Winning government drone service business contracts as a startup requires understanding specific government needs and compliance with regulations. Register as a vendor, showcase your unique drone skills, and build a strong reputation in specialized services to enhance your chances of securing these lucrative contracts.
Is Government Contracting Right for You?
A Beginner’s Guide to Government Drone Service Business for Drone Service Providers.
Your drone business startup is getting some air under its wings. You have gained a reputation in your local area, established a few recurring customers, and often receive inquiries from new customers. Business is good.
Suddenly, your most lucrative customer informs you that they are selling the business and will no longer be requiring your service. Another customer finds a new, less experienced, drone service provider that charges lower rates for similar results. Yet another customer has hit some financial troubles and needs to cut costs, including your services.
What used to be a thriving business has now become a hectic race to expand outreach, outwit the competition, and bring in new business.
Does this sound familiar to you? It is the story of many small businesses in every industry.
One of the best practices for growing a small business is to establish multiple revenue streams. This can come in the form of multiple products or services, or broadening the target market. The more diverse the streams are, the lower the overall risk of business failure due to insufficient revenue (generally speaking).
Most commercial entities have a business model comprised purely of B2B (Business-To-Business) or B2C (Business-To-Consumer) relationships. A select few DSP’s have successfully ventured into B2G (Business-To-Government) Government Drone Service Business.
Adding Government Drone Service Business to your customer base can be lucrative in terms of recurring work and a stable source of funding. It can also be highly rewarding knowing that your work is benefiting the community by supporting a public organization.
Navigating government drone service business contracting can be a complex, but rewarding process. Government contracting at nearly any level of government is a complex process governed by public law and subject to audits. However, government organizations are typically well-funded, even in times of economic hardship in the private sector. Government organizations also often prefer to continue doing business with a known entity, rather than vet a new provider. B2G can be a great addition to any drone service provider’s business plan for sustainable, repeatable revenue.
What drone services does the Government need?
When we refer to the Government, we must separate the different levels of government, and the various agencies within each level. In the United States, government drone service business opportunities exist at Federal, State, County, and Local levels. This hierarchical style is seen in many other countries as well. Within each level are multiple agencies—for example, the Federal Government has the Department of Defense, Department of the Interior, Department of Transportation, etc. State governments may have similar separations: Department of Natural Resources, Department of Commerce, etc. The same goes for County and Local government organizations. It is important to understand your customer, so be sure to take some time getting familiar with your own local government structure and organizations.
What types of drone services do these various organizations need? Well, all of them, of course!
Understanding the diverse needs in government drone service business is essential:
- Nearly every government organization posts social media photographs and videos. They can be for special events, public affairs, recruitment, or a variety of other reasons. Somebody is behind the camera for those shoots, and it is not always a government employee.
- Like the private sector, the public sector tends to work indoors. In buildings. Buildings that are subject to construction and inspection codes that apply to the local area. Their roofs require maintenance too.
- The Government owns land. Lots of land. For comparison: the largest U.S. military base (by land area) is White Sands Missile Range (WSMR). WSMR is nearly 3 times the size of the state of Rhode Island! National Parks and State Parks also count as Government-owned acreage. Landowners of all types have requirements for survey, vegetation monitoring, environmental management, erosion control, and the like.
- The Government owns critical infrastructure in some areas. Gas/oil pipelines, water towers, interstate highways with bridges…the list goes on. These assets require periodic inspection as part of a responsible Preventative Maintenance regime.
What is Government Contracting?
Let’s delve into the intricacies of government drone service business contracting. As the term suggests, a Government Contract is a legally binding agreement between a Government organization and a commercial entity (such as a drone service provider). The commercial entity typically provides products or services that are defined (in detail) in the contract, in exchange for an agreed-upon price that is also detailed in the contract. This is not terribly different from pure commercial contracts.
Here are a few common forms of Government contracts.
