Zero dollar winning – Part 1
Author’s Note: Zero dollar winning in federal contracting occurs when you secure a “hunting license”—an award that initially comes with no guaranteed money or work. The challenge being most companies winning these zero dollar contracts struggle to turn them into revenue-generating opportunities.
Let’s start by clearing up terminology and talking about where the money goes when agencies leverage zero dollar contracts.
First, zero dollar winning is what happens in federal contracting when you receive a multiple-award contract with no guaranteed money or work. The result is a zero dollar contract.
An agency-specific contract is one that allows purchases for just one particular organization, whether it’s at the office, agency, or department level.
A multi-agency contract(MAC #1) is similar in the outcome to be achieved except it’s available to two or more agencies. Think of it like HUD and VA joining forces on a Veterans Housing program and pooling their resources.
Then, there are governmentwide contracts. Again, the outcome is a common theme but these are available for any federal entity can use as if they had written it themselves, for their own use.
Finally, we have a multiple-award contract, or MAC #2. These can be issued as agency-specific, multi-agency, or governmentwide, and are awarded to two or more vendors.
Want to know about total spending on zero dollar contract vehicles? During fiscal year 2023 (from Oct 1, 2022 through Sep 30, 2023) multiple-award contract spending accounted for 25 percent of total fiscal obligations. This means for every dollar spent on zero dollar contracts, three dollars were spent on contracts that were not zero dollar vehicles. Another way of saying this is, of the recorded $760 billion in FY23 obligations, $570 billion was obligated against single-award contract vehicles recorded as dollars to basic ordering agreements, blanket purchase agreements, and indefinite delivery contracts in the Federal Procurement Data System (FPDS). Also included in that tally are dollars to standalone awards recorded as definitive contracts and purchase orders. Those last ones are called standalone awards (or standalone contracts) because they are not used in conjunction with an indefinite delivery vehicle (IDV). They are awards that stand on their own. I’m leaving this here so you can refer to it later.
Let’s briefly revisit MAC #2, multiple-award contracts. It’s important to note that not all multiple-award contract vehicles are created equal, nor are the always easily recognizable. Typically, these MACs operate under “fair opportunity” guidelines, meaning that all awardees enter the contract with the understanding that they—and every other awardee—will have a chance to bid on each opportunity. This also depends on the contract structure that could be:
- – one big award pool, or;
- – multiple pools based on criteria like functional area, business size, or socioeconomic designation.
Some multiple-award contracts are what I like to call single/multiple-award contracts. These are a hybrid form of multiple-awards still in use today. Back when I was actively selling to Navy Fleet Industrial Supply Centers (FISC), I secured blanket purchase agreements (BPAs) with various centers, including those in Jacksonville, San Diego, Puget Sound, Norfolk, and several others. These BPAs appeared to be multiple-award contracts on the surface, but their actual structure told a different story. These were not bound by fair opportunity rules, and a quick search in FPDS showed them listed as single-award contracts. Most of us vendors, and our customers, knew that a number of companies had been awarded the same contract for identical goods and services. The approach used by the buyers resembled my high school round robin wrestling tournaments. Each awardee had a turn at an opportunity, when it was your turn. Those of us who were clued in and patiently waited our turn as these contracts were both active and lucrative. The key was to avoid any actions that might give the buyers a reason to offer your spot to another company. I see this tactic in use today across many agencies. Getting “kicked” out of line can happen simply by not responding often enough. Read your contracts and agreements.
Here’s the main takeaway. Be sure to understand what you’re trying to win, because you just might get it. Now what? These zero dollar contract vehicles are procurement solutions looking for a customer requirement to resolve. Until a requisition is submitted to a contracting activity, zero dollar contract vehicles are pretty much twiddling their thumbs waiting on their next delivery or task order. They are the opposite of standalone awards and single-award contract vehicles that are created to address a specific program requirement. Zero dollar contract vehicles are broad in scope to address needs across a range of programs and customers. Don’t get me wrong, use them if you’ve got them, just know they are not the only way, or even the primary way Uncle Sam is buying goods and services. If you’re blinded by the glare of what often amounts to nothing more than shiny objects, you’re missing opportunities not mapped for purchase through zero dollar contracts.
In Zero dollar winning – Part 2, I’ll dive into fatal mistakes made by companies who succeed in getting the initial award, and not much else. Thanks for reading!
Peace, Health, and Thriving,
Go-To-Guy Timberlake
Very thoughtful and great write up Guy. Small companies in particular are plagued by chasing vehicles and then the agency only issues limited funded task orders. This effort by agencies to show “awards” to multiple vendors particularly in the small business community is almost cruel in some ways. Many socio-economic and set aside companies burn the midnight oil to respond to these, only to receive no funded tasks. The banking and finance communities are also realizing that the multiple award contracts may contain limited funding and are wary of supplying much needed capital to small companies.
