Government Contracts: To Do Or Not To Do

Winning a government tender is a matter of pride for solution providers. It
also makes for interesting news when a partner bags a government contract. But
no one talks about the difficulties in deploying these projects, where partners
have to deal with several levels of hierarchy, bureaucracy, lack of user
technical know-how and other issues.

In a recent study done by PCQuest, the government sector ranked second in
terms of deploying IT projects in the country. According to the report, this
segment comprises 18 percent of the total IT deployment, just two percent less
than the manufacturing sector. The report highlighted that a lot of government
departments and ministries were busy building up their IT infrastructures by
introducing workflow automa­tion, setting up new information system and portals,
HR management solutions, mobility solutions, etc. What does this indicates for
solution providers?

Well, it reflects the surmounting business opportu­nities for solution
providers in the government sector and that it could be a goose laying golden
eggs for them.

Grab and run

Solution providers are always vying to grab government contracts for the
obvious reason that the volume of business in this segment is bigger than in any
private segment. The projects are on a wider base and provide challenging
opportunities to them to expand their portfolio.

Sharing his views on the potential in working for government projects, Dilip
Banerjee, Director and CEO of Kolkata-based Syntech Group of Companies said, “We
gain huge experience in working with ground realities extended over large
geographies and cultural diversity.”

Expressing a similar sentiment, Avinash Pitale, Executive Director of
Mumbai-based Omnitech Infosolutions said, “It helps in creating a brand image
that may assist in bagging a private project.”

However, for solution providers, implementing a project for the government is
not an easy task as the path is full of obstacles that one has to face. There is
no alternate route that solution providers can take to implement the project in
a professional manner, without getting entangled in hierarchies, red-tapism and
the sluggish attitude of government babus.

Speed breakers

Decision making-'The govern­ment body is not clear in terms of their scope.'
This is the first sentiment that solution providers convey when asked about the
operations in government sector. They further added that this segment of
customers is unable to define its objective, which in turn propels lack of
evaluation of the project. This creates a problem at the system integrator's end
and it delays the project at the initial stage itself.

The over-stretched decision-making phenomena cause long gestation periods
that are another trouble for solution providers. By the time the project is
conceived, budgeting is done, operations are started and the implementation is
finally done, there is considerable fall in the price of the technology. The
pre-tendering process of getting the tender takes weeks and months. Even when
the tender is taken up it takes between six months to one year to finalize the
dates for starting the operation.

Moreover, the implementa­tion time of a project in the government sector is
extended at such a length that the technology gets obsolete. After reaching to
the stage of grabbing the tender and making it fully operational, the whole
scenario of technology changes and this leads to

price fall of the older technology and sometimes it causes unavailability of the
older technology.

“Many times, the older technology is not available in the market. In that
case we have to implement new technology, which again demands an approval from
all the levels in the government body. This task keeps on delaying the project
for no reason,” said Prateek Garg, CEO of Noida based Progressive Infotech.

Red-tapism

Another major issue in government that cripples solution providers is the
presence of hierarchy and bureaucracy. Transfer of files from one desk to
another delays the entire project. Moreover, efficient execution of a project
largely depends on the people who are heading the government department. Their
interest in technology can help the system integrators in implementing the
technology at one go, in the absence of which it can take years.

“In the government sector, people get transferred from one department to
another over a certain period of time. Often what happens is that due to long
gestation period, all the key people who had initiated the project are
transferred to another department and the new sets

of people do not have any understanding of technology. This causes a problem for
us,” expressed Garg.

“Employees who would be using the technology are not aware about the project.
A set of people conceive the project and due to choked flow of information from
one department to another, the actual user might not know the advantages of the
latest implementation. If the project is spread across a large area, employees
at one location might not be aware of the project. Their non-cooperative
attitude leads to partial utility of the project,” said Rajiv Jain, MD, HTP
Systems, Mumbai.

Red-tapism is common in all the government departments and solution providers
know that it is unavoidable. Perhaps there are only a few who know how to work
their way through government people. But it certainly is not everyone's cup of
tea.

“Things are not executed in an organized manner. There is no one appointed to
deal with the solution providers. In the private sector, the responsibility lies
in the hands of a team who is responsible for it and monitors the entire
process. The chalta hai attitude is very much prevalent in the government bodies
and the kind of returns that we expect from them is generally never realized.
Also, cash power is needed in dealing with them,” highlighted Prasad Kshirsagar,
Director of Mumbai-based Pace Infotech (India).