- Support Labor. In government drone service business, Contract Support Labor plays a vital role. Many, if not most, Government organizations are comprised of both Government employees and Contract Support personnel. Government employees are hired directly by the Government organization, and their paycheck comes from that organization. On the other hand, Contract Support personnel are hired by their parent company to fill a specialized skill set and receives their paycheck from the company. The Government organization then contracts with the parent company to provide labor hours to support the Government employees. They often work side-by-side as a team in an office setting. The Government organization sometimes participates in the company’s hiring process, or at least approves the personnel selection and assignment to the role.
- Support Service. Many Government organizations contract for janitorial services, facility maintenance, repair services, etc. The Government often does not participate in the hiring process, as they depend on the contracted company to have the appropriate business certifications and appropriate hiring processes for the work.
- Product Procurement is another aspect of government drone service business Product-based companies such as furniture vendors or automotive manufacturers have some form of product catalog that Government purchasers may choose from. This applies to digital products as well: software, training curricula, and digital media may be licensed to the Government buyer as if it were a physical good.
Here are some additional terms and concepts that may be more relevant to Government contracts than their Commercial counterparts.
- Prime Contractor versus Subcontractor. In government drone service business, the distinction between Prime and Subcontractors is crucial. The Government awards a contract to one single commercial entity (the Prime Contractor), who may then award its own contract to multiple commercial entities (Subcontractor). We often see this in residential Construction: the homeowner hires the General Contractor, who in turn subcontracts to specialists: roofers, electricians, plumbers, drywallers, pavers, etc. Automotive and aircraft manufacturers work a similar way: the prime vendor owns the overall product, but is likely to purchase components (engines, tires, electronics) from companies specializing in those items. In nearly all cases, the Prime Contractor is held accountable for the performance of their Subcontractors.
- Contracting Officer. Strictly speaking, the authority to obligate the Government to enter into a binding contractual agreement with a commercial entity is vested into a select group of individuals known as Contracting Officers (often shortened to CO or KO). The CO has specialized training in the contracting regulations for their organization and is specifically authorized to sign a contract on behalf of the Government. They may also be held personally/professionally liable for any contractual malpractice. It takes a special personality to hold this level of responsibility and they tend to not take their duties lightly.
- Contract Surveillance. Contract Surveillance is a significant part of managing a government drone service business. Surveillance is a method of Quality Assurance that is mandated by many Government organizations. The CO (or their representative) is often accountable for monitoring the execution of the contractual obligations and ensuring acceptable quality. At some levels of the Government, an office may maintain records of contractor performance; these records are made available to other Government organizations to aid their own selection of qualified contractors.
- Vendor Registration Code. In government drone service business, staying updated with Vendor Registration Codes is important. Most Government organizations in the U.S. maintain a database of registered vendors. Unfortunately, most of them do not share information with one another, and even use different names for the codes! As an example, the Federal Government issues a Unique Entity Identification (UEI) code, while a State Government may issue a different Vendor Identification code. It is the vendors’ responsibility to register on the appropriate site(s) for their target market, and maintain the registration by keeping information updated and renewing it from time to time.
- Product or Service Code. Similar to the Vendor Code, the category of product or service that is being offered is also likely to have a code in a different database. As an example, the Federal Product Service Code (PSC) for “Aerial Photographic Product” is T009. However, the Commodity Code in the state of Maryland for “Aerial Photography” is 82131601. It is likely to be different in each state, and possibly even lower levels of the Government.
Major Differences Between Commercial Contracting and Government Contracting
A seller cannot approach a Government buyer the same way they could approach a Commercial buyer. There are certain limitations to how the Government does business with private entities; in fact, there are several purchasing techniques that the Government cannot legally conduct the way a business could. We have assembled a brief list of some of the major differences between Commercial and Government buyers. This list is general in nature and will not apply to each individual Government organization. Likewise, some companies (especially larger companies) may have internal policies that limit their actions.
May retain discretionary funds indefinitely and spend them on nearly anything the company desires.
