Brand New Business

alaurent@govexec.com

When you think about fast, efficient, easy purchases, your thoughts probably don't automatically turn to the Interior Department's Minerals Management Service. But that could soon change. MMS is out to burn its image on your brain. Using a branding campaign worthy of an aggressive small business, the 15-person MMS procurement operations branch hopes to transform itself from a well-regarded start-up known for helping managers buy information technology to a purchasing powerhouse handling a variety of products and services.

Following a path well trodden by private-sector entrepreneurs but unfamiliar to federal agencies, MMS is attempting to break out of the pack of fee-for-service buying businesses by creating a buzz in the marketplace. Late last year, the procurement shop hired an advertising firm and embarked on a strategy of creating a name for itself among federal project managers. As part of Interior's franchise fund since 1996, the branch had been nurturing a small, but growing, fee-for-service business handling other agencies' acquisitions, mostly of IT. But by last year, the business had reached the limits of word-of-mouth marketing.

"We spent two years marketing by word of mouth," says David Sutfin, chief of the MMS procurement operations branch. "It became obvious that we were doing something right and that it was time to grow faster and do it in a way that presented a positive image of government."

In September 1998, MMS put out a call for bids on a "customer awareness program," to include "direct mail brochures, paid print advertising, sales materials, informational meetings, video and other meetings." The procurement shop has an annual advertising budget of $150,000. "We went out to buy an awareness program, but subsequently I realized we were buying a brand," says Sutfin. "We knew [the name] MMS wasn't working. We had to create an identity."

Enter Osborn & Barr, a $60 million St. Louis advertising firm whose main claim to fame is its brand campaign for agricultural equipment manufacturer John Deere-"Nothing runs like a Deere." Osborn & Barr bowled over the MMS staff with an oral presentation that included the moniker "Gov.Works" and a full strategy for building the brand. "It was amazing to me how well they understood the frustrations we were trying to piggyback on-[that] if you're a project manager, the last thing you want is to have somebody in the acquisition shop tell you why you can't do something," says Sutfin.

"It was a perfect opportunity for branding," says Mark Vogel, Osborn & Barr executive vice president for brand management. "The [Gov.Works] concept came quite naturally. MMS was able to eliminate a lot of red tape [for clients] and it's [an example of] government that works." Gov.Works' Web site is slated to go live in mid-October.

Osborn & Barr understood the sensitivities of working with an entrepreneurial entity inside the government. "We knew there were some politics involved, that MMS could be seen as coming in and superseding the procurement offices of other agencies," Vogel says.

A series of ads and brochures so far has featured an archetypal federal manager throwing a paper airplane and a pair of hands untying a bow made of red ribbon. A third is in the works. "We were connoting the simplicity and ease of doing business with MMS, using a paper airplane and red tape as visual icons,"
Vogel says. "Managing support services-We'll take it from here," reads the Gov.Works logo. The paper airplane ad urges managers to "Put some air under your wings with Gov.Works." The red tape version promises that Gov.Works' "federal acquisition experts" will help managers cut through, untangle and get rid of red tape.

Osborn & Barr placed the ads in this magazine and another publication with high readership among project managers at agencies MMS targeted. MMS picked the Defense Department and Department of Health and Human Services "as two departments to go after," Vogel says. "We cross-screened project manager mailing lists for those departments and also [placed] an emphasis on information technology. We were looking for cost efficiencies because they obviously don't have an extensive budget."

Sutfin says branding is bringing in new business. "We've gotten a lot of calls, and they've been productive calls," he says. In July, the value of contracts Gov.Works handled in fiscal 1999 had reached almost $74 million, the total for fiscal 1998, and Sutfin expects to finish the year at about $100 million. With fees ranging from 2 percent to 4 percent, that translates to projected income of just over $2 million for fiscal 1999, up from $1.7 million in 1998 and $700,000 in 1997.

'Just Do It'

Advertising isn't the first gutsy move MMS procurement people made. It's just one in a series of "just do it" moments that have marked Gov.Works' history. The first was the decision to create the business. By the mid-1990s, it was obvious to almost everyone working in support operations in government-finance, human resources, acquisition and the like-that their days were numbered. Vice President Al Gore's National Performance Review had recommended drastic personnel reductions in these fields, and the drive to balance the budget was only increasing the pressure. MMS' procurement branch decided it had a choice, Sutfin says: "We [could] be responsible for our own destiny or we [could] let others be."

