Entrepreneurship: Government Markets
Government markets offer rich pickings for the well-organized entrepreneur but they have certain characteristics which have to be taken into account.
Although the nature of the relationship between the private and public sectors varies considerably from country to country, that relationship is nevertheless one of considerable important in determining economic and commercial growth. In the context of this series of article, the government sector represents one of the biggest markets for entrepreneurs wishing to acquire new business and can be very remunerative, although there are certain characteristics of that market which have to be learned.
Especially in the age of privatization, governments are contracting out more and more of those services which once were considered to be central to public provision and, to be honest, many of these services are of course much better served in the public sector. This means that, in the long-term, many such services will be nationalized or renationalized but, in the meantime, the prevailing ideology (or zeitgeist) in favour of privatization means that governments will provide all kinds of support to the private sector contractor to try to prevent the collapse of the contract. In short, this means entrepreneurs making contracts with the government can have their profits kept secure for themselves and their losses socialized (i.e. picked up by the poor tax-payer). In Britain, for example, the government offers Private Sector Initiatives to build infrastructure or maintain important service facilities which are almost like printing money for the contractor; in the USA, deals for private jails or for reconstruction in countries that are being occupied are money-spinners in which activities are hidden from prying eyes.
Second, when dealing with public sector bodies, it is much more important to pay careful attention to all aspects of a contract and to document all the work done, all the deliverables provided and all the deadlines required to be met. This documentation is potentially available for scrutiny not only by auditors but also through whatever form of Freedom of Information Act may be in place in the country concerned. Everyone involved will wish to protect herself.When dealing with government contracts, it is important to bear in mind that, according to legal requirements put in place in most countries, incredible amounts of detail must be provided to demonstrate the bona fides of the bidding company – these are required to protect all concerned from accusations of corruption and general skullduggery. Creating the paperwork necessary to satisfy these requirements is expensive and onerous and tends to act as a barrier to entry to smaller companies and also a source of competitive advantage for those who are able to put it all together. This is one reason why it seems to be the same old companies who always get the plum contracts.
Third, government agencies really are likely to be those kinds of organization you may have learned so much about in organizational behaviour classes – there are probably all kinds of interpersonal, political struggles going on behind the scenes and a contractor can easily get used as a weapon or tool in such a struggle. In general, stay away from such in-fighting – there is almost certainly no upside to it in the long run.