Must use allocated funds for their intended purpose within the authorized window of time.
Is not required to conduct market research or solicit bids/quotes/ proposals from multiple sources.
Is required to conduct market research and solicit bids/quotes/proposals from as many vendors as possible.
May select a vendor based purely on personal preference or other intangible criteria.
Must follow a rigorous selection process based on tangible criteria, that should be repeatable with a different selection committee.
Is not required to demonstrate the cost effectiveness of the product/service.
Is required to demonstrate the cost effectiveness of the product/service.
May award contracts based on direct outreach and convincing sales techniques to empowered individual.
Often limited to posting public Solicitations and being able to only select from the respondents who answered the Solicitation.
Is not required to publicize an awarded contract and has no requirement to use competitive practices.
Is often required to publicize an awarded contract and give competitors an opportunity to protest the award if anti-competitive practices were used.
I’d like to discuss Marketing and Sales techniques in more depth. When marketing your services to businesses or consumers, you likely employ some combination of these techniques:
- Cold outreach
- Targeted advertising
- Word-of-Mouth advertising
- Presentation at community gathering
- No-cost demonstration
- Explain your service’s superiority over your competitors
- Explain your service’s ability to reduce their costs or increase their quality
These are fine marketing techniques, but they do not quite work the same with the Government as they do with a business. The Government employee that understands their need for your services, and can readily see the value in hiring you for the job, is probably not the same person that is authorized to award you a contract: that would be the Contracting Officer. The CO is accustomed to posting a public Solicitation and following a rigorous selection process from the group of vendors that respond to the posting. The CO probably cares very little how many batteries you have or what processing software you use; they are likely to care much more that your Vendor Code is updated and your proposed price is fair and reasonable to the Government.
What Makes a Vendor Attractive to the Government?
From my years working with Government contracts, as both a Buyer and a Seller, I developed the following list of my observations of what makes a specific vendor a good candidate for a contract.
- Administrative perfection. Your Vendor Registration should be current and complete, and your Product/Service Codes should match what is being requested. To put this another way: if the Government buyer searches “the system” for PSC T009 (Aerial Photography), your business listing should come up, and all information should be accurate.
- Capable of meeting the requirements. If you are responding to a posted Solicitation, it will probably have a list of requirements, and possibly personal certifications. As an example, a Solicitation for thermal asset inspection may specify a minimum resolution of 640×480 pixels and Level I Thermographer certification for the pilot/analyst. Your proposal should highlight how you meet these requirements. There is little value in exceeding them.
- Fair and reasonable cost. Nobody likes to be over-charged for a service, and the Government is no exception. They have methods to determine if your proposed prices are fair and reasonable. They do not always select the lowest bidder, but this does happen from time to time. Be very transparent with your pricing to help them arrive at a favorable cost justification.
- Contractual accessibility. The CO is a human just like the rest of us and does not want to do more work than is absolutely necessary. The thought of conducting yet another Solicitation, sifting through a competitive Source Selection committee, and negotiating yet another new contract is very low on their list of priorities for the next month. I have personally witnessed government Program Managers genuinely desire to get a specific business on contract, only to lose the opportunity because there was no shortcut available. Contractors who are able to show them an “Easy Button” to reduce their workload really brightens their day and increases the chance of a successful contract award. In fact, many Government organizations pride themselves on awarding the fewest number of new contracts and may even track internal metrics in meeting this goal. More on this below.
I mentioned earlier that the Government often has regulatory responsibilities to conduct formal contract surveillance. Agencies differ in the specific methods that they use, but they often involve periodic reporting of the contractor’s ability to meet contractual requirements and adhere to cost/schedule targets. These may be stored in a rating system (somewhat akin to the star rating system found in e-commerce) with greater detail. These ratings may never disappear from the records, and early failures may be memorialized for a long duration.
