Unseating the Incumbent

Incumbent contractors often have many advantages—but may also suffer from vulnerabilities. Use a tactical approach to exploit incumbents’ weaknesses and win a rebid competition.

Introduction

A simple way to organize opportunities is to think of two categories: competitions for new contracts, and competitions for old contracts, in which an incumbent contractor already holds the contract you’re attempting to win.

Rebid competitions, in which an incumbent must defend its existing contract, require different tactics and strategies than competitions for new contracts. Incumbents have many advantages—they thoroughly know the customer, who’s who and who matters, the work, and how much everything costs. However, with patience, smart opportunity analysis, and a persuasive proposal, you may be able to leverage an incumbent’s typical weaknesses and win its contract.

Best Practices

1. Collect and compile intelligence on the customer and incumbent.

This step must begin before the release of an RFP. When an old contract is recompeted, the incumbent typically holds many competitive advantages over any challengers. The incumbent has a comprehensive understanding of the contract scope of work, complete knowledge of the customer’s staff (including decisionmakers, decision influencers, and troublemakers), and an intimate familiarity with all cost factors associated with the contract. This depth and breadth of knowledge can be difficult to overcome in a head-to-head competition.

However, incumbents often suffer from certain vulnerabilities that sharp competitors can exploit, including:

  • Taking the customer for granted
  • Not listening to the customer
  • Acting as though its company is smarter than the customer
  • Slipping into a routine level of performance with no focus on innovation
  • Tolerating cost growth
  • Not being highly motivated or prepared for intense competition for its contract

Challengers must probe the customer’s and the incumbent’s organizations to identify and gauge incumbent advantages and vulnerabilities. Is the customer satisfied with the incumbent’s contract performance? Is the incumbent performing well on all aspects of the contract? Are there deficiencies in its work? Does the incumbent listen to the customer? Does the incumbent’s management team lead effectively? Is something missing? Are costs accurate and reasonable? What could the incumbent do better? Overall, is the customer looking for more of the same or for a new way forward?

Typical sources of information that can answer such questions include:

  • Customer program and procurement staff, senior managers, technical experts, administrators, and workers at all levels (pre-RFP release)
  • Members of the customer’s staff who recently moved to other jobs or retired
  • Any customer-, contract-, or incumbent-related paperwork (reports, correspondence, publications, other documents) available publicly or via Freedom of Information Act requests
  • Current and former members of the incumbent contract staff who are willing to talk
  • Current and former employees of incumbent subcontractors who worked on the targeted contract

Carefully filter intelligence you collect, because everyone has an opinion, and people often have opinions that don’t align. A bidder comparison matrix can help you do this. Also be wary of information provided by angry people—it may be tainted by emotion and not fully accurate. Getting as much accurate information as possible is important, because you’ll have to decide if your company or team can honestly do a better job than the incumbent. If you can’t, you shouldn’t bother competing for the targeted contract.

2. Assess incumbent performance and develop improved solutions.

Compile and analyze the available information and objectively assess the incumbent’s performance and the customer’s satisfaction level. Use an incumbent assessment worksheet such as the following one.

Contract Requirements and Customer Issues/Hot Buttons Incumbent Performance Score (1–5) Incumbent Deficiencies Our Improved Solution Gaps in Solution Actions Required to Mitigate Gaps

Figure 1. In addition to listing the contract requirements, identify the customer’s issues and hot buttons. Assess the incumbent’s performance against each contract requirement and customer issue, list the incumbent’s deficiencies, and identify potential “fixes” or improved solutions that your company or team could deliver.

In addition to listing the contract requirements, identify the customer’s issues and hot buttons. Assess the incumbent’s performance against each contract requirement and customer issue, list the incumbent’s deficiencies, and identify potential fixes or improved solutions that your company or team could deliver. Identify any gaps or deficiencies in your firm’s (or team’s) ability to deliver the improved solution and describe actions necessary to mitigate these gaps.

3. Qualify the opportunity; conduct decision gate reviews (bid/no-bid decisions).

The incumbent assessment worksheet should provide a clear indication of the incumbent’s vulnerabilities and your company’s ability to provide a better service or product. Use this information to answer the following key questions:

  • Is this incumbent beatable?
  • Can you assemble the resources and strategies to unseat this incumbent?
  • Can you do a better job of meeting all of this customer’s needs (and can you provide evidence/proof points)?

Thoroughly review the opportunity by proceeding through the sequential bid decision gate reviews to qualify and pursue the opportunity, proceed to the pre-RFP phase, and prepare and submit the final proposal.

Conducting these reviews should ensure continuing corporate commitment and senior management support of opportunity analysis and proposal activities, because unseating an incumbent can take a long time and require substantial resources.

4. Use a variety of tactics to capitalize on the incumbent’s weaknesses and neutralize its strengths.

Capitalize on the incumbent’s deficiencies by developing better solutions, then test your solutions on the customer, tactfully increasing customer dissatisfaction with the incumbent’s performance. Using the solution gaps and action items from the incumbent assessment worksheet, continue to develop and refine your solution improvements and ensure your ability to deliver them. Be careful how and when you reveal these ideas to the customer, however. The customer could simply take your ideas and suggest to the incumbent that it implements them.

