What Startups Need to Know About Working with Government

Governments spend billions of dollars every year delivering a range of services to their citizens. Health, education, law and order, parks and recreation; their reach is extensive. They are under constant public scrutiny to provide effective services at an affordable cost, which is something the ingenuity and tech from the startup sector can certainly help with! So why is it so hard for startups to land government clients?

One reason may be a lack of understanding of the system. Here are 5 things you may not know that can help get you started.

1. The sale starts before the tender documents are released

Ask the experts, and they’ll tell you that if you respond cold to a tender request, other than for off-the-shelf items like stationery and cleaning services, you will have very little chance of getting it. That’s not because the process is rigged. It’s because you are unlikely to be a perfect match.

The companies that win these tenders have often been talking to public servants in the weeks or months prior, helping them understand the scope of the requirements that will get them the outcome they are looking for. Public servants are experts in the problem, not necessarily the solution. They need to have lots of conversations with potential suppliers to work out what’s available, what feels like the right fit, and what they should specify or ‘go-to-market’ for.

To increase your chances of winning a tender start talking to public servants about the benefits of your unique solution prior to the tender being released. Be aware that once the tender is in the market there are strict rules to ensure no one is given special treatment, and that after this point no discussions are allowed.

2. Every penny of spend has been pre-allocated in detailed budgets

It doesn’t matter whether you have the most impactful or breakthrough product that could change millions of lives, if there’s no budget allocation for it, it’s not likely to find support.

Budgets are set annually, for 3 or 4 years in advance, through a very complex and hierarchical process. The complexity of the process means that once the budget is set, it rarely moves. The only chance you have of getting traction is to attempt to anticipate the next budget cycle.

To do that you need to understand what’s driving budget allocation decisions, and that’s government policy. Every department starts its annual planning process by defining what it needs to achieve that year, which is heavily influenced by government Ministers. If you are working in an area that is not a priority for government you may have to wait until it is to get any traction.

3. Alignment is key for getting public servants to pick up the phone

Once policy outcomes and budgets are set in stone public servants take a razor sharp focus to getting this work done. There is little room to move on priorities or funding so if you approach them with something that’s not aligned, you’re not likely to get their attention. That’s not because they’re not interested, it’s because it’s not a good use of their time.

The good news is that policy priorities for every department are listed on their websites. The funding that sits behind each policy area is publicly available either through the department itself, or the Department of Treasury and Finance budget papers. You should be able to track down the people associated with each policy area by checking the organisational charts that are also online.

Always do your homework before you reach out to a public servant. If you specifically mention how your work relates to the policy area they are working on you are much more likely to get a response and land a meeting.

4. Procurement processes are big blockers but there are ways to navigate through them

Governments are spending public money and have a responsibility to do this with the utmost care, which is why procurement processes are so strict and cumbersome. Over time the number of boxes that need to be ticked to ensure that money is spent appropriately has increased. Various procurement reform initiatives are springing up inside government which may improve the ability of startups to win work in the longer term, however in the short term it may be easier to find creative alternatives.

One of the toughest requirements for startups to meet is the financial stability one. Most tender processes require companies to submit the prior two year financial statements in order to indicate that the company is financially sound and therefore likely to deliver the project in full. Startups that do have two years trading history may not meet this requirement if they have reinvested profits to fund growth and are posting losses.

It’s worth having a discussion with the department prior to the procurement process kicking off if you think this will be a problem. In rare cases they may be able to request an exemption, if the funding and risk are proportional . An alternative would be to reach out to a potential partner organisation and submit a joint response. You deliver the work and they provide oversight and a form of insurance in case anything goes wrong. You may need to increase the price to cover their overseeing role. Government procurement is all about ‘value for money’, so if yours is the best fit for delivering the outcomes it’s less likely to come down to price which may provide room for these types of arrangements to work.

5. Startups and public servants have more in common that you might think!

One of the most encouraging things I’ve found while working the GovTech sector is how dedicated and purpose- driven public servants are. Like entrepreneurs, most public servants are motivated by a higher purpose, doing public good … which happens to be the very thing that motivates a lot of entrepreneurs! There’s an opportunity for startups to develop great relationships with the people they work with inside government because their values and goals are often aligned — more so perhaps than other suppliers they work with.

Tristonne is Managing Director of Australia’s first “GovTech” accelerator, CivVic Labs, which is a digital transformation program run by Launch Vic that facilitates Victorian government access to the daring innovation found in the startup sector.

Since 2018, CivVic Labs has worked with 38 startups across areas like infection control, public transport, the circular economy and workplace safety, driving new implementations of commercial tech in government and securing over $1.8 million in funding for new technology companies.