Some agencies at the Federal level have additional contract surveillance unique to aviation operations. For example, the Defense Contract Management Agency developed a robust and standardized contract surveillance program in the publication DCMAINST 8210.1. This particular instruction applies to the entire Department of Defense and some other Federal agencies. States may have their own version, or may simply follow Federal standards. DCMAINST 8210.1 mandates very specific requirements for the contractor’s Standard Operating Procedures (SOPs) and certification requirements for Government inspectors. It can be very intimidating for small businesses new to Government contracting.
I would expect that most local governments have minimal additional requirements for aviation-related services, so this particular phenomenon will probably be most apparent at Federal- and State-level contracts. But I do recommend asking the question, to avoid any unpleasant surprises: if you are the first drone pilot an agency has ever hired, they may not even be aware of their own regulations on the matter. This could be an opportunity for you to do some research ahead of time, and possibly educate your Government counterparts on those seldom-read bits of policy that they may not be familiar with.
Data Security is a critical consideration in government drone service business. We as drone pilots have the ability to collect imagery and other data about potentially sensitive sites. By now, you should be aware of the general public’s concerns about privacy. Businesses tend to have extra levels of sensitivity to privacy, in that they may have proprietary information or other sensitive information about their operations that is visible from the air, but they would prefer to keep somewhat private so as to not give their competitors any advantages.
Government agencies have similar privacy concerns, albeit for different reasons. For example, military installations have a legitimate need to restrict imagery collection of perimeter security and operational activities going on within the installation, in order to prevent foreign adversaries from gaining information of intelligence value. This is not unique to drones: even commercial satellite imagery of military installations is often presented to the public in lower resolution, or the imagery of the site may be censored altogether! The military is not being paranoid, and they are not the only organization with such limitations: critical infrastructure and office buildings have long been targets for terrorist and criminal activity, so it is completely reasonable that the Government would emplace some safeguards to protect basic information that could expose a vulnerability.
Professional drone pilots in the U.S. have probably heard about a Federal government restriction in the purchase and usage of drones originating from a certain country—if not, we recommend that you educate yourself prior to taking further steps for Government contracting. Some states are beginning to adopt similar laws and I expect that local governments may follow suit. The challenge for commercial drone pilots is that nearly 80% of global commercial drones (including the U.S.) are produced within this certain country. The reasons are valid: the products are high-quality and cost-effective. However, it can be demonstrated that imagery collected by these products has the ability to be exploited by foreign intelligence agencies, so the Federal Government made a conservative decision to simply ban them outright.
Click in to my article “American Made Drones for your Drone Startup Business” for more information on this.
The drone manufacturer represents only one link in the digital chain of custody of sensitive government information. If imagery is uploaded to a cloud storage or processing application, that cloud now becomes a potential point of data leakage. Once the information is processed and you are ready to deliver the product, the method of secure file transfer becomes yet another potential point of data leakage.
I do not write these considerations with the intent of scaring you away from Government contracting—on the contrary, I hope to expose you to some of your potential customers’ realistic concerns so that you may formulate strategies as to how to overcome them and deliver a superior service. We can all stand to be a bit more mindful of how we safeguard sensitive information. Speaking of which, when is the last time you have changed your passwords?
No Drone Zone
Understanding ‘No Drone Zone’ regulations is vital for government drone service business. As alluded to in the previous section, the Government has a legitimate interest in restricting drone flights over/near its facilities. The notorious “No Drone Zone” sign is posted near the entrance of many sensitive sites. The sign itself may be purchased for about $10 USD, but more importantly, it may be backed up by an FAA NOTAM that all drone pilots are required to comply with.
There is good news here: the installation owner/commander (leader of the Government activity) has the authority to waive the restriction! I spent some time with my local FAA representative poring through the regulations, and we both agreed that the regulations state that the installation owner/commander has the authority to authorize a specific pilot, with a specific drone, to conduct a specific operation, at a specific location, on a specific date.
