MARKET OVERVIEW

As mentioned above, there are 87,000 separate state and local buying agencies from Hawaii to Puerto Rico. What does this market include? Everything from major state agencies such as the Office of General Services of the State of New York, to a local water district in California. Counties, cities, towns, hospitals, school districts, police and fire departments, and school districts, all purchasing various products and services on a daily basis.

According to the WEFA Group, total purchases of goods and services by State and Local governments were $966 billion in 1998. This is projected to grow to $1.31 trillion by 2004. Though state and local government spending varies depending on location, don't let the fact that you are located in a small state deter you. While over $181 billion was spent in California in 1998, almost $3 billion was spent in Vermont.

INDUSTRY SECTORS

What types of products and services are being purchased? Everything! Food, office equipment and supplies, security services, construction equipment, temporary personnel services, promotional products, computers and supplies, engineering services. You name it, the government needs it. According to the magazine, The Public Purchaser, the following is the top 20 areas where state and local governments spend the most money:

New construction - $101,060 million / year
Maintenance and repair construction -$32,065 million / year
Electric services - $15,467 million / year
Business and professional services (not including medical, 
        legal, engineering, accounting) - $15,129 million / year
Petroleum refining and related products - $12,068 million / year
Wholesale trade - $11,621 million / year
Finance - $11,106 million / year
Real estate & royalties - $10,032 million / year
Computer and data processing services - $8,879 million / year
Food products - $8,654 million / year
Communications, except radio - $8,490 million / year
Newspapers, periodicals, other printing - $7,122 million / year
Motor vehicles - $5,887 million / year
Drugs - $4,936 - million / year
Railroads and related services - $4,287 million / year
Scientific and controlling instruments - $4,263 million / year
Legal, engineering, accounting - $3,988 million / year
Computer and office equipment - $3,931 million / year
Automotive and repair service - $3,708 million / year
Gas production and distribution - $3,645 million / year

If you are a new company, with a very local market area, the easiest way to begin to tap into government sales is by personally contacting the various counties, cities, school districts, and other public agencies in your region. Normally, you want to contact their purchasing departments and request to be placed on their bidders (or vendors) list. This will enable you to receive information by mail (a bid notice) whenever the specific agency is looking to purchase your product or service. Also, you should check out the classified section of your local newspapers. In many states, agencies are normally required to publicize their bidding opportunities in a local publication. If you are interested in selling to state agencies, you may be able to subscribe to the state's Contract Reporter, if one is published. This is a printed publication, usually outlining all of the bidding opportunities available over a certain dollar amount (For New York State, any contract over $25,000).

One tip: When submitting your bid, include a self-addressed postage-paid envelope and request bid tabulations. This will enable the agency to send you a list of companies that submitted bids, and the dollar amount of the winning bid. This information allows you to evaluate your future bidding strategy.

EXPANDING GOVERNMENT SALES

If you are looking to sell throughout your state, several states, or nationwide, then you need to consider two options for identifying potential bidding opportunities. The first option is the do-it-yourself (DIY) one. Start by contacting government agencies across the country to be placed on their vendor lists. You may also want to subscribe to all of the published state Contract Reporters. The cost for a one-year subscription for 12 Reporters (including New York City's own Reporter) is over $1,500.

Subscribing to newspapers in the major markets is another source, and finally, you will need to start looking at using the internet. State and local governments have discovered the world wide web, and many are now posting their bidding opportunities on-line (example: the Montana Department of Transportation at www.mdt.mt.gov/bids/). However, be aware that there is no single standard being used by the agencies. Each web site is structured differently, and locating the bidding information is not always easy. How often the web site is updated also needs to be determined. Some agencies update their site on a daily basis, while others may do it only once per week.

As you can see, with 87,000 agencies nationwide, this can be a major project. Many companies have one or more people employed full or part-time, identifying and tracking bidding opportunities. Time and money will be spent as you build a data base of agencies. In addition, there are a few that charge registration fees. Finally, even being registered directly with an agency may not guarantee that you will receive all of the bids issued by that agency for your specific product or service. Some agencies will rotate through their vendors list, only sending a specific bid notice to a few of the vendors registered. All of this may cause you to consider the second option, subscribing to a bid tracking service.

A bid service, such as BidNet, tracks bidding opportunities from a specific state, region, or nationwide. The bids are entered into a computer data base, and matched to the products or service provided by the service's subscribers. Where there is a match, a one-page summary of the bid is then delivered (by fax or e-mail) to subscribers on a daily basis. A bid service offers you a number of advantages: an instant network of thousands of purchasing agencies from across the country, bids targeted to specific products / services, no vendor list rotation, and all at a fraction of the cost of the DIY option. Recently, a customer of BidNet's learned about a bidding opportunity after joining the service three weeks previous. After submitting their bid, they found out they were the only company to do so. The result: a $500,000 contract!

PITFALLS OF BIDDING

There are a couple of things you should be aware of before entering this market. Due to their competitive nature, some industry sectors have razor-thin margins. Also, there are some local agencies who exhibit a preference for vendors located in their area. However, if you take a long-term perspective, and put the time into it, the state and local government market can be a profitable one.