Onsite readiness

Even after the project is explained to solution providers, objectives are
defined and dates are fixed, there are more hurdles. What happens when the
technical guys reach the site with the tools and technology, but find that there
are no basic facilities like power, broadband connectivity or even furniture for
installing the computers?

“At times, sites are just not ready and we cannot help it. We have to wait
till everything is in place. It happened with me once. There was an order of
deploying 20 computers in a government department and when we reached the site
with all the peripherals, there was no furniture. When we asked the government
people for it, they simply refused to render any support. In that case we cannot
do anything and the task gets postponed,” said Ravi Nandi, Director of Indore-based
Business Automations.

Nandi, whose 60 percent business comprises government projects, highlighted
that Madhya Pradesh is a vast state and most of the IT deployments for
government are in remote areas where transportation becomes a big problem
besides power supply and other basic facilities.

Payment collection

While bagging a government contract may bring a smile on the face of the
winner, it is only for a short while. At the end of the contract comes the issue
of payment collection, which simply haunts integrators. After implementing the
project, it can take up to one to two years for the solution providers to get
their payment.

“Payment collection is one of the most daunting task that dealers have to
face while dealing with the government sector. We have to make regular
follow-ups and even then there are often no crucial results. We have to approach
higher authorities. This demands for unnecessary time and energy, and above all,
the cash flow gets blocked. It affects our business as one cannot wait and
watch. We try to come out of the bottleneck as fast as possible for which we
have to maintain good relations with higher authorities in the government
sector,” added Garg.

“Most of the government orders that we execute are on turnkey basis. Long
payment cycles are one of the major problems in executing government projects.
We have to adjust and plan our finances according to the same,” said Banerjee.

Making his point on the same Mahesh K Shah, Director of Kolkata-based Pecon
Infotech said that payment is the most prominent issue in any government project
since the payment terms are very long and advance planning is not possible.

“We cannot make any plans for that money. Therefore, we have to adjust our
financial schedules or any other plans accordingly. Apart from that, getting and
implementing the orders are a challenge on their own. Generally, these are big
projects, so challenges associated with proper implementation and management of
the projects are bigger,” he commented.

“Payments are made only after the project is completed and the time it takes
to complete one government project is so long that the payment is invariably
delayed. For instance, in a small project like installing computers, there are
no basic facilities like power at the site and in that case we cannot claim the
payment and have to wait for an indefinite period,” remarked Nandi.

Price undercutting

There are instances when principal companies also join the race to grab a
project and in that case, partners start undercutting on the price of the
project. Due to the low margins, it is not profitable for them to make drastic
changes in the cost and therefore vendors often win the game. The government
sector enjoys the lowest prices of IT products amongst the entire segment
whereas in other trades, governments buy products at higher prices. Long payment
cycles and lower costs at times compel the solution provider to undercut the
quality of the overall project.

Technical qualification

Most often, government departments do not have technically qualified people.
It becomes the job of the solution provider to put an extra effort in to
explaining the whole process and that is an added burden on them. Making them
understand the technology is another challenge and due to inadequate know-how,
they also mishandle the project.

Expressing his concern about the same, Banerjee added, “This is quite
expected. However there are technical experts who are taking up this challenge
from the government side. There should be association among partners for
extending technical expertise. We have to look after related issues like
training programs and operation guidelines from time to time.”

Kshirsagar commented that solution providers have to train the government
employees since they are generally not technically qualified. They are
transferred from various departments to the IT department based on only
seniority and not on their technical knowledge; hence they are unaware of
technical aspects.

Manpower retention

At a stage when attrition is at an all time high, retention of employees is
a major issue of concern for solution providers. Nowadays, employees in all
companies are on the verge of switching jobs and therefore system integrators
have to think in this direction also. Leaving a company in the middle of a
project may cause a lot of inconveniences.

The only solution for this is that solution providers maintain a team of
multiple people so that even if one or two leave, it does not obstruct the flow
of the project. Employees should also try and keep a tab on where his employee
is joining, because that company could be his competitor, and he could lose some
important information along with his manpower to that company. Therefore, until
a project is over, solution providers should try and retain their employees by
offering them various incentives and time-to-time appraisals.