Best practice: get these specifics in writing, signed by the owner/commander (or their representative), and socialize with your local FAA representative prior to conducting the flight. It would not hurt to also touch base with the installation’s security force or local law enforcement, to ensure they are aware of the authorization that their Boss gave to you (as they could ruin your authorized flight very quickly if improperly informed). This may come out as part of the contracting process, or may be a follow-on process facilitated by the CO that awards the contract. We are finding (in the U.S., anyway) that FAA representatives often have incomplete training in drone regulations, and are only compelled to study the books the first time they encounter a situation. The first time is often the most difficult; it should become much easier after that.
Contracting “Easy Buttons”
Now, let’s explore ways to simplify contracting in government drone service business. At nearly every level of Government contracting, the process of getting on contract to provide a service or product is the single greatest obstacle—for both the Contractor and the Government! As promised earlier, here are 5 techniques we recommend to turn the “No way, that’s too hard!” into a “We might be able to do this”, or even a “Yes, that sounds very simple”!
If you have flown many real estate jobs, I am guessing that the majority of your flights have not been hired by the selling homeowner: you were more likely hired by a real estate photographer, or the real estate agent. In essence, you were subcontracting to the selling homeowner.
This applies in other areas as well. A facility manager is unlikely to hire a drone pilot to help with facility maintenance, and then separately hire a maintenance team to actually do the maintenance. Rather, the manager is more likely to simply hire a maintenance provider, and the provider in turn may hire a drone pilot to support the effort.
Government contracting is no different. They already have companies on contract to care for their lands and buildings, to capture imagery of special events, and to maintain critical infrastructure. These companies are already on contract, and could very well be unaware of the benefit that drones could provide to their work. Or, they could be very aware, but not yet ready to launch their own internal drone program.
This is an opportunity for you to step in and make their life easier. You, as a drone service provider, could provide these companies a low-cost, low-risk solution to provide an outsized impact to the work they are already doing. They pay you for the product/service you provide, without the overhead of running an internal drone program (initial/recurring training, insurance, software licenses, etc.). You are contracting with a company, not the Government. I would still advise having a conversation with the Government customer to ensure they fully understand what you are providing and what safeguards you are taking, lest your involvement creates undue friction with their Prime Contractor.
How does one locate these Prime Contractors? Some government agencies are required to publicize their contract awards. Learn where these are posted and make a habit of checking them on a routine basis. Other times, such as roadway repair or facility maintenance, you can figure out who is doing the work by looking for white vans/trucks with logos in the Government parking lot. They are parked there for a reason, and it is probably to fulfill a contract. Finally, you can let your fingers do the walking by browsing the web sites of your local businesses that work in a field the Government may use. Business web sites are notorious for having a “trophy wall” of their partners (customers) as a form of bragging rights. If you see a government agency listed on the trophy wall, there is a good chance this company has, at some point, done business with that government agency, and may be continuing to do so.
Fun fact: if the Prime Contractor is a large business (500+ employees), they likely have a contractual requirement to outsource some portion of their work to small business subcontractors. Some portion of their own contract surveillance is their performance in fulfilling this subcontracting obligation. This is yet another opportunity to make a Prime’s life just a little bit easier, by coming to them with a solution to their pain-point. This typically applies to large businesses only.
Small Business Set-Asides
News flash: the Government enjoys doing business with Small Business. There is a U.S. Small Business Administration at the Federal level for this very reason, and most (if not all) States have an analogous office. The Government wants, even needs, to do business with Small Business.
Every Federal, State, and Local government organization I have researched has annual goals for the percentage of contracts, or percentage of dollars, that were awarded/paid to small businesses. They publish internal report cards every year showing what their SmallBiz goals were, and how close they came to achieving them.
Every Small Business is special, but some are even more special. In particular, SmallBiz that are veteran-owned, women-owned, and minority-owned usually have additional goals. Some jurisdictions even look at business location (such as the Historically Underutilized Business (HUB) Zone) as a special category.
