Capital Thinking Magazine

AGENCIES: WHERE TO FIND FUNDING

With governments tightening their belts, companies seeking support may want to focus on agencies

By Peter Haapaniemi

The U.S. federal government has long been an important source of funding for private-sector projects ranging from research to construction, transportation and health care. But with belt-tightening now the order of the day in Washington, companies that rely on that funding are facing a sea change.

One major factor is the disappearance of earmarks, the provisions tucked into legislation that designate funding for specific projects. Over the past two decades, earmarks have become a widely used method for businesses to attract funding. But in February, with an eye toward a burgeoning federal deficit, Congress agreed to a moratorium on earmarks, and President Obama has said he will veto legislation that includes earmarks.

"For at least the next two years, Congress will no longer be using earmarks to fund specific projects," says Patton Boggs partner Jeffrey L. Turner. Add to this change a reduction in discretionary spending as part of additional looming federal budget cuts, and "it will make things more challenging for companies looking for funding," he says.

Moving down the Hill

Under the earmarks process, businesses typically worked with members of Congress and their staffs to get their funding included in a bill. Then, the appropriate government agency would obey that legislative mandate, overseeing and paying for the execution of the project in question. Now, however, companies should consider shifting their focus to agencies as a source of funding.

Of course, those agencies will likely be working with smaller dollar amounts—in some cases, they are being asked to make double-digit percentage reductions, says Robert Tompkins, a partner at Patton Boggs. "But those are not likely to be across-the-board uniform cuts in terms of percentages," he says. "So companies will need to monitor agencies and determine what their priorities are. Find out what the agency is identifying as being worth maintaining, or at least not reducing significantly, and then figure out how that overlays with your business."

Companies will need to take a more traditional sales approach when working with agencies, as opposed to Congress. Agencies are having to make tougher trade-offs and focus on the most important projects—and companies will have to compete with other companies to convince officials that a given initiative is right for the agency and its mission. "You have to persuade them that an initiative is something that they would want to allocate scarce resources to, instead of some other project," Turner says. "Then you have to persuade them that you're the best entity to provide it." The good news is that agencies may now be in a better position to consider different pitches, because the elimination of earmarks gives them more flexibility in how they spend funds.

A fundamental tenet of any effective sales approach is "know the customer," and that applies to persuading agencies too. Companies need to do their homework on its mission, goals, operations, key decision makers and so forth. That knowledge will help them approach the agency with solutions that will help it fulfill its mission and solve its problems.

Doing more with less

Each agency is different, but most will be highly receptive to proposals that do more with less. "In addition to simply cutting contractors and headcounts, agencies are interested in driving more efficiency out of their contractors. That's where the government sees itself getting the most value out of its dollar," says Tompkins. "The contractor that can say, 'With these productivity improvements or these innovations I can get the same things done for $90 that used to take $100,' will be in step with the agencies. Helping the government think about how to achieve its mission with less money is an important strategic step for contractors."

Doing your homework also means understanding how agencies are likely to work in an era of tighter budgets. "We're seeing agencies trying to save money through sharper business practices," says Tompkins. That may mean taking longer to pay contractors, or looking more closely at invoicing and financial reports to uncover any inconsistencies and delay payment until they are resolved.

In particular, agencies are likely to pay close attention to any billings for costs incurred. "If there are problems there, it potentially gives them the right to either refuse to pay the larger invoice or even to seek damages from the contractor," he says. With that in mind, "companies need to be sure that their invoicing processes are impeccable and beyond reproach. And they need to be prompt and diligent in submitting their invoices, knowing that it's likely going to take longer to get paid and there's going to be more scrutiny given to those invoices."

Finally, says Turner, companies should take a long-term view of these efforts, because that's what the agencies themselves are doing. "They recognize that it is not just a passing fad for Congress to reduce spending," he says. "We're in an era of ongoing deficit reduction, and most agencies are going to have less money to spend in the next few years. The more sophisticated companies will be helping agencies think over a longer time frame about how to address particular issues and positioning themselves to help meet that particular need."