Key Takeaways

  • An incumbent contractor is the company currently holding a government or private contract; their status gives them advantages but also unique challenges.
  • Agencies weigh whether to rehire incumbents or select new contractors based on performance, cost savings, innovation, and compliance.
  • Incumbents often win re-competes due to familiarity, but complacency, weak performance, or failure to innovate can lead to losses.
  • Federal rules such as Executive Order 14055 require successor contractors to offer employment to service employees of the incumbent, impacting workforce transitions.
  • Hiring incumbent workers is a critical strategy for new contractors, as it reduces disruption, ensures continuity, and satisfies government expectations.
  • Both incumbents and challengers must focus on innovation, cost-effectiveness, and strong proposals to succeed in contract competitions.

Choosing an incumbent contractor for a new transit contract is often preferred and considered less risky due to the contractor's familiarity with the company's processes, personnel, and past performance history.

However, choosing a new contractor could be beneficial if it comes with reduced cost, improved technology, increased efficiency, and performance. There is also a tendency for new contractors to over deliver in order to impress and retain new clients.

New Expectations

Although familiarity is reassuring, it's not a good idea to choose an incumbent contractor due to the perceived risk of working with new contractors. Sticking with an incumbent contractor that doesn't deliver in order to avoid dealing with changes may result in a lot of issues and challenges down the line.

Legal and Regulatory Considerations

Federal contracting has introduced new rules that directly affect incumbent contractors and their employees. Under Executive Order 14055, known as Nondisplacement of Qualified Workers Under Service Contracts, successor contractors must offer a right of first refusal of employment to service employees of the incumbent if they are qualified for the position. This rule ensures continuity of services, protects workers from sudden unemployment, and minimizes disruption for agencies. For incumbents, this means that employee retention during re-competes is no longer just a business choice—it is a compliance requirement.

New Metrics and Expectations

Working with new contractors allows transit agencies to start afresh with new metrics and expectations. By assessing the failures and weaknesses of the incumbent contractor, the agency can put in place better metrics and processes to ensure that the new contractor performs according to expectations.

Increased Value

New transit contractors can add more value to your agency in terms of finances. They could either deliver services at a lower cost—facilitating a leaner budget or produce a richer and more diverse set of services—leading to improved performance at the same cost. It may be difficult to assess which brings more value—increased performance and satisfaction levels at the same (or a slightly higher) cost, or the same kind of service delivered by incumbent contractors at a lower cost.

Why Incumbents Often Win Re-Competes

While new contractors may bring fresh value, data shows that incumbents often retain contracts in re-competitions. The primary reasons include established agency relationships, knowledge of agency operations, and reduced risk for government clients. Agencies typically prefer minimizing transition risks such as staff turnover, operational downtime, and retraining costs. However, incumbents cannot assume automatic renewal; agencies are under increasing pressure to justify contract awards, making strong performance documentation and competitive pricing essential.

Fresh Perspective

In terms of operational capabilities and expertise, new contractors may be able to offer a fresh perspective that speaks to the agency's goals and pain points. They can bring in new processes or technological solutions that will increase productivity and efficiency for paratransit operations. Due to a history of winning previous contracts, incumbent contractors may not feel the need to:

  • Undergo additional training
  • Bring in new equipment
  • Hire new talent (subject matter experts and consultants)

On the other hand, a new contractor may be predisposed to up the ante and bring in additional tools and talent to win the contract.

Previously, incumbent contractors were confident of winning a re-compete based on the organic, year-over-year growth that was common in the past 10 years.

However, contractors no longer have that luxury of assuming that they can win a contract bid. Just because incumbent contractors participate in the re-compete process doesn't automatically guarantee a winning bid.

Workforce Transition and Hiring Incumbent Employees

For new contractors, one of the best ways to compete against incumbents is by retaining their workforce. Government agencies prefer continuity of services, so demonstrating a plan to recruit and hire incumbent employees strengthens proposals. 

Strategies include:

  • Building relationships with current employees before the contract transition.
  • Offering competitive compensation packages to retain experienced talent.
  • Ensuring compliance with federal nondisplacement rules.
    This approach reduces onboarding challenges and reassures the agency that service quality will not decline during the transition.

More Competition and Fewer Opportunities

Presently, it has become fairly difficult for incumbent contractors to win during the rebidding process due to more competition and fewer opportunities. As such, incumbent contractors must arm themselves with the information they need to win a re-compete—meaning that they must understand how they compare with the competition.

Risks of Complacency for Incumbents

Incumbent contractors may mistakenly believe their long-standing relationship with an agency guarantees renewal. However, agencies increasingly look for measurable improvements and innovation. Contractors that fail to modernize, address performance weaknesses, or offer cost efficiencies risk losing their re-compete. Past performance remains a critical factor, but it must be paired with clear evidence of adaptation and improvement.

Obtaining Key Insight/Feedback

Although gathering key insights may require the use of independent, third-party research providers, the resultant feedback can be beneficial to contractors during the re-compete process and the contract's tenure.

Since government customers usually find it difficult to provide negative commentaries, honest feedback, and constructive criticism directly to contractors, the use of third-party research providers may become necessary.

In this new age of government contracting, it is vital for incumbent contractors to obtain honest feedback/insight from government customers in order to secure re-competes. They no longer have the luxury of assuming that they will automatically win the contract bid. With such feedback/insight, there is increased likelihood of enhancing performance and retaining existing contracts.

Competing with Incumbent Contractors

For new contractors, it can be extremely difficult to compete effectively with incumbent contractors that have a long working relationship with the government agency. However, they may succeed if they offer a more innovative proposal that is cheaper and better.

The key advice for winning government contract bids is to do something that no one else has done in a way that is much better and cheaper. If incumbent and new contractors follow this simple guide, they would find it much easier to pursue and win contracts. If the contractor only does something unique and innovative, there will eventually be a contractor that does the same thing but at a lower cost.

Strategies for New Contractors to Break In

New contractors can successfully challenge incumbents by focusing on:

  • Innovation: Offering unique technical solutions or improved processes.
  • Cost Competitiveness: Delivering comparable services at reduced expense.
  • Proactive Workforce Planning: Recruiting incumbent employees early to ease transitions.
  • Customer-Centric Proposals: Highlighting ways the agency’s mission will be better supported under new leadership.

While incumbents hold advantages, new contractors who present compelling evidence of improved value and reduced risk often win government bids.

Frequently Asked Questions

  1. What does incumbent contractor mean?
    An incumbent contractor is the business currently holding and performing under a government or private contract, often with advantages in re-bids due to experience.
  2. Do incumbent contractors always win re-competes?
    No. While incumbents have advantages, agencies may select new contractors if they offer lower costs, better performance, or innovative solutions.
  3. Are successor contractors required to hire incumbent employees?
    Yes. Under Executive Order 14055, successor contractors must offer qualified incumbent employees the right of first refusal for employment.
  4. Why would an agency choose a new contractor over the incumbent?
    Agencies may prefer new contractors for cost savings, new technologies, improved efficiency, or to correct weaknesses in the incumbent’s performance.
  5. How can new contractors compete with incumbents?
    They can win by presenting innovative proposals, hiring incumbent staff, offering better pricing, and demonstrating stronger alignment with agency goals.

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