I previously mentioned how the Contracting Officer’s (CO) worst nightmare is to post a Solicitation and receive hundreds of responses to sift through. However…. If the CO (or the Program Manager who is actually the real customer) becomes aware that there is a Woman-Owned Small Business capable of meeting the requirements, this changes the dynamic. The Program Manager (PM) and CO may jointly elect to set aside the funding for the work, and reserve it exclusively for Woman-Owned Small Businesses (WOSB). They conduct the Solicitation as usual, but include the stipulation that only WOSB are eligible to respond. Now, instead of receiving hundreds of responses, they only receive five responses. The odds of winning the competitive contract just increased dramatically.
The first, and most important, action for you is to register on every Small Business portal for your service area that you can. If you would like to go to the next level, research the definitions for the special categories I mentioned above (veteran-owned, woman-owned, minority-owned, and underutilized zones). Though this varies by jurisdiction, many only require that the SmallBiz is 51% owned by a person falling into one of those categories (or the business has the proper mailing address, in the case of the underutilized zone). There are different certification requirements for each of these designations; all it costs is some time and paperwork.
Make no mistake: there are SmallBiz companies out there that give 51% company ownership to a certain individual for exactly this reason. A freelance man with an LLC can make his wife the 51% owner for the sole purpose of claiming the WOSB certification. This is not cheating the system; this is using the rules in your favor, and in your customers’ favor. For that matter, you could go recruit a business partner! You could find a service-disabled veteran (like me!) to own 51% of your company and legally claim the SDVOSB certification.
Once your Government customers learn that they can create a set-aside to limit the competitive playing field, their lives become much simpler. Simple is good.
The previous section discussed one method of reducing the playing field (from the Buyer’s perspective), but there are more. Your government Buyer is probably aware of various ISO certifications for manufacturing and safety, but less aware of the personal/business certifications that apply to drone service providers. Here are a few examples that I have “educated” my local Government officials on, and most were received very well.
- Pilot Certifications. Most competent CO’s and PM’s will discover the FAA Part 107 certification through their own research, but may not be aware of other personal certifications that could be “required” to conduct the work. Thermography, GIS, Multispectral, and Photogrammetry disciplines each have their own certifications through various organizations. If you happen to hold one of these, you could mention that this differentiates you as a higher-qualified candidate, and it could magically appear as a Solicitation requirement.
- Equipment Certifications. I will be very honest: every one of my drones was purchased (or built) with the intent of being eligible for Federal Government work, and I am sure to verbalize this to every Government official that I converse with. Even my local Utility commission has the right to stipulate that the equipment used in the job must comply with Federal regulations (and I give them the citations with links). If they happen to mandate compliance with this Federal regulation, 80% of my competition disappears from the playing field. “Made in the U.S.A.” still means something to a lot of people.
- Software Certifications. Storage and processing software may run locally on your own computer, or in the cloud. It is important to understand the sensitivity of the data you are collecting and show how your solution protects it in a proportionate manner. If you use encryption or some other source of data protection, educate the customer on how these methods protect their sensitive data, and how it would be wise of them to require similar protections from a service provider.
- Standards Compliance. Once again, I will be very honest: I have a background as a DCMAINST 8210.1 inspector (Government Flight Representative), and I make this known to my potential customers. As a buyer, they have every right to invoke the requirements of DCMAINST 8210.1 into any Flight Services contract that they award, and I suspect that I am one of three drone pilots in my local area that even knows what this document is. I am only too happy to demonstrate how my Procedures magically match the standard format and will satisfy most levels of scrutiny during an audit.
I can summarize these bullets in one statement: make it an unfair fight. Our potential Government customers are as ignorant about the drone industry as the rest of the population, and are hungry for experts to show them the right answers. My advice here is to determine what makes you different, what makes you stand out from the competition, and show them the value. If they agree that these are qualities they would look for in a Contractor, they could build them into the requirements and instantly eliminate the inferior candidates that did not choose to walk the difficult path that you did. Even if you are not the Contractor ultimately selected, you have still done a public service by helping the Government select a superior provider for their needs, and benefitted the drone community by influencing a positive customer experience with a qualified provider.