Is the scenario changing?

Amid all the odds, the situation is evolving at the government front. There
could be delays in implementing a project but the solution providers have
observed the increasing interest of government in deploying the latest
technology in their department.

This means that the trend is gradually changing and they are enthusiastic
about integrating with the world. The rate of IT deployments in this sector
signifies that the government sector does not want to lag behind and have the
will to become a tech savvy segment.

“Government agencies have realized the importance, hence they have to update
themselves. However, it depends on the people in government to make this
decision, some of whom are fast in adapting to new technology whereas others
follow the lax route,” commented Singh from Jammu.

“Development in the IT sector has been tremendous in the last couple of
years. Technologies have to be identified as to whether they

are beneficial for the growth of the economy, if seriously implemented. Partners
do often approach the government with new technologies and they show their
interest in implementing it,” commented Banerjee.

“The government is interested in IT. However, there is a lack of proper
coordination in the team which is necessary for smooth implementation of the
project,” said Pitale from Omnitech, Mumbai.

On the other hand, Kshirsagar from Mumbai felt that the government is not at
all enthusiastic about deploying latest IT solutions in their departments. He
opined that this was especially the case with the Maharashtra government, which
is behind some of the other states.

Preferred customers

Ask solution providers what they enjoy more, working for the government or
private sector and you will get an instant response. The private sector.
“Comparatively, private projects are better as the working environment is
professional and everything is pre-scheduled. They have the understanding of
technology and adhere to their terms and conditions. Moreover, payment is done
on time and there is no bureaucracy there. Basically, it is transparency that
compels us to prefer private customers,” said Singh from Jammu.

“Things are not defined well in the government sector. Private projects are
more interesting. However, volume wise, it is beneficial to do government
projects. I don't think that it is beneficial for a solution provider to do
projects solely for government. We have to maintain a balance because one offers
voluminous job and other timely payment,” expressed Nandi from Indore.

“Nearly 50 percent of our business comes from the government sector. This
will increase in the coming years as we expand our presence to other states. I
don't think that it is wise to do only government projects. A mix of projects
from the government and private would be more realistic and there are distinct
advantages while working with both class of customers,” clarified Banerjee from
Kolkata.

Shah from Pecon Infotech admitted that though it is possible to do business
with the government, it requires serious planning, which may cause result in
lower turnover but higher profitability.

Remedy

While dealing with government projects, solution providers very well know
about all the pitfalls but they still go ahead to do projects for this segment.
Some of them evaluate their own ways to handle it while others get habituated to
the lethargic conditions. In some cases, system integrators even take the
decision not to deal with a particular department when the situation gets out of
order.

“A lot of time is wasted in collecting payment, and apart from that, we have
to do regular follow-ups. We have to maintain good relations with higher
authorities, so that if a problem is not handled at the lower end, we may
approach them,” said Nandi.

Another partner remarked that the decision to deal with the government is one
that a partner has to make on his own. While doing this, he has to keep in mind
all the issues involved and also work out how to deal with them, rather than
jumping into this business blindly.

In most cases, solution providers do the forecasting for government projects.
They calculate the timing of the maturity of tender and delivery, so whenever
they do the quotation, they calculate the tentative prices and then put it on
paper. According to most solution providers, this is the only way to deal with
government projects and they have to follow this procedure.

“In our case, (software market), it is volume business. It is just a gesture
of goodwill that we undertake something related to a government body, for
example, systems integration. This helps us bag private projects,” opined
Kshirsagar.

Security is the benefit in a government project that lures the solution
providers to go for it. There could be various hurdles but once you get the job,
it is secured. One has to plan out a pattern to deal with government projects in
order to handle all the issues. Also unlike the private sector, changes do not
happen that frequently in the government sector, be it people, management
policies, etc. The job is much more stable and steady.

Whichever route solution providers decide to take, they know that they have
to face a roller coaster ride while dealing with the government body and will
have to come up with certain processes on their own to make working more easy.
However, with the gradual change in mindset of government people with regard to
implementing the latest technology, the situation may improve in future.

Amrita Tejasvi

amritat@cybermedia.co.in

With inputs from Piyali Guha in Kolkata and Subbalakshmi BM in Bangalore