GOING PUBLIC

With public inquiries in Toronto and Waterloo giving municipal contractors pause for thought, we thought we'd give our readers a glimpse into large-scale federal I.T. opportunities. To find out what it's like to do business with the big boys, we tracked down Dr. McKenley Esnard.

Esnard: If you're a bootstrap operation, you don't stand a chance in hell of winning an RFP.

The former diplomat, Assistant Deputy Minister and Systemhouse exec is uniquely positioned to advise resellers on how to sell into the federal government. Esnard's 10-year-old Ottawa company, ECCI, has 120 employees providing informatics consulting services to public and private-sector organizations.

CBIZ: What type of consulting does ECCI do?
ME: I help companies trying to do business with the federal government obtain National Master Standing Offers. Our proposals have been very successful, whereas the opportunity for some of these companies to win an RFP was previously almost non-existent.

CBIZ: MERX (Canada's public-sector electronic tendering service) claims to have leveled the playing field so that businesses of any size can bid on federal, provincial and municipal projects. Has the government opened up a lot?
ME: It's become more competitive; I wouldn't say opened up; it's totally dependent on where you are in the federal government. The government is looking for the biggest bang for their buck - "We'll take the lowest cost but we want the most for our money."

CBIZ: Do you have to have the cheapest bid?
ME: Put it this way: presenting the best proposal doesn't necessarily mean the cheapest proposal. In other words, providing a winning bid doesn't necessarily mean that you win. You go on the assumption that "My bid is better than anyone else's," but the problem is you have to make sure that your prices are the best of the lot. And the effort to respond can be very costly to a corporation - it costs us $8,000 to $10,000 to respond to one RFP. You can't include that cost in the bid.

CBIZ: $8,000 to $10,000? How are those costs incurred?
ME: Our company has people dedicated to responding to a specific RFP, as we're doing now with Government On-Line [the federal project to provide information and services on the Internet by 2005]. It takes six to eight weeks four to five dedicated personnel to complete one proposal. I worked on one this summer that cost two companies over $1 million. There were only five companies in the entire world that could have afforded to responded to that RFP.

CBIZ: This all sounds quite prohibitive to the average reseller.
ME: In the U.S., [certain groups] will pay you to respond to an RFP, whereas in Canada, they don't pay you a nickel. You respond to an RFP, you take your chances like everyone else. This means if you're a bootstrap operation, you don't have a chance in hell of winning an RFP, to put it bluntly. The process is so complex. It's supposed to have been made simple and it isn't. You'll speak to 20 companies in the City of Ottawa that deal with the federal government and they'll tell you that responding to an RFP is not a cheap process. So if you're a Ma and Pa shop, good luck.

CBIZ: Are the costs comparative no matter what level of government you're targeting?
ME: Yes, it's also expensive at the municipal government level. One, you have to have subject matter expertise; two, a very good writer and editor, and three, a very good marketing person to manage the whole process.

CBIZ: How do you go about finding what's available?
ME: There are many RFPs that go out on a daily basis in the federal government. If your company haven't developed a process that will allow you to select the ones that you want on a daily basis, you'll miss just about everything.

CBIZ: Plus, you have to make sure you're authorized on the right equipment.
ME: Yes, and in some cases you may have to have certain certifications and entitlements. I did [an RFP] this summer where you had to set up a $11.5-million bond to even respond. Not too many companies have got that kind of money to sit on.

CBIZ: If you're a reseller partnering with a manufacturer like IBM, though, I'm assuming they'd help front the money.
ME: Sometimes they do but not in every case. It depends on what the reseller will do. We don't partner with anybody. I got a call this morning: we're going to have to put up $250,000 just to get in the door, and nobody's paying me the Interest charges on the money.

CBIZ: What are the size of the contracts that result from these RFPs?
ME: Anything over $100,000. That's on MERX. In some cases it could be as little as $50,000.

CBIZ: So the cost of putting together an RFP could be a sliding scale depending on the size of the ultimate project.
ME: Yes, it depends how much expertise the company might have with respect to that specific RFP. The only problem with MERX is a lot of times it doesn't give you a lot of details, so you may have to pay $40 or $50 to get the document, only to find out you don't qualify. That happens to us quite often. We think, "Oh, this one looks good," and you send for the document and you find out,"Uh-oh."

CBIZ: I'm looking at MERX's Information Processing Services category and it lists 85 projects; five were posted today.
ME: And there are different situations. Contracts under $25,000 are usually issued by the department, or the division within the department on their own. So it's up to you as an individual to walk around and find out who's got what. It's not like it was before when you could go to the I.T. department, get a name, sit down and speak with the person, and find out if you met the requirements. Now it's like a needle in a haystack because a lot of departments have become decentralized. There could be just about any manager or any individual in an organization with a requirement that you will never know about.

CBIZ: What's the average length of a smaller contract?
ME: Usually two months. It depends on the per diem of the individual involved. If you've got a senior manager who demands $1,500 a day, $25,000 is not going to last very long. Chances are the project will be too small for him, or the project is too big for $25,000. They may amend that project to ensure that it gets finished, but that company may be limited, based on the contract, as to what they can deliver. Another federal government contracting process is the Informatics Professional Services (IPS) group. [Departments] call up a company and say, "We found these people on the IPS that have these skills. Send us an RFP; these are the requirements we're looking for." Then you'll get a contract usually for less than $70,000. MERX comes after that. Government On-Line goes in tiers: $100,000, $200,000, and anything above that.

CBIZ: How long does it take to get paid?
ME: Realistically, most of the time you end up paying the bill, your staff and everybody else. Then you wait for five to six months before you see your first cheque. In a sense you're financing the government, interest-free. It's nice that you're writing this article, because I think it will make a lot more companies aware of the complexities, and present them to the government: "This process is not as simple as you think it is."

Alison Eastwood
Channel Businness
February 5, 2003