Micro Purchase Thresholds
While there are some government procurement/acquisition rules that apply equally to small and large purchases, there are others that vary based on the dollar value. In general, the level of market research and competition increases as the dollar value increases—and the opposite is true as well. Smaller purchases simply require less work for the PM and CO. This makes intuitive sense: it should be easier for the Government to purchase an office chair than for a fleet of 200 fighter aircraft.
As drone service providers, we have an opportunity to strategically price some services to a level that is convenient for our buyers. Alternatively, we can choose to only offer those services that happen to fall beneath these levels.
Though it varies by jurisdiction, many agencies employ a “Micro Purchase Threshold” (MPT). This is a dollar value that marks a change in the rules that must be followed. For the Federal Government, the amount is $10,000. For my own municipal government, the amount is $1000. The difference between a $999 and a $1001 purchase is measured in weeks, even months, of paperwork. In essence, the Government regulations gave themselves an “Easy Button” to purchase inexpensive goods/services without all the hassle.
What are the benefits of purchasing a good/service below the MPT? As usual, this varies by jurisdiction; however, some common themes include the following:
- Waiving mandatory Soliciation
- Waiving Source Selection
- Waiving contract Surveillance
- Waiving Accounting/Auditing standards
There is an additional fringe benefit that is difficult to quantify: many Government agencies have a Government Purchase Card (GPC, aka credit card) for purchases up to a certain dollar value. The default method to pay a Contractor is via an electronic funds transfer (EFT), similar to the Direct Deposit method we are familiar with. EFT’s take time and effort to set up, and can induce costs for both the sender and the receiver. Put yourself in your customer’s shoes: would you rather pay somebody by setting up a Direct Deposit, or using a credit card in an e-commerce application? I am guessing that you chose the latter, and this is exactly what your Government customer is also likely to choose. So, learn what their GPC threshold is, and try to market your services below that level. And prepare yourself to receive credit card payments.
The MPT and GPC thresholds came up in conversation with my local municipal Government customer earlier this year. I quoted an amount below both thresholds and got the job (24 hours to get on contract). Looking back, I realize that I could have quoted $100 or $999 and gotten the exact same result. If it saved them 50 hours of labor to get me on contract, it was worth it, because that 50 hours of internal labor probably costs them over $7000.
Please hear this: do not price gouge your customers just because you can. Be fair and reasonable, and also be very sensitive to those dollar amounts that trigger a different rule book. It is good for business for both parties.
Multiple Award, Indefinite Quantity Contracts
This is the most complex of the “Easy Button” offerings, but I feel necessary to include it for larger drone service providers that could do heavy volume with the Government.
Let me start with a metaphor. I do not have the Premium membership at a certain shopping club, but my neighbor does. The Premium membership comes with discounts and expedited shipping. But, obtaining a Premium membership costs me time (going through the application process) and money (monthly membership dues). I only want to purchase one item from this particular company, so getting a Premium membership does not make sense for me right now.
What do I do? I give my neighbor some cash, and they order the item for me. I saved some money on my order, I did not have to go through the effort to create a Premium membership, my neighbor got a few bucks as a tip, and I received my item much faster than I would have if I had ordered as a Standard member. And the company got my business that they otherwise would have lost because the barriers to entry were too high. Everybody wins!
Government contracting works in a similar fashion. If Agency A (acquirer) wants to buy a widget from a certain Company C but does not feel up to getting them on contract, they are in a tough position. However, Agency B (buyer) has that Company C on contract to buy that exact widget! The Government makes allowances for Agency A to send money to Agency B to purchase the item and deliver it to Agency A.
