Contractors Increasingly Look to Diversification for Stability and Growth Previous item Are You the Business... Next item Kick off 2015 with the...

Say the name “General Dynamics” to anyone in the government market and images of tanks, warheads, and other military hardware come to mind.  Now, though, General Dynamics is seeking to replicate its success in areas such as logistics management and healthcare provision in state and commercial markets.  It’s not alone.  As federal acquisition budgets remain static more and more traditional government contractors are looking for ways to either get into or expand in non-federal markets, including the private sector.

Contractors are looking both inside and outside of their traditional operational areas, as well.  How, for example, can a Navy ship-based solution be adapted to a school with similar space restrictions?  How can experience with providing federal cyber solutions be transferred to large, corporate clients?

It’s not just logical follow-on areas that contractors are thinking about, though.  Some are truly looking “outside the box” to see what skills and solutions might be adapted from a classified intelligence project to a project for tax record centralization.

The common ingredient each of these activities has is diversification of company capabilities to stabilize or grow business outside of what may have been a company’s primary focus on federal business.

Federal contractors may have a lot to offer commercial or local government clients.  Experience in solving difficult challenges, working on higher-profile projects with lots of oversight, tight budgets, etc. are all skills any customer should want to have in a contractor.  Proven track records of success and reliability can help you win business in any situation.

Of course, contractors have to be knowledgeable about the different rules and customs that drive commercial business. Relationships matter here, just as they do federally.  Competitors who have traditionally focused on commercial accounts may have an initial edge in terms of the special relationship and rule-based knowledge that is required to be successful.  Federal contractors, however, should be quick learners given the environment in which they have traditionally done business.

One thing that federal contractors need to keep in mind is that commercial customers may expect a nice dinner, lunch, or free game tickets.  Offer those to a federal customer and you may find yourself, and your customer, under an ethics investigation.  Anyone who’s ever been to a government-based trade show and a commercial market show knows, though, that gift rules outside of the federal world are usually much more relaxed.

Diversification help may be available from some state governments.  The Governor of Virginia, for example, recently expressed his interest in diversifying his state’s business so that it is not overly-reliant on the peculiarities of federal budgeting.  States may be able to provide information and support, especially to smaller firms, who are looking to expand their client base.

If your company is seeking to recapture lost business, stabilize, or grow – diversification of your customer base outside of the federal market could be key.  Think about what your firm has to offer a commercial or local government account.  Start with the skills and knowledge that are easily transferrable.  What is in your local community that may provide opportunities?

Barring unexpected events, federal IT spending is expected to remain flat until the 2016 fiscal year for civilian agencies and perhaps FY 2017 for DOD.  Your company has at least a year to wait before federal purse strings could loosen up.  Finding new customers in the state, local, or private sector market segments is a smart idea to ensure the future of your business.