AI emerging as a not-so-secret business development weapon for government contractors
New benchmarking report details how companies are — or could be — using AI to strengthen proposals, fill pipelines and generate revenue.
New business opportunities are abundant for government contractors, but converting those opportunities into wins is far from guaranteed amid fierce competition to land contracts.
That much becomes clear in the newly released 2024 GAUGE benchmarking report from Unanet and CohnReznic. The report, based on an industry-wide survey of executives and upper level managers at government contracting companies, reveals that 57% of those contributors view finding new revenue sources as their company’s most significant financial challenge. Meanwhile, more than one-third of them indicated their companies also struggle with organic growth.
The reality is, to boost revenue and grow year-over-year, a government contracting company must consistently convert project proposals into actual new business. To do that, its business development processes and practices, and the proposals it submits, better be on-point.
As results of the eighth annual GAUGE Report indicate, company leaders view technology — and artificial intelligence in particular — as a tool that can help in that regard by simplifying processes, bolstering proposal quality and output, and supporting pursuit decision-making. About one-third of GovCon companies are currently using AI in its various forms: generative AI powered by natural language processing (NLP) capabilities, predictive tools and machine learning (ML) algorithms to name a few. As the report (of which I am a co-author along with CohnReznick’s Christine Williamson) points out, “For GovCons, the applications [for AI] are wide-ranging: automating tasks, validating data, preparing proposals, checking clauses, [and] acting as a virtual assistant.”
While the government contracting sector’s relatively slow uptake of AI reflects the risk-averse nature of the business they’re in, it’s also important not to overlook the value AI can provide in various use cases across the business, and particularly on the business development front. That value isn’t lost on a significant share of GovCon companies. In the 2024 GAUGE Report (see the two graphics below), more than half the GovCon execs we surveyed said their companies either currently use or plan to use AI in two key areas over the next year: business development/marketing and operations/IT. Content generation and data analysis are the two areas of their business where they see AI potentially providing the most value.
The report suggests that AI can be a true difference-maker, helping companies elevate their proposal win rate. Today, about 60% of companies are winning less than 50% of the time. Almost two-thirds of respondents indicated their company’s win rate didn’t improve year-over-year.
“Ruthlessly targeting the most qualified opportunities and creating highly compelling proposals will improve win rate,” the report says. “Both these approaches benefit from increased standardization, automation, visibility and measurability. Companies looking to win more must be prepared to invest in AI-enhanced BD tools and formalize bid and capture processes.”
How exactly can AI help companies win more business? For one, it can comb the digital landscape to uncover lucrative new government contracting opportunities. It also can support decision-makers in prioritizing pursuits. AI-driven analytics tools can digest a vast amount of data about past pursuits, projects and potential clients to help companies prioritize pursuits that align with its strategic priorities in term of the types of clients, projects and markets they prefer. AI algorithms also can predict the probability of success for projects, a huge help with prioritization. This is invaluable in helping GovCons avoid wasting time, resources and money chasing the wrong projects.
Besides helping companies refine their pursuit decision-making, AI also can play an important role in actual proposal creation, with data-gathering and content-generation capabilities to ensure a proposal tracks directly to what’s required in an RFP. It can also help them create content (such as tapping past proposals for content in a specific area, then tailoring it to the current proposal). AI can help interpret RFP complexities and provide optimal pricing recommendations. Arming proposal teams with intelligent templates can minimize manual effort so they don’t have to recreate the wheel with every proposal, while ensuring the consistency and accuracy of information included in a proposal. All these efficiency and quality improvements translate into a couple of important benefits — without increasing business development team headcount: higher proposal generation capacity as well as better overall proposal quality.
As valuable as AI can be to government contracting companies and their business development teams, maximizing that value is no given. Indeed, it’s vital that companies assess their readiness for implementing AI before they commit to doing so. Use the checklist below to help with that assessment:
If your company is ready, willing and able to check these boxes, then you’re well positioned to begin an AI journey that could well result in smarter pursuit strategies, better proposals, higher win rates and consistent growth, year after year.
Kim Koster is vice president of product marketing at Unanet, a software company that provides enterprise resource planning and customer relationship management solutions for organizations in the government contracting, architecture, engineering, construction and professional services markets
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