Continued Procurement Problems
While spending pressures capture most of the headlines and accepting this as a relatively universal growth obstacle, procurement difficulties may also be considered a key contributor.
Median Award Months by Quarter
Median Award Months by Size1
Anecdotally, acquisition personnel are stretched from a resource and capability perspective. This can translate into drawn-out procurements, and a more likely disconnect between requirements definition at the request for proposal and the requirement needs upon contract execution. In this disconnect lies the potential for execution and financial inefficiencies. Add into the mix a heightened protest environment, and timelines further drag. Having analyzed public data for a sample of high profile procurements since 2009, the median time in months from solicitation to award (“Median Award Months”) is nearly 12. This figure can be further examined as an average of approximately 15 months for Department of Defense (“DoD”) let contracts and nearly 14 months for non-DoD opportunities; these averages are influenced by select procurements that experienced significant delays.
A drawn out procurement cycle poses various challenges to contract suitors over the additional compliance and disclosure burdens recently levied on contractors. First, a longer time from bid preparation to realization of contract revenue, if and upon award, can lower the ROI on business and proposal (“B&P”) dollars, time, and effort. Second, the uncertain procurement process complicates how to allocate (or budget) B&P resources today, when returns are more than a year away. Bid, no-bid decisions appear tougher than ever. Third, requirements sometimes seem in a constant state of flux, especially over a 12 – 24 month period. These procurement characteristics can complicate financial management, business operations, and thereby inhibit organic growth.
In summary, while there are bid opportunities abound, it’s critical that companies recognize and plan for delay, from both a budgeting and hiring perspective. From an M&A preparation standpoint, maintain the flexibility to unwind conservatism as developments unfold. This approach can mitigate the risk of underperformance, while maintaining the rewards of successfully executing your strategic plan.