"All administrative services had targets on their backs. We thought half our staff would have to be let go," Sutfin says. "We tried to figure out how to ensure this team could stay together. We just went out and did it. In government, we tend to study stuff to death. You have to go out and try it and do it and if you make a mistake, well, OK."

The procurement shop's decision to go into business came at a two-day off-site meeting in 1996. The group didn't yet know that its parent department had a franchise fund-a working capital fund under which administrative services can become self-supporting by accepting fees from other agencies and can retain funds for management and capital improvements. Instead, the MMS procurement employees were considering offering their services under the much more restrictive 1932 Economy Act. The act allows agencies operating services at less than full capacity to do reimbursable work for other agencies. But funds collected under the act cannot be retained beyond the end of a fiscal year, and before using Economy Act providers, agencies must make burdensome determinations that supplies or services cannot be obtained as conveniently or economically from the private sector.

Gov.Works might never have evolved, but for the support and encouragement of MMS executives like Bob Brown, associate director for administration and budget, who helped the agency find its way into the franchise fund. "We found out about the franchise fund about three years ago," Brown says. "If Interior hadn't had a franchise fund, we would have had to look for a working capital fund to become part of or get one through Congress. We could have done some work through the Economy Act, but generally the funds are transferred under an agreement that runs out at the end of the fiscal year. That's no good if you are providing a service that you can't cut off because you will lose your investment, or because it's impractical."

Discovering the Interior franchise fund proved a lifesaver to MMS, allowing it to take on work spanning more than a single fiscal year, build reserves, and, someday soon, begin setting aside up to 4 percent of annual revenues above costs for future investments. "So far, our revenues have more than covered our expenses," Sutfin says, adding that the 4 percent set-aside will help MMS "grow the business."

'Nimble and Young'

"We're very lucky to have senior managers open to change and experimentation and making the workplace better," Sutfin says. Brown and Sutfin also credit the MMS environment for supporting and sustaining Gov.Works. MMS was created about 15 years ago to manage the resources of the outer continental shelf and collect royalties from oil and gas exploration. The agency considers itself a profit center for the government, returning to the treasury $5 billion to $6 billion a year over its operating budget. Its relative youth, close relations with private companies, and customer-service focus make MMS an ideal business incubator.

"We're nimble because we're small and young and customer-oriented," Brown says. "We don't have a massive history with involved procedures. Because of that, we are able to staff up with people who are unencumbered by hidebound rules." As evidence of MMS' business-positive approach, Brown points to an episode in the early 1990s, when the oil and gas industry and some states united to forestall a reinvention proposal to devolve many of MMS' functions to the states. "They perceived us as responsive and driven," Brown says.

Gov.Works sells itself to clients based on the same traits. "What Gov.Works sells is nothing that anybody else couldn't sell," says Brown. "It's the same contracts and the same systems as anybody can sell. [But Gov.Works also sells] responsiveness, sensitivity and the ability to deliver. We get people willing to pay a fee to get that-program people who feel lost, displaced and not supported." Sutfin frankly acknowledges that Gov.Works trades on the failures of other agencies' acquisition offices. "Program managers come to us because they are looking for an alternative," he says. "If you have to spend months getting through the acquisition process, you're losing money. We're able to do it faster than most."

Taking Latitude

"We know the business. We were using past performance as an evaluation factor years before [former Office of Federal Procurement Administrator] Steve Kelman started pushing it," Sutfin adds. "Three years ago we were using oral presentations. We've been an innovator where we thought it was important. Where there's latitude, we take the latitude." For example, Gov.Works uses fixed-fee arrangements-generally between 2 percent and 4 percent of the total value of an acquisition, depending on its complexity-negotiated up front to win competitive advantage. "Some agencies charge by the hour plus overhead and travel," says Sutfin. "We chose a fixed fee as a way of showing clients what their costs are going to be. We say that if it costs more-if we made a mistake in setting our fee-we are not going to charge more."

In addition, Gov.Works trades on the fact that many federal contracting offices don't pay their bills on time. "We pay contractors for [clients]," Brown says. "For many agencies, that means we are able to pay quicker. We're able to negotiate a better deal because we have the money in hand. The businesses don't have to take out loans to cover the time until they receive payment, so they negotiate a lower price." And the agencies avoid having to pay penalties for late payments, as well.

