, nearly every product Newark sells can be found on some other company's schedule.
Next, DiVenere was asked to fill out a 92-page questionnaire. GSA wanted to know the company's size, whether it was registered as a federal contractor, how many of its suppliers qualified as small or minority or women-owned businesses, and a litany of other questions.
GSA was also particularly concerned with whether or not Newark could account for its total federal sales. The 1 percent fee GSA collects is based on those sales. DiVenere said if the company had no way to provide the information, it would have no hope of winning the contract.
The application process took about five months from start to finish, DiVenere said. Much of that time was spent coding federal accounts to monitor Newark's suppliers. Just filling out the paperwork took several weeks. On Dec. 1, Newark submitted its offer to GSA. Five months later--to the day--it was awarded the contract.
DiVenere and his team had little time to savor the sweet smell of success. The arduous process of winning the contract was just the first step. Now, Newark would have to let people know its schedule was open and ready for business.
Thus begins the ever-present, ever-pressing need for federal contractors to market, a concept totally foreign to them only 10 years ago, before sweeping reforms unchained agencies from restrictive purchasing regulations and turned the federal technology market on its head. DiVenere said Newark started the process early, putting out the word eight months ago that its schedule was coming. The company also set up a special, toll-free number just for federal buyers, and agency shoppers can now order the catalog free of charge or access it online.
Jackie Schatz, Newark's federal marketing manager, said the schedule is a major part of creating "brand awareness" for the firm. Traditionally, commercial firms build such "stickiness" in the minds of the masses through months, if not years, of repetitive advertising, product testing and teasing, and crafting the perfect slogan and name. The same rules apply in the federal space, but as Schatz and thousands of other marketers would attest, without a schedule, a company is often not taken seriously.
For schedule holders, the future health of the program is of great concern. The program has come under attack recently from lawmakers that fear agencies are too freewheeling with these flexible agreements and aren't abiding by the rules of fair and open competition. The schedule makes it easy for an agency contracting officer to go right to the vendor she wants, for example, without having to release a completely open solicitation.
While the debate about appropriate use of the schedules plays out, companies like Newark must stay focused on winning more business. How well they do that will tell them whether going through the government's rite of passage for schedules was ultimately worth the effort. In the coming months, Tech Insider will check in periodically with Newark to see how they're doing.
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