Government Goldmine

If you thought the government sector of the janitorial supply marketplace was plagued by bottom-line pricing and a lowest-bid mentality, you’re mistaken. Not only is this market sector growing too fast to be ignored, it’s been very good to some in the janitorial supply distribution business, securing them an undervalued chunk of business. Their secret? Going beyond the call of duty.

There’s no question about it. The government market of the future offers distributors a wealth of opportunity. Demand for industrial and institutional cleaning chemicals in government facilities is expected to grow 5.6 percent per year to $153 million by 2006, according to the Freedonia Group, a Cleveland, Ohio-based market research firm. (More forecasts covering the government market are available in the Freedonia Group’s Industrial & Institutional Cleaning Chemicals report, which was published in February 2002.)

The government market is already a substantial part of the supply business. A recent study conducted by Sanitary Maintenance and ISSA indicates that government purchases of cleaning and maintenance products sold through distributors are approaching $1.4 billion annually. And that definition of “government” includes only municipal, county, state and federal levels.

In their latest reader survey, Government Procurement and Government Product News magazines report that:

• Nearly three out of four responding government administrators say it is very important to residents and tourists that their city is clean.
  
• Approximately nine out of 10 responding government administrators currently use sweepers, scrubbers, and similar equipment to clean outdoor areas.
  

What’s more, a quick scan of BidNet (www.bidnet.com), a Web-based bid information service, shows well over 1,000 requests for bids covering janitorial supplies are received from state and local governments in an average year. BidNet also publishes bids for janitorial services. The information that BidNet provides comes from thousands of government purchasing agencies that do not have Internet sites, as well as from the several hundred that do.

Home is Where the Business Is
Sometimes distributors need not travel far from their own back door to find a wealth of opportunity with the government segment. Consider local governments: all 87,453 of them in the United States could be a steady revenue source or possibly a business bonanza for SM readers.

Dawnchem, Inc., a cleaning distributor in Willowick, Ohio, a Cleveland suburb, has been selling to local governments for most of the 23 years it has been in business.

“We do business with a lot of the county government offices, as well as most of the city halls and municipal buildings in this area,” says Bob Mercuri, a sales manager with Dawnchem. County and municipal hospitals and health care facilities, as well as U.S. post offices and local school districts, are also key government customer categories for Dawnchem.

What products are government agencies interested in?

“Our specialty is environmental service products, which includes equipment, chemicals, and dry goods to clean and maintain buildings,” says Mercuri. Products include sweepers, auto scrubbers, vacuums and mop buckets, to name a few. Cleaning systems with proportioning and mixing equipment are also a strong suit in the company’s product lineup.

Dawnchem has also taken strides to improve its value-added offerings and educational opportunities for customers. For example, it operates a custodial college in conjunction with nearby Lakeland Community College for end users. The college is a two-day, non-sales oriented training school.

Customer Stronghold
Once a company procures government business, retaining and servicing those accounts is often a large-scale effort.

“To land government business, you’ve got to sell your value-added services. To maintain that business, you have to communicate. And that means face-to-face” says Mercuri. He advises distributors to appeal to each buying influence in a facility, from receptionists to janitors to accounts-receivable clerks. His advice to the company’s 11-person sales team: “You just can’t do business with the government’s business manager or district treasurer.” Everybody should be included. Key buying influences receive his firm’s “Dawn Dispatch” quarterly newsletter as just one way to keep communication lines open.

Richard Rasperger, general manager of Sanitary Solutions, based in Aurora, Colo., has seen growth in the government portion of his business in recent years as well. His firm has been selling to the U.S. Department of Energy (DOE) and other government entities for about five years.

“For myself and our operation, government is definitely a growing business in the years ahead,” says Rasperger. “As the larger guys get larger, more things slip through their fingers. That’s where we, as a smaller operation, can clean up.

“Persistence is the key to selling to the U.S. Department of Energy,” he continues, and adds: “Some of the stuff the DOE requests can be really exotic, especially in the area of water treatment chemicals.”

A suggestion for distributors trying to break into the market:

“When going through the contracts or the bid process with governments, it’s important to get a firm understanding of what’s required under the contract or bid. Governments give distributors plenty of opportunity to question what the bid is about, and distributors need to take every bit of advantage they can by asking those questions and getting the answers. Then, if they aren’t satisfied with those answers, they need to re-ask the questions. Persistence does pay off,” Rasperger says. He also suggests attending pre-bid conferences.

Fulfilling Needs
Giving the government buyer what he or she wants is how Joe Ward avoids having government entities buy low-bid, low-margin commodities. Ward is director of marketing at Columbus Janitor/Health Net in Columbus, Ohio, a full-line distributor of cleaning equipment and chemicals, and maintenance-related products.

“I think traditionally the best way to approach the situation is to try and get your product specified in,” he says. “To have the agency create specifications that will at least narrow down the range of outside operations that will compete with your firm.”

Opportunities abound in this sector, especially considering the market’s projected growth.

“Government business will be better than ever in 2002,” predicts Ward, who is a 12-year veteran of his company. “Governments have moved from using purchase orders to credit cards, which means there is a quick turnaround on payments.” This helps distributors keep cash flow in check.

Other distributors that SM interviewed said focusing on their firm’s dependable service and skill levels in presentations to government agencies helped them win government business — beyond low-bid opportunities.

One way distributors can reach public works directors, service directors, building managers, and other government-buying decision makers is at local conferences. Distributors should check to see if their local business group sponsors exhibits where they might be able to rub shoulders with representatives of city public works departments. Most municipalities of any size will have a local trade or business show, or building manager’s show, where distributors can promote their products and services to local governments.

Distributors may also want to consider exhibiting at the National Institute of Governmental Purchasing’s (NIGP) Annual Forum and Products Exposition, held each August. The forum annually attracts more than 1,000 delegates and 160 exhibitors. Distributors interested in learning more about the show should visit NIGP’s website.

Another potential strategy for distributors is holding workshops where they can show off the latest technology. For example, John Lehlbach, director of public service in the city of Westlake, Ohio, reports that a distributor in his area recently invited sewer, government building maintenance, and public works officials to view a demonstration of a power snake with camera and sensing attachments. The new unit permits easier viewing of underground sanitary sewer connections.

“This guy’s pretty knowledgeable and caring about his customers,” Lehlbach says of the distributor. Lehlbach found the demonstration very valuable.

At the federal level, meanwhile, the future looks bright for distributors, predicts Bob Williams, vice president of Interface Inc., a Fairfax, Va.-based company that sells — and helps client firms sell — to government agencies

“In the old days, it would take four to six weeks for businesses selling to federal agencies to get their money. Those days are out the window, as more and more federal purchasers rely on IMPAC government credit cards. If your bank clears your money in 24 hours, you’ve got the cash,” explains Williams, who predicts: “You’ll see a tremendous increase in the utilization of the IMPAC card down the road among federal agencies.”

Governments everywhere are in the midst of recovering their fiscal health. As the national economy perks up, governments will have more dollars to spend as their revenues return to pre-recession levels.

Michael Keating is research manager for Penton Media’s Government Product News and Government Procurement magazines. E-mail Keating for a free copy of his “Selling to the Government Markets” pamphlet.
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