Tom, I think you and I have been down this road a few times with a few companies. What is often lacking is effective task order management strategies, and the ability to drive business to the vehicles, versus waiting for what comes over the fence. Thanks for contributing!
This.
“The banking and finance communities are also realizing that the multiple award contracts may contain limited funding and are wary of supplying much needed capital to small companies.”
For many years, companies winning these zero dollar contracts had a seemingly endless supply of resources, to include funding options. Is that part of the landscape changing? Are these vehicles being seen for what they are for most companies winning them?
Guy – Very educational! Zero dollar contract vehicles are a license to hunt AND a commitment to spend unknown amounts on an unknown quantity of TOPRs (or the like) for an unknown ROI. Awardees of these vehicles must have the stomach, patience, and financial resources to go all in. (A tall order for some SBs.) Also, these awardees cannot forecast revenue from the vehicle with any precision. Their financial reports do not get rosier upon vehicle award because of all the unknowns. My advice: Celebrate the vehicle award but save the BIG celebration for revenue generation!
Thanks for this great insight, Mark! Zero dollar contracts are not for the faint of heart!
Being new to this game, I see relationships are a large part of success. As such, I think it is important to know your customer and focus energy on solving real world problems for them. I see the Multi-Award as a shot gun effect and not the most sporting approach for hunting. I’m all for a more targeted approach to success. That said, if you enter down the path of a multi-award effort, be sure you also work the relationships and you might open a door to an opportunity.
I just had this conversation this morning with one of my APEX Accelerator small business clients. The have been awarded two “zero dollar” contracts but after a year have not seen a competitive task order from either vehicle. My suggestion to them was to “professionally communicate your frustration” with the procurement office (by the way these are a state level agency and a major university). I suggested that they ask if the agency is doing competitive task order procurements under the vehicle or are they allowing users of the vehicle to “cherry pick” companies, and can they provide a list of potential vehicle users within their organizations to market their capabilities.
Michael,
Thanks for your comments! I’ll share a few things you might decide to share with your client, and use in the future. Last November, I published a blog article titled “Stop Wasting Time And Money!” that talked about the issue you described. https://theasbc.org/stop-wasting-time-and-money/
“The have been awarded two “zero dollar” contracts but after a year have not seen a competitive task order from either vehicle.”
What does your client know about they “Why” behind the organization issuing the contract? Did they receive/ask for a forecast specific to the contract or customer? Do they know the customer that will use the contract? Note that customer is not the buying entity. Most important, did your client read the contract cover-to-cover to understand how the contract will and can be used? Who are the official POCS for contracting and technical? What do they know about the use of the contract to date? Are other companies seeing any business? Is the contract a “fair opportunity” contract or is it a single-award contract issued to many companies, allowing customers to pick and choose who they work with?
Before expressing frustration, have your client ensure it’s not a result of their lack of understanding of the rules of engagement (first), and that they are making themselves known to customers AND buyers versus just buyers. Keep in mind, buyers only buy. That’s not meant to be a knock, but the truth. Customers submit and fund requirements. If they don’t know of you, you have less opportunity of knowing about and winning work, than companies with visibility to the customer and their requirements.
Michael,
Another good read related to your client’s issue is from July of last year. That blog was called “Filling your bucket” and can be viewed here: https://theasbc.org/bucket/
Thanks for contributing to this discussion, Tony! I agree 1000%!
As an example, the Navy SeaPort contracts account for a significant chunk of multiple-award spending each fiscal year. With 1800 vendors on the contracts coming into the beginning of this year, what many thought would be a foot in the door and possibly a walk in the park to new customers and business, has turned out to be completely the opposite. Customer knowledge and visibility of and to SeaPort customer organizations such as NAVWAR, NAVSEA HQ, MARCORSYSCOM, NSWC Dahlgren, and many others, is key to success for current winners of substantive business. The 80-20 Rule is alive and well.
Thank you for an indepth explanation of zero dollar winning. I will use this article to help build my knowledge and growth process.
Thank you for reading, Nicolette.
Great explanation, Guy, and the exchange is also instructive. I can’t tell you how many times I’ve heard a SB owner say he or she “had” to get a MAC 2 (or 2) because competitors were on them… it’s where the money is… it’ll add value to the company… etc. It only takes a few minutes to see they lack a BD and capture strategy to support their business strategy – which they don’t really have, either, except in their heads. The FG is a big market with more ways to work in than most companies need. For that reason plus others, knowing why one does what one does helps focus the what and how.
Hey, Lou!
I love this: ““had” to get a MAC 2 (or 2) because competitors were on them… it’s where the money is… it’ll add value to the company… etc.”
Famous last words.
Let’s hope they’re not LITERALLY last words, Guy. HA!