Businesses can encounter many barriers to entry when pursuing a contract. Whether it’s a lack of relevant past performance, technical capabilities, personnel with expertise, or experience with the customer…any business (including GOVCON!) seek solutions to such gaps. This challenge comes up in any number of situations, from Black Hat reviews, to market intelligence engagements and others. The fundamental concern of any business is HOW they will close a gap. If we simplify the path to close a gap, it involves one or more of the following simple ideas:
- Buy
- Borrow
- Build
Whether the solution to a problem is to buy, borrow or build out of some sort of business gap, such measures will be used to temporarily or permanently close gaps in:
- Technical expertise (skills)
- Customer relationships
- Technology to create or support a solution
- Specialized facilities to conduct work
- Access to contract vehicles to pursue U.S. Government contracts
- Unique personnel with a combination of credibility, technical and/or management skills and other valuable knowledge
Choosing among buying, borrowing and building involves balancing risks, time and investment necessary to execute the action.
Buying
Buying is typically associated with mergers and acquisitions. It may seem “easy” as it (in theory) instantaneously closes gaps through acquiring a business that has means of closing gaps. Aside from identifying a suitable and available business to buy, there are many risks and immediate costs involved. Acquisitions take due diligence to verify claims made are valid, time to integrate, etc. Beyond paying a premium to acquire the business, such bold investments do not always yield the expected outcome.
EXAMPLE
ASRC Federal’s purchase of Vistronix is a prime example of a company gaining technical capabilities and customer relationships through an acquisition. With the acquisition, ASRC Federal expanded its footprint in the Intelligence Community, federal civilian agencies (specifically the U.S. Department of State, Environment Protection Agency, and the U.S. Department of Agriculture) and the U.S. Department of Defense. It also boosted the company’s capabilities in IT, signals intelligence, advanced analytics, and software development. It provided ASRC Federal access to several SMEs and technological advancements they could provide to their new base of federal civilian customers.
Borrowing
Borrowing is typically a lower-cost investment and provides companies with an instant return on investment. However, borrowing capabilities is by definition a temporary fix. This is typically realized through a prime-subcontractor relationship, contracting teaming agreement (CTA), or joint venture. However, note that joint ventures typically only last for a single project or short period of time (maybe a few years at most). Forming joint ventures are considerable efforts and there is a cost associated with making them.
EXAMPLE
In 2019, Accenture was awarded a $2 billion BPA by the U.S. Department of Energy for CIO Business Operations Support Services (CBOSS). Accenture was tasked with providing a wide variety of IT support, telecommunications, shared services, systems architecture and engineering, and cybersecurity support. To gain additional technical depth across the full scope of work, Accenture formed a contractor teaming arrangement (CTA) with the former Unisys federal business, General Dynamics Information Technology (GDIT), and Red River.
These companies filled the following gaps:
- GDIT provided expertise in unified communications and experience operating network centers.
- Red River provided experience in IT hardware and software, networking, security, analytics, cloud solutions, mobility, and collaboration.
- Unisys’ federal business (acquired by SAIC) provided digital transformation and application services, security software and services, digital workplace services, and cloud and infrastructure services experience.
Building
Building is a low-risk approach but constitutes an investment, which may require years to reap results.
EXAMPLE
In early 2019, Leidos built their Leidos Innovation Center (LInC) to perform externally funded contract research and development (CRAD) work for customers like DARPA, IARPA, AFRL and other Intelligence Community (IC) Science and Technology (S&T) organizations. The facility supports program capture and execution through addressing national technical challenges and the development of technologies, platforms, and discriminators.
The facility enhances the company’s capabilities in AL/ML, cyber technology, data analytics, electronic warfare, intelligence, surveillance, and reconnaissance, and chemical, biological, radiological, nuclear sensing (CBRN). Moreover, it enables Leidos to leverage their robust R&D capabilities for a variety of capture pursuits.
FedSavvy Strategies Takeaway
- Government contractors rarely have the perfect story for how they can fulfill all contract requirements.
- Contractors must identify their gaps and implement strategies for how to fill them. They often have three options: to buy, borrow, or build.
- The choice of which approach to take is greatly informed by a contactor’s appetite for risk, how long they wish for the process to take, and whether they want to permanently or temporarily fill a gap in expertise.
- When making this choice, carefully consider the implications of each and how it can not only impact one pursuit but future competitive positioning.
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