In this scenario, Agency B may have had a requirement to purchase 500 widgets from Company C. However, because they were forward-thinking, they awarded a contract for up to 10,000 widgets. That way, if other agencies came forward wanting the same widget, Agency B could order on the other agencies’ behalf.
In some jurisdictions, this is known as an “Indefinite Quantity” contract. The vendor is on contract to provide somewhere between zero and 10,000 widgets (in this example), and the Government is under no obligation to even order a single widget. However, if several agencies decide they want this widget, they only have to send the funding to Agency B, and Agency B will order it for them since they already have the proverbial Premium membership with Company C.
Here is the next layer of complexity: Agency B might have this arrangement not with just one company, but with one hundred companies. And each company might be offering dozens of their widgets. On a single contract. This is known as a “Multiple Award” contract. Each individual company can be offering their own unique products (some sell pens, while others sell office chairs). And they could also be selling the same product at different prices (it is surprising how many companies still sell a red Swingline stapler). But, if the customer is ordering multiple products, it might make sense to bundle them into a single purchase to simplify the invoicing.
What does this sound like? It sounds to me like a Catalog.
The Federal Government set up the General Services Administration (GSA) as a form of a catalog provider for odds-and-ends typically found in the office (pens, sticky pads, floor mats). Over time, GSA Multiple Award Schedules (MAS) have grown to include software licenses, hourly labor, and one-time services (such as chartered airline transportation). The GSA has given the Federal Government a sort of shopping catalog: they already awarded a contract, so other acquirers must only send some money to the neighbor (GSA) and place an order.
While the GSA is oriented at Federal buyers, it makes allowances for State and Local governments to shop the catalog as well. One such allowance is disaster relief: if the President or Congress declare a certain area to be in a Disaster Relief status (hurricane, tornado, terrorism), the local Government may be allowed to order off the GSA catalog. There are other allowances involving Law Enforcement, Fire Response, and Homeland Security that allow State/Local purchase from a Federal catalog.
GSA is one example at the Federal level, but most States have their own equivalent services. Company C may even be awarded an Indefinite Quantity (IQ) type of contract with Agency B within the local area, and numerous local Agency A’s may come to the table looking to buy from the catalog.
The key is to do your homework. State-level contracts may be accessible to your local/municipal government agencies, but they take some effort to get in place. Once they are in place, you will still need to reach out and market your services knowing that you have created an “Easy Button” for them to make a catalog order.
To give you an idea of the level of effort required to obtain one of these contracts: I recently helped a company in the U.S. drone industry secure a GSA contract. It took us nearly one year, between the misunderstandings of the policy, ignorance about the drone industry, and the back-and-forth negotiations on pricing. But, now that the contract is in place, this vendor has an “Easy Button” to every Federal agency, and most State agencies under certain circumstances. Even better, the product happens to fall under the GPC threshold which makes it easier for buyers. My partner company will receive as much volume as they capture through their Government marketing strategy.
Branching out into government drone service business can be a game-changer for your drone startup. Once your drone business startup hits a plateau in new business, it might be time to start branching out to government work. Government contracts are complex, but often lucrative for those with the courage and endurance to wade through the process.
If you are interested in pursuing a B2G sales channel but feel a bit intimidated by this information, have no fear! There are free resources available to small businesses in the U.S. and most states. Plus, we’d love to help you out. Feel free to reach out to us and we will try to assist as you navigate through this complex process. Building a healthy drone ecosystem is what we do.
About the Author of this article…
Dave has a Master’s of Business Administration and specializes in helping drone startups achieve their business goals. He freelances as a Business Development Consultant for companies in the drone industry. He flies as a Part 107 pilot for the love of the game and continues to increase his certifications in the field.
Dave loves drones. His military drone background has given him perspective to the power and potential of this technology. Dave has been both a Buyer and a Seller at the Federal Government level, and is currently selling his drone services to his local Government. He has helped other companies market and sell their products at all levels of the Government and has plans to expand his own service offerings to all levels of the Government in his local area.