Lifting the lid on Business to Government Commerce
For manufacturers, distributors and other B2B sellers, selling to government agencies can be challenging. But those who can navigate the bureaucracy and land a contract can reap great rewards.
Digital commerce pioneer Oro Inc, the industry leader behind OroCommerce, reveals the B2G selling challenges in the industry, as well as its benefits.
B2G eCommerce refers to electronic transactions between businesses and government entities. This involves selling to federal, regional, and local governments, including publicly funded agencies, subdivisions, affiliates, and other entities. The B2G business model is a variant of the B2B model that involves transactions between the selling business and the purchasing governmental entity.
For example, businesses that specialize in construction frequently perform B2G transactions with government agencies. Government agencies will solicit requests for proposals (RFPs) that detail the work needed for the construction of new buildings, park developments, libraries, schools, or road construction. When an agency approves the tender of a business, they begin a B2G relationship.
Both B2B and B2G commerce can be complex with extensive regulations and complex approval processes; yet there are some differences between the two models. In terms of vendor choice, B2B customers have significant freedom in selecting suppliers depending on the industry; while the government and its affiliated customers are limited by their procurement regulations when screening and selecting suppliers.
Additionally, there are also differences in sales cycles. B2B transactions are not spontaneous and the businesses in question look for trustworthy, long-term suppliers. Lead pools are smaller and sales cycles are long compared with B2C, but are relatively linear and predictable. The sales cycle in B2G is usually longer than in B2B due to additional workflows and approvals required. While getting B2G contracts is more difficult than B2B, they tend to be larger value contracts that extend over a longer period of time.
Despite a few more hoops to jump through, there are some great benefits of engaging with B2G commerce. The federal government, for instance, sets aside contracts for women-owned small businesses (WOSB) and and women-owned small businesses (EDWOSB) in specific industries in distribution, manufacturing, warehousing, and construction. Similarly, DVA contracts are offered exclusively to veteran-owned small businesses.
There are also intangible benefits to doing business with the government. Government agency contracts can boost company awareness and enhance brand reputation. Not only does your contract bring in sales, it can help land additional sales in the private sector. As a government contractor, you’ll play your part in providing services for or solving some of the country’s most pressing challenges. Because governments prioritize corporate social responsibility, they help businesses give back to the communities where they operate. Even if your business is small, government tenders are designed to place businesses of all sizes on an even playing field and almost all federal agencies are required to procure a certain amount of products from smaller businesses.
There is, of course, the other side of the coin to consider in terms of the disadvantages of B2G commerce. Government contracts aren’t negotiated like other business contracts. In B2B the parties simply negotiate mutually agreeable terms. Government contracts are governed by FAR, which is designed to protect the government’s interests. Businesses selling B2G must learn about FAR, their legal rights, negotiation options, and adjust their contract processes accordingly. In addition, contract agents may negotiate on the government’s behalf.
Selling to the government is a complex and resource-intensive endeavour, but can be lucrative when done right. Luckily, manufacturers, distributors, and other B2B sellers are well-positioned to capitalize on B2G opportunities.
Article by Chris Raven, UK Channel Manager at Oro, Inc.