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Basics of Marketing - Kotler Philip

How do government agencies make purchasing decisions?

Government procurement procedures often seem complicated and discouraging to suppliers. In one recent survey, the suppliers made a number of complaints on this issue. They complained about excessive amounts of paper work, bureaucracy, unjustified regulation, the desire to receive offers with low prices, red tape with decision-making, the frequent change of officials responsible for procurement, and the endless change of political attitudes. And nevertheless, special features of sale to government agencies can be mastered in a short time. Government agencies usually help suppliers by disseminating information about their needs and the specifics of the procurement procedure. Government bodies are equally often interested in attracting new suppliers, as are suppliers in finding clients. For example, the Office for the Advocacy of Small Businesses publishes a booklet entitled "US Government Procurement Manual, Terms and Conditions of Supply." It lists thousands of goods that are most often procured by government agencies, and cross-references are made to institutions that usually purchase certain goods. The government printing house of the United States publishes the bulletin "Business Business Daily", which provides information on all military supplies worth more than $ 10,000 and about civilian deliveries worth over $ 5,000, as well as information on contracts just concluded, Allowing to judge the markets of subcontract works. The Office of General Services has in several major cities of the country business service centers, whose employees train entrepreneurs in all the features of the procurement procedure carried out by government agencies and the measures that should be taken by the suppliers themselves. Various specialized publications and professional associations provide information on how to come into contact with schools, hospitals, road authorities and other government agencies.

Public procurement is carried out in two main ways: by open tendering or by contract negotiation. When using the open bidding method, the public procurement agency requests from qualified suppliers proposals for the supply of carefully described goods and usually awards the contract to the one who offers the lowest price. The supplier should consider whether he will be able to meet the technical requirements and whether the remaining delivery conditions are acceptable to him. With regard to consumer goods and standard products such as fuel or school equipment, technical requirements are not a difficult obstacle. However, for non-standard products, the technical conditions can present a serious obstacle. The state procurement organization usually has to provide the contract to the bidder who requested the lowest price, according to the principle "the winner gets everything". In some cases, however, take into account the high quality of the goods of the supplier or his reputation.

When using the negotiated contract method, the state organization works with one or more firms and conducts direct negotiations on concluding a contract with one of them on mutually agreed terms. This method is used primarily when working on complex projects, often involving significant expenditure on R & D and a significant share of the risk, and / or in the absence of sufficiently effective competition. The execution of such a contract is subject to ongoing monitoring, and in the event that the supplier receives excessive profits, the contract can be revised.

Many firms that supply government agencies for a variety of reasons do not use marketing principles in their activities. The total amount of government spending is determined by elected officials. Procurement policy of state bodies focuses on the problem of price, which forces suppliers to make maximum efforts in the field of technology in order to reduce production costs. Once the characteristics of the product are described in detail in the technical requirements for it, then the differentiation of the goods is not a marketing factor. And for public tenders, neither advertising nor personal selling methods are important.

A growing number of firms began to establish special marketing departments responsible for supply work for government organizations. As examples, you can refer to the corporation "J. I. Case, Eastman Kodak and Gudiyr. These firms want to coordinate work on their proposals, prepare them on a more scientific basis, not just respond to the initiative of state organizations, and offer projects for them, collect competitive information and develop a more effective communication program to spread knowledge about the competence of the supplier.