While practices like these have endeared Gov.Works to program and project managers, they have won the operation some enmity in contracting offices. "We are hitting turf issues," says Sutfin. "Program managers are very receptive, [but] the acquisition community, sensing competition, is taking a defensive posture." Though they offer an alternative to traditional contracting shops, a Gov.Works staffers are adamant about staying within the acquisition rules. "Because we're out here on the front lines, I think we have to be even more careful," says Jim Connors, a Gov.Works contracting officer. "We're even more subject to being under the microscope." His colleague, contracting officer Katherine Valltos, agrees: "If a client asked us in any way to bend the rules, no one would do it. Part of our goal is to protect our clients and not do anything that would sully our reputation."

Not all procurement offices are wary of Gov.Works; Sutfin says some have come to his office for help with heavy workloads. For example, the Federal Systems Integration and Management Center (FEDSIM), a fee-for-service information technology support operation within the General Services Administration's Federal Technology Service, has its own contracting office, but uses Gov.Works and 30 to 40 other contracting offices to handle overflow work. "They've done a marvelous job for us," says FEDSIM director Timothy McCurdy. Gov.Works handles contracts in the $100,000 to $500,000 range, he says, running competitions for FEDSIM technical project managers. "We supply them with the statement of work and selection criteria and they'll get the proposals, run the competition and place the orders."

In fact, Gov. Works learned an important business lesson from its relationship with FEDSIM, Sutfin says. The partnership with FEDSIM once accounted for 75 percent of Gov.Works business. But for six months last year, McCurdy ordered all FEDSIM staff to check first with the internal contracting shop before going to outside providers such as Gov.Works. The policy had the intended effect of bolstering that office, but it threw a scare into Gov.Works. "We had relied too heavily on FEDSIM and we realized we couldn't depend too much on one customer," Sutfin says. McCurdy has since rescinded the policy and FEDSIM work is again flowing to Gov.Works, but in better proportion to that of other clients. "Now, as a result of the marketing program, [our work] is 50 percent FEDSIM," Sutfin says.

'Aggressive, But Honest'

Gov.Works hopes to use its marketing campaign to keep its business balanced and to branch out beyond technology acquisitions. This open reliance on advertising is yet another method Gov.Works uses to set itself apart from the competition. "Advertising" and "marketing" still are dirty words among many entrepreneurial federal organizations. When franchise funds were being created, their founders often were warned by congressional staffers not to risk legislators' fragile support of businesslike government by pushing too hard to generate sales. "A staff director of a congressional committee told me unequivocally to be careful how we market," says Ernest Hardaway, vice president for national marketing and reinvention of government at the HHS Office of Federal Occupational Health franchise fund. "He indicated that something euphemistic like 'customer awareness' or 'education campaign' would be far more appropriate."

Fully aware of such concerns, Gov.Works staffers were careful to seek endorsement from the MMS leadership. "We sold the idea at several levels of the agency and had no negative reaction," says Sutfin. "We discussed the types [of media] and radio and TV got a thumbs-down. We all know Manny [DeVera]," says Sutfin, referring to the former National Institutes of Health acquisition program manager who was severely criticized in 1996 for running ads for NIH contracts during the radio program hosted by shock jock Howard Stern. "We've had no political feedback," says Brown. "We were mostly concerned somebody might have a negative political take on it-should government be doing this type of thing. We only put ads in publications aimed exclusively at the population we're trying to serve. Clearly it's aggressive, but we think it's honest."

Indeed, Osborn & Barr's Vogel says one of the charms of the Gov.Works account is that it doesn't require exaggeration. "Agencies love Gov.Works because it's a great value, so it's easy to do the advertising-you don't have to get into hype." For now, the task is building the Gov.Works brand by making sure everything clients see or hear carries the same message. "We conducted a four-day sales training program with the Gov.Works staff so they can understand how to follow up on the brand in their selling," Vogel says. "We analyze every contact point-personnel, communications, anything that goes out into the marketplace-to make sure it is consistent with your brand." Once Gov.Works becomes synonymous with "acquisition" in federal managers' minds, Vogel hopes to target specific market segments by size of project, products being acquired, buyer behavior and other characteristics to pattern Gov.Works services to specific needs.

But that's all in the future. For now, Vogel sees his work as building the Gov.Works brand and Sutfin sees his as building Gov.Works. "We consider ourselves a start-up. We're still growing, still learning," Sutfin says. Gov.Works appears to have made an auspicious debut. Former OFPP chief Kelman calls the staff "excellent people." McCurdy, who deals with "a whole [range] of niche contracting offices," says he expects Gov.Works will be one of the survivors of this competitive era. "I'd be very surprised if they fell by the wayside," he says. "I'll bet they will grow."

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