10 Differences Between Selling To Federal And Commercial Markets

Federal sales is simply not the same as commercial sales. Many sales professionals and leaders will try to say "sales is sales," but the truth is there are 10 real differences between selling to Commercial and Federal customers. 

What is the Commercial Sales Process? 

Commercial or private sector sales tends to follow a linear and transparent sales process where the sales person can hold a significant amount of influence at every stage. 

The following is a very general example of a commercial sales process: 

This is not to say the process is easy, it can be very challenging at times but the steps are easy to understand. In fact, this process is understandable for everyone from the CEO to the Front Desk Administrator, which makes it easy for a Sales Rep to gain the resources and cash necessary to gain “logos” in and grow their market share and revenues.

10 Challenges of Selling to the Federal Market 

Selling to the Federal Market is not necessarily more difficult than private sector sales but the process is far less linear and the sales rep holds much less control. Ultimately, there are 10 key differences between these two types of sales: 

1. FARS
2. ETHICS RULES
3. OBLIGATION OF GOVERNMENT FUNDS
4. CONTRACTING OFFICER
5. CONTRACT VEHICLES
6. RESELLERS
7. CONTRACTS SET ASIDES
8. CERTIFICATIONS
9. CAGE CODES
10. BUDGET CYCLE

1. FARS

According to Acquisition.gov "The Federal Acquisition Regulations System is established for the codification and publication of uniform policies and procedures for acquisition by all executive agencies." The FAR itself is a document organized into 53 sections to provide this agency-wide guidance toward procurement. If that is not enough, each agency faces additional agency-specific guidance toward procurement. 

The FAR provides guidance in which contractors to select based on past performance, how to communicate with industry to determine the capabilities available in the market, minimize operating cost and much more. 

While some private sector companies may have a process for doing business with them, it's doubtful any would have a document as stringent as the FAR. 

2. Ethics Rules 

Arguably, every organization should have a policy on Ethics Rules and aim to follow ethical business practices. However, in the Federal Government (which operates using tax payer money) ethics violations are criminal acts that may result in monetary fines and/or prison sentences for all parties involved. 

This means, as a salesperson, you cannot take a potential Government customer out to dinner, a ball game, golfing, etc to help close the deal. You cannot give them anything valued over $25, otherwise it is an ethics violation and you both could face serious consequences. 

In the private sector, such outings go a long way to help develop trust between buyer and seller and ultimately close large revenue deals. For the Federal sales rep, however, you will need to find another way to form such a relationship. 

3. Obligation of Government Funds

Typically, during a commercial sales process you communicate directly with someone who can authorize funds or, at the very least, with someone who can directly communicate with the person who can authorize funds. This is far from true in the Federal Market. 

Only a select few Federal Government employees can obligate Government funds. "Only a contracting officer can purchase goods or services or contract for them on behalf of the government. Without a warrant as a contracting officer, issued by an authorized government official, an individual cannot commit the government. If they do, they are in effect establishing a personal commitment and possibly personal financial liability for the action" (source).   

We will discuss the role of the contracting officer more in depth below, but it is important to note that the contracting officer's sole job is to obligate funds. They have little interest in or may never even use the product they are obligating funds for which makes it that much trickier to get them to sign over funds for the product you are selling. 

4. Contracting Officer 

Just as a reminder, in the Federal sales process the person who is interested in buying your product cannot actually obligate the funds for purchase, it needs to go to a Contracting Officer. Well, here's the next catch, your Federal Government contact (who is so interested in your product) may not even be able to talk to the Contracting Officer or you once the sale goes to that part of the process. 

This part of the Federal sales process can feel like a black hole in which you have little to no control over the outcomes. A Contracting Officer may reach out to you with further questions, but they don't have to (more often than not, you will never speak to the Contracting Officer). Likewise, they may need to get further quotes to determine if they are getting the best price for the technical capability and suddenly you have more competition than you anticipated. 

This part of the sales process is entirely unique to Federal sales and does not exist in the commercial sales process.

5. Contracting Vehicles

Only small dollar sales can be purchased using a Government Purchase Card (GPC) (AKA a credit card). All other purchases, need to go through an approved contracting vehicle.

Contracting vehicles are a way to help minimize operating costs (ahem FARS) by pre-approving best-in-class contractors for specific types of products or services. To get your organization and product/service listed on a Government contracting vehicle is a long, expensive process and that is just to get listed on one vehicle. There are dozens of vehicles that Contracting Officers can use to purchase a product and if you are not on (or partnered with a reseller that is on) a Contracting Vehicle that the Contracting Officer wants to use, well they can't buy your product.

6. Resellers 

Resellers directly relate to the challenges in #5. It is impossible to get your organization and all your products/services listed on every Contracting Vehicle but it is possible to partner with organizations on every vehicle that can resell your product. 

While, commercial organizations may establish channel partners to expand their sales it is rarely not as much as a necessity as it is for Federal sales. Resellers with access to the right contract vehicles expands their opportunities for sales the same way a business that accepts AMEX, VISA, Discover and MasterCard increases their opportunities for sales. 

7. Contract Set Asides

If the aspects of Contracting Vehicles and Officers wasn't enough of a differentiator from the Commercial sales process, each Government agency also needs to met specific set aside percentages of the money they spend. This means that a certain percentage of their budget must go to Small Businesses, Women-Owned Businesses, Veteran-Owned Businesses, Economically-Disadvantaged Businesses, etc.

8. Certifications 

While private sector organizations may have some standards regarding the types of products and where they are sourced from, they are likely not nearly as strict as the Federal Government. Depending on the type of product you are selling, you may need to attain one or more product certifications to prove that you meet the Government's standards. These certifications could cost your organization thousands to millions of dollars to attain and maintain but you also would not be able to sell your product to a Federal agency without them. 

9. CAGE Codes 

The U.S. Federal Government uses CAGE codes to identify your company and it is a requirement for the Contracting Officer to include your CAGE code in a contract. This is different than your Company's EIN, which is usually all you need to do business within the private sector. While you do not pay for a CAGE code, you do need to register for one to do business with the Federal Government. 

10. Budget Cycle 

This could possibly be the most glaring difference between private sector and Federal sales. It may also be the most convoluted piece of the entire Federal sales process. Why? Because it is essentially one giant moving target.

The Federal Government receives an annual budget each year designed to be spent in its entirety each year. However, budgets are rarely released on October 1st, which is the start of the U.S. Federal Government's fiscal year. In fact, they may not be released for weeks or months later but the money still needs to be spent before midnight on September 30th and Government Officials still need to follow all of the rules of the FAR which means you could have very little time to complete what is historically a very long sales process.

We provide a high level outline of the Federal Budget Cycle on this post and we dedicate an entire section of our Federal Sales Certification Training course to learning how the Federal Budget Cycle works and the strategies and tactics you can employ to still hit your quota during tumultuous budget cycles.