Are You Talking To A Potential Competitor?
Most businesses understand the basics of being a Prime or a Subcontractor when responding to a government Request For Proposal (RFP) or Request For Quote (RFQ). As prime, you submit the proposal and if awarded, your company receives the award. You may have one or more companies (subcontractors) who work for you on the project. As a subcontractor, you are a member of a team and work for the prime who is awarded the contract. Most companies understand the basics.
Two weeks ago, I was on a conference call with a media organization that provides federal radio advertising on government radio stations. What transpired was troubling and while it was legal, it was highly unethical. More important, the situation discussed below educated the prime on what questions you must ask other companies when you obtain pricing.
RSM Federal is on a team responding to a federal agency RFP. Because the RFP requires purchase of radio ads on specific radio stations, every company responding to the RFP had to call the radio station to get pricing. To broaden this concept, if it were a technology RFP, you might call Oracle to get pricing on a database license; or if the RFP asks for kitchen exhaust hoods in addition to cleaning services, you may provide the hoods, but you may need to subcontract to a cleaning company and obtain pricing for their cleaning detergents. In this case, it's obtaining pricing for on-air time slots. Our team is a strategic marketing and advertising team - not a radio station. Every company that wants to respond to the RFP has to call the station for pricing.
This led to a conference call. Throughout the call, the employee for the radio station was answering questions but didn't seem to be providing complete answers. It felt as if she were holding back information. So I asked the following questions:
- Are you providing the same pricing to every company that calls you and if not, how do we obtain preferred pricing?
- Are you, as a radio station planning to subcontract or prime this opportunity?
- If you are planning to prime, is our team obtaining the same or better pricing?
- If you are planning to prime, are you running a screen?
She would not confirm that they were providing the same pricing to all companies or if there was preferred pricing. When asked directly, she confirmed that the radio station was in fact planning to respond to the RFP as a prime. Finally, she would not verify if the pricing given to our team was competitive (the same) as what the radio station was going to quote themselves. In other words, the radio station was providing pricing to various teams but it was likely that the pricing in their own proposal would be less expensive than what they were giving to us. Furthermore, now that we knew they were responding to the proposal AND providing pricing to other teams, we asked if they were running a screen. They refused to answer the question.
What is a screen? When a company plans on responding to an RFP as the prime (submitting a proposal directly to the government) and as a subcontractor (supporting pricing, requirements, manpower, etc.) to another company, ethics require that the company employ a screen. In the case of this radio station, they should have two teams that do NOT communicate between themselves on the specifics of the RFP. This ensures that the services being provided and the costs of those services are not being communicated between the internal teams. Again, not illegal - but full of unethical possibilities. Here's what can happen: Let's assume you are the prime and you ask for pricing on a ten second radio slot and get $85. Now you have to add a margin so let's assume your bid to the government is $90. Without a screen, the radio station that just gave you a price of $85 recognizes that you are going to add a margin. Then they bid $75 directly to the government. You're at $90 and they are at $75. This is legal. But it's highly unethical and this situation can be prevented by asking the questions above before pricing is discussed.
And here is what we left out - during the call, our team discussed proposal strategy, assuming that the radio station was not a prime. The alarm bells didn't start going off until after we had discussed our strategy. So we had given another company, our competition, a competitive advantage without realizing it. The team had assumed that since the opportunity was a 100% small business set-aside, that the radio station would not desire and could not respond as a prime. Bad assumption.
While not legally a subcontractor, by obtaining pricing from the radio station, they are a de-facto subcontractor because those parts of the RFP are being subcontracted to another company. . . the radio station. There are no none disclosures or teaming agreements - just pricing.
Our team identified ways to compensate for this and updated our pricing accordingly. We're currently in source selection. Whether our team wins or loses, we'll provide an update to this article.
Every government acquisition is different. For many companies, responding to an RFP may not require products, services, and pricing from another company. This situation is a bit more unusual because the government specifically identified a radio station by name in the RFP. We had to get pricing from them.
To recap the lessons learned: If you have to get pricing for products or services from another company, before you discuss the opportunity, you must first verify their intent. Are they providing pricing to other teams? Are they a sub-contractor on another team? Are they intending to prime? Also, depending on the answers, are they running a screen? This provides your company or team with confidence that all parties are being ethical. Regardless of running a screen, are they being consistent with their pricing and if not, to what extent? In certain situations, you may decide not to bid because it may be too difficult to achieve competitive pricing.
RSM Federal specializes in these and other small business government teaming and sales strategies. For more information, please visit www.rsmfederal.com or call us at (703) 677-1700.
Joshua P. Frank is Principal and owner of RSM Federal, a federal consulting and business-acceleration strategy firm that represents small and large businesses in accelerating the education and processes necessary to win government contracts. For more information and videos about RSM Federal, please visit www.rsmfederal.com