Foreign Government Sales - Mystery? Necessity? Both!

Ed Marsh | Dec 10, 2012

"But my business is B2B"

OK.  Maybe historically.  And maybe domestically.  But there are a number of reasons why global market diversification could be important to your business.  (We've got lots of articles on that topic.)  And if you think about going global, your strategy should include a component of B2G international business development.

Sound crazy?  This quick intro might dispel some misconceptions and highlight some opportunity before you discount the idea.

Reasons why B2G business might be important for your company internationally include:
  • Many developing markets are more centralized than the US.  There are often substantial opportunities to sell products to foreign governments even though the product/service would normally be bought by businesses in the US.
  • In many cases the US government provides subsidies to developing markets for purchases of American made products/services.  Much of that money is routed through government purchases by the foreign government.
  • In many emerging markets, the bulk of the funds available for early investment are available through the host government.
  • In countries with substantial import barriers (e.g. high tariffs) many times local government purchases are exempt so your solutions might be far more economical for government buyers.  In the case of Brazil, for instance, recent legislation means that products "dedicated to the use or consumption of the organization or the holding of the ('16 Rio Olympics) events" are tax exempt

And if it makes sense...then what?

First of all it's a completely different sales process.  Can you speak the language of "tenders"?  Do you know what it takes to be an "L1" contender?

It's a different language and a different process.  And even if you have experience selling to the US government, many international government acquisition programs have more in common with each other than with the US.

Success in this area often comes down to finding the right channel model and channel partners.  In many cases international B2G sales require purchases be made through local firms.  Therefore agency/rep arrangements often won't work.

If you have worked in developing markets you've probably wondered how many folks can actually be the cousin of the "Minister of XXX"?  Been there?  Sound familiar?  The point is there are many, many folks who claim to hold the keys to the kingdom.  A very few are legitimate, some are hucksters and many are simply mistaken.  But any government tends to be very "silo'd" and therefore your efforts need to focus on likely targets in parallel efforts, and often with parallel channel partners limited to areas of vertical responsibility.

Proactive approach & patience

The best acid test for a potential channel partner is their first contact with you.  If the context is a tender that "has been issued", in many cases this isn't the right sort of partner.  Conversely if the contact is in advance about a tender that "will be issued" there may be more value.

Why?  By the time a tender has been issued the outcome is nearly a "fait accompli."  Although nearly every government has contracting regulations that prohibit a specification so specific as to exclude all but one vendor (and formal procedures for instances where that is appropriate,) in reality this is often precisely what transpires.  And although there are always opportunities to protest, success is rare and invoking that option often results in latent prejudice against subsequent tender bids.

The answer is participate early - during the formulation of the requirement and preparation of the tender specification.  With deep understanding of the competitive landscape and detailed understanding of the project objectives you can guide a capable channel partner in their efforts to create a favorable tender specification.

A strong channel partner will understand this intuitively and will work early on projects.  An opportunistic one, with little likelihood of consistent success, will monitor tenders as they are floated and try to poach opportunities.  Real success over the long-term takes developmental work, patience and commitment.  And your international channel management program should include these elements in many cases.

Don't get stung by the FCPA

But you're wandering in a minefield here.  (Sorry for mixed analogies!)  The US Foreign Corrupt Practices Act is often unknown to executives of US SMBs and yet carries substantial implications.  It imposes substantial civil penalties, and potential criminal liability, on companies and their Directors and Officers, for payments to government officials.  Noteworthy is the fact that actions of non-employees (e.g. channel partners) taken without knowledge of the company, still create the exposure!

The FCPA applies to payments not only explicitly intended to secure an order, but even, for instance, to alleviate a customs hang-up with a shipment.  Therefore, every company working internationally, whether they sell to foreign governments or not, should be familiar with it and have a risk management procedure in place.  (Contact us for more info.  The program should require strict contractual compliance affirmations from employees and other associated firms, as well as regular training and certain record keeping.) 

But clearly an important criteria in channel partner selection must be their understanding of the FCPA and strict compliance.

The unknown unknown

B2G foreign sales could present a huge potential opportunity for your business - even if you don't normally think of your product as one purchased by governments.  There are potentially unfamiliar procedures and considerations (did you realize that US Ex/Im Bank foreign receivables insurance typically can't insure foreign government purchases because of sovereignty complications?) but they are manageable.

Interested in exploring what opportunities you might be missing?  Contact us today to discuss your global potential.