Relationships vs. Expertise: What Matters Most When Trying To Win A Federal Services Contract

Welcome to our in-depth exploration of federal contracting through the eyes of Paul Dillahay, a seasoned industry executive with experience at large organizations like CACI, PwC, and Lockheed Martin. In this interview-style blog post, discover how relationships fuel the federal contracting world, why past performance and team culture are crucial for success, and Paul’s approach to fostering innovation and breaking down organizational silos.‍

You have extensive experience in the Federal sector, working with several significant players. What drew you to federal contracting?

‍Paul Dillahay: As federal contractors, our mission is to provide critical services for our citizens, and on the intelligence or defense side, it's to provide high-end solutions for our analysts and our warfighter. I care deeply about what we, as government contractors, can do to support our warfighters and citizens.‍

Is contracting a relationship-based industry? Is that changing?

‍Paul: Relationships and winning bids are interrelated. I spent a lot of my career trying to build and maintain relationships. I routinely talk with customers, both prior and potential, and to people who worked for me years ago to see how they're doing, if I can help, or if we can collaborate again. Having a relationship as a trusted partner is essential.

Maintaining those past relationships is essential because you never know what's around the corner that could lead to an M&A discussion, a teaming discussion, or a subprime relationship on a specific opportunity. It’s always easier to come to those agreements if you know somebody in the company.

‍As a P&L leader, what are the most important factors that drive success in growing the business?

‍Paul: Every company prioritizes differently. There is no single factor, but if I had to pick one, it would be execution. You need a solid past performance and a reputation for delivering in areas critical to that client. Past performance issues will ultimately catch up to you. 

The second factor is interrelated with execution. Your culture, the caliber of your people, and the environment you establish as a leader sets the stage for excellent performance. You can't execute programs well if people are constantly leaving. Your teams must be committed to the company's and customer's mission. The interrelationship between execution and people is vitally important.

How do you extend into areas where you lack past performance?

Paul: That's a good question. And this is a challenge, especially for a small mid-tier company that doesn’t have the reputation that the large system integrators have. If you think of a quad matrix of existing customers, existing capability, and new customers and capability. Where does this opportunity plot on this chart? New capabilities are very hard, and a new capability with a new customer is the most challenging.

Building intimacy with the client is the right way to close those gaps. Suppose I have no customer intimacy, but I'm going after a customer for the first time. In that case, our capture team, myself, and my executive team need to talk to that customer and validated their pain points and our approach to solving them. We should only submit a proposal if we have done that. Otherwise, we should refrain from bidding and invest in other opportunities.

Sometimes, you win without this preparation, and those instances reinforce bad behavior. It is generally not repeatable. Teaming is another option for expanding into new areas, but with the right amount of preparation and time, I prefer making strategic hires to priming opportunities.

It is also important to manage your reputation and a client’s perception of your capabilities. They might only think of you as an IT Service Management (ITSM) company, for example, and not consider appreciate the breadth of your capabilities. That's a barrier to overcome because you get locked in the customer's mind for doing certain things very well, and they need to envision you being able to innovate, too.

Although this makes the probability of winning more challenging, you can overcome it. You can do this through proofs of concept, demos, and dialogue. Hopefully, you're building past performance with capabilities you can point to elsewhere to provide proof points and vignettes of success. 

Many CEOs say people are our biggest asset. Do you agree or disagree with this statement? If you agree, how are you investing in that asset to get the best outcome for your business?

Paul: I agree with that. I've been told that there are two types of leaders—leaders people run toward or leaders people run from. We would all prefer to be the former. In my career, I've been very fortunate to have some superstars work with me and, in some cases, follow me from company to company.

Sometimes, you go to a new company, and there's so much talent there already. Figuring out the team and ensuring you have all the right people in the right jobs is a first priority. This is critical to positioning the company for success.

Whether that results in replacing some leaders, bringing in new leaders, or changing the status quo, you can do it with dignity and respect, treating people fairly and coaching them through it, whatever the outcome.

