Ahh, the 80/20 Rule.
The 80/20 Rule, also known as the Pareto principle, states (and I’m paraphrasing) that 80% of our benefit in a given area comes from 20% of our effort. I find it amazing how many areas this principle has been proven to be true. From stock market results, to employee performance, to revenue per customer, to success of sales strategies.
Paul and I did a podcast about this back in the early days of the CO Podcast and an encore version a few months ago. In both episodes, we spun the 80/20 Rule to describe the ratio of the acquisition process to the relationships that are needed to get a government contract. We explained how factors such the size of a program, the complexity of the requirement, and even the strategic importance of its success can influence how far from the 80% process – and toward the 80% relationship – a given acquisition can be.
Most of the time, winning a government contract is closer to 80% process and 20% relationship. It takes both parts, but the ratio leans to the process side.
However, as we described in the second podcast, the process can lean toward 20/80 (20% process and 80% relationship). Plenty of stories make news about the relationships that lead to contracts for companies. On a smaller scale, these can include direct awards to 8(a), SDVOSB, or WOSB companies. On a larger scale, these can include the next enterprise software system for an agency, or who is eligible to bid on a large competitive contract for a new weapons system.
Both the 80/20 and the 20/80 are reasonable and viable acquisition strategies. There is nothing wrong with either of them…and all the variants between these two types.
Here’s the catch.
It’s critical that that the offerors know where a particular acquisition sits on the continuum between 80/20 and 20/80. If you miscalculate, you risk losing time, targeting effort, and most critically, an unfortunately timed surprise at the end of the acquisition (as in you are surprised you lost)
As you target opportunities, look for nuggets in the acquisition process, including pre-RFP communication to make sure the 80/20 ratio aligns with what you think it will be.
What if you think the relationship matters 50%, but it only matter 5% to the 3 Deciders? What if you think it’s 5% relationship and it’s really 50%? This ratio impacts the result of the acquisition (i.e., who wins) greatly.
Indicator that a competition is 80/20 when you thought it was 20/80:
Is the government looking for commercial equivalents to your product? Even though your product is proprietary and may have been customized through your experience as the incumbent for years, the government is required to at least look for replacements. How hard are they looking? (Google search vs. SSS and RFI). The harder they are looking, the closer to the 80/20 the acquisition will be.
Indicator that a competition is 20/80 when you thought it was 80/20:
Does the requirement include specific skills, experience, training, certifications, and/or capabilities that seem outside the scope of the actual requirement? For example, the RFP requires experience from a certain rank of military experience when the service is commercially available (as in no military experience is required). These requirement changes can be part of the shaping process (more on that in another blog). The more an offeror uses their relationship to shape the acquisition, the closer it gets to a 20/80 acquisition.
While these are two extreme examples, many acquisition lie somewhere between these two. While most will fall closer to the 80/20 end than the 20/80 end, the risk of not knowing where they will fall is very real and very acute.
So, don’t guess. Target agencies. Target opportunities. Target RFPs carefully so you have the time to look for these indicators.
If you need help identifying where a given RFP is on the 80/20 Continuum, ask us. The Skyway team has managed contract awards from 80/20 all the way to 20/80, or even 10/90.