Develop strategies to neutralize the incumbent’s advantages. If it employs renowned SMEs, hire comparable ones or attempt to hire key SMEs from the incumbent. If it uses industry-leading management software or manufacturing techniques, acquire them (or comparable ones) yourself. If it has unique equipment or facilities, acquire comparable ones by teaming with firms that have them. If it has intimate knowledge of the customer and contract operations, acquire it by hiring previous key customer or incumbent staff. Teaming with other companies can often be an easy way to neutralize the incumbent’s advantages and provide resources and capabilities that exceed the incumbent’s. Be sure to evaluate potential teaming companies with the customer to ensure that they bring no “baggage” or personality conflicts with key customer personnel.

Improve your competitive position by continuing to educate the customer on the improved solutions, desirable resources, better service, more efficient performance, etc. that you would bring as the next contractor. Validate this by connecting customer personnel with people in your existing customer organizations who would give excellent evaluations and testimonials of your performance on similar contracts. Submit white papers, make relevant presentations at industry conferences, and submit relevant publications in industry trade publications—and ensure that the customer receives copies. Build a sense of excitement about the new opportunities, capabilities, and resources that your company can bring.

Finally, prepare a persuasive proposal that matches or exceeds the incumbent on all evaluation criteria by neutralizing its strengths and capitalizing on its weaknesses. Beat the incumbent “between the lines” by addressing the customer’s dissatisfactions, issues, and hot buttons with understanding and validated improved solutions. And don’t forget to include the proof of your prior successes.

5. Carefully determine price-to-win; develop and implement pricing strategy.

Incumbents are frequently vulnerable in the area of cost growth. As employees remain dedicated to a contract, their salaries and wage rates tend to increase automatically. Additional personnel are often permanently added to a contract in response to short-term requirements or as a solution to meeting utilization/billability goals. As motivation to perform and please the customer declines over time, operational efficiencies tend to decrease, resulting in reduced productivity and increased labor costs.

Price-to-win becomes especially important when competing against an incumbent. Its program staff often overlook cost-reduction techniques because they “know” exactly how many employees it takes to perform the scope of work, and they would never replace existing personnel with less experienced, less expensive employees. Corporate management often is used to a certain level of revenue and profit from the contract and would be unwilling to accept reductions in revenue or profit during rebid proposal pricing.

An astute challenger will learn the customer’s budget and cost expectations, study the incumbent’s resourcing and apparent pricing, and develop a bottom-up cost estimate by taking a fresh, objective look at resource requirements. There are also many opportunities to take advantage of innovative pricing opportunities that the incumbent likely wouldn’t consider (e.g., stand-alone cost structures, fixed or unit prices for portions of the contract, and reductions in annual costs as contract objectives are met).

All of these activities should lead to the development of a realistic, believable lower price than the incumbent’s expected price. A challenger almost always has to underbid an incumbent to take away its contract, unless it can clearly offer a quantifiable best value compared to the incumbent. Implement a pricing strategy early in the opportunity/capture planning phase and build a persuasive proposal that clearly demonstrates the benefits of your lower-cost approach.

6. Be vigilant and prepare for surprises.

Challengers seeking to unseat an incumbent often face little or no pushback from the incumbent during the early opportunity planning phases because the incumbent mistakenly assumes that re-winning its contract is a foregone conclusion.

However, as the incumbent becomes aware of your activities to penetrate the customer’s and its own organizations and to focus on its performance deficiencies, expect the incumbent to fight back fiercely to protect its contract. Watch for and prepare to combat disinformation spread by the incumbent and for other countervailing tactics to neutralize your own strengths. Staying ahead of the incumbent with competitive tactics will ensure your ability to establish and maintain a competitive advantage.

Especially for higher-value contracts, be on the watch for political influence applied to affect the contract award decision. Astute companies have learned the value of forging relationships with local, regional, and national-level politicians and may call on them to influence procurement officials to help steer an award toward their company. Incumbents, feeling threatened by a challenger to their contract, often will tap into their political capital to help ensure a re-win.

Common Pitfalls and Misconceptions

Underestimation of incumbents’ strengths.

“Standard” opportunity/capture planning strategies and tactics usually aren’t successful in unseating incumbents because incumbents have so many inherent advantages. Plus, it takes a significant amount of time to effectively penetrate the customer’s and incumbent’s organizations to identify and determine how to take advantage of the incumbent’s weaknesses and execute a more complicated win strategy. Due to this longer timeframe, opportunity/capture planning and proposal costs are often higher than for “new” contracts. It also typically requires more effort to obtain and maintain senior management support to unseat an incumbent.

Initial opportunity/capture planning efforts might generate little or no response from an incumbent, which can lead to a false sense of security among a challenger’s opportunity planning team. Incumbents may have fallen asleep at the switch, but efforts to unseat them are likely to awaken the sleeping giant. Incumbents have significant advantages and can often wage damaging and effective disinformation and reputation attack campaigns. Challengers should be prepared for a long and difficult opportunity planning and competition, despite an apparent lack of resistance in the early stages.

Summary

  • When a contract is recompeted, the incumbent usually holds many competitive advantages over any challengers. However, incumbents often suffer from many self-imposed disadvantages that make them vulnerable.
  • Standard opportunity/capture planning strategies and tactics usually aren’t successful in unseating incumbents. It takes significant time and effort to collect enough intelligence to determine how to neutralize an incumbent’s strengths and take advantage of its weaknesses.
  • To unseat an incumbent, a challenger must determine how to provide better solutions (services or products) than the incumbent and at a lower or comparable price. Challengers also must provide evidence of prior success. If your organization can’t identify how to do this, you should walk away from the opportunity.

Terms to Know

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