I've worked for some exceptional leaders who have done a great job with teams. I've also worked with some leaders from whom I've learned a lot but who also demonstrated some things I wanted to avoid doing. Both of those experiences are very healthy. I wouldn't be where I am now without having both positive and negative experiences with past leaders.

I treat people the way I want people to treat my mom and my dad. Doing that doesn't mean you can't make changes. And it doesn't mean you can't hold people accountable.

At OnFrontiers, we consider ourselves the experts on expertise. What does the term “expertise” mean for you as the CEO of a government contracting business?

Paul: Interesting question. Even though I have a strong finance background, I've had strong CFOs work for me in all my roles. That’s because I don't want to do that job. I want to be something other than the expert CFO. I've done that job, but now I want to focus on being an expert CEO.

The point is to hire good people. Hire the experts in those positions so that you can focus on strategy, culture, and growth. You hire good people, hold them accountable, help guide them, and they will do great things on their own.

Raw ambition to drive results is one dimension where I’ve observed leaders and organizations diverge.  What do you think separates ambitious companies from those who may be more complacent?

Paul Dillahay: I think the companies routinely outperform their peers have leaders who know how to assess and take prudent risks.  Perceiving market changes, technological changes or business model changes is one thing. Having the courage to commit resources to champion that change is another. Personally, I’d rather be at the forefront of driving innovation, whatever its form, than passively observing the change and letting others outperform in the industry.  I have the battle scars from this approach, however, I couldn't do it any other way.

How can CEOs foster more innovation in their businesses?

Paul: It's an exciting time for this question. We should continuously innovate based on what's happening in the marketplace from an AI perspective. Our challenge in federal contracting is the customer's willingness to adopt this new technology.

Some defense department agencies are always on the cutting edge. But generally, the federal marketplace is slower to move than the commercial sector. You must strike a balance by determining your customer's willingness to embrace change. I can give several examples of proposals we've written, and even after spending significant time prepping the customer for innovation, our solution was deemed too high-risk by the client.

The same things clients recognize as strengths can become weaknesses. It's a reality of the process, though, and you should learn from that. Hopefully, when they read your proposal, which you’ve prepped them on, they'll shake their heads and say, "I agree with the innovation, and I'd like to discuss that with them,” instead of a response like, “Can you provide proof points and examples of where you've done it before?” How are you truly innovating if you've already done it before?

Part of the answer is to think in terms of degrees of innovation. If you approach it with a black box the client has never heard of, and you've never implemented it, and tell the client to trust your story, this is a hard ask. It will take a lot of work to convince people to buy it in any significant way. But taking a solution you’ve implemented in a different context, combined with strong analysis and validated hypotheses that it can be adapted to the client’s purpose, is a stronger pitch.

Can you deterministically gauge the customer's risk appetite related to a specific opportunity?

‍Paul Dillahay: I have yet to solve that challenge if there is a solution. Certain agencies tend to avoid all risks. Their mission can't accept risk. There may be an innovation adopted commercially for five years, such as robotic process automation (RPA), and you want to bring it to the tip of the spear, to the warfighter's mission. You'll have to work hard to convince them.  We’ve done it, but it takes the right commanding officer and the right timing.

On the other hand, some CIOs and agency leaders believe their role is to serve as the government's test bed, so they're more apt to accept innovation and the possibility of failure that comes with innovation. If you can fail fast and correct, you can still have a win. Knowing those agencies and proposing something that could change the market but is in the early stages is a viable path.

Do you see silos as a problem in federal contracting? And as CEO, are there measures you have taken to break down silos?

‍Paul Dillahay: Yeah, I think it's natural at times for organizations to put these silos and barriers up that hinder innovation, collaboration, and communication. This happens within an organization and across government and industry teams practically every single day across every program.

‍And when those barriers go up, it doesn’t matter whether the cause lies on the government or industry side, as leaders, we need to break those silos down. I’ve proposed approaches such as daily executive tag-ups or even team building events where we get contractor and agency teams together and focus on working better together.

COVID hasn’t helped. Remote work has many advantages, but it has put stress on our ability to truly collaborate with our Government customers and even within our teams. That creates challenges for all of us as leaders to collaborate more directly and constantly deliver impactful outcomes for our missions.

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