The Wall Street Journal Claims Y&R Won the Census Account by Undercutting Rival Agencies

By Patrick Coffee 

Last month, a representative for the U.S. Census confirmed that the organization had chosen Y&R as its new lead creative agency after a pitch that lasted nearly a year.

Late Tuesday, The Wall Street Journal’s newest advertising reporter Alex Bruell filed a story centered on a document that demonstrated how Y&R won: by severely under-bidding its rivals. In fact, according to this document which we admittedly have not seen, the agency’s bid was lower than those of competitors FCB, DDB, McCann and Droga5 by as much as 50 percent.

From the WSJ story:

A team led by Y&R submitted a proposal for the three-year deal that would cost the government agency about $14 million, far lower than the bids submitted by four other players, which ranged from roughly $25 million to over $30 million, according to people familiar with the matter.

According to a document reviewed by The Wall Street Journal that ranked agency fee proposals by price, Y&R’s team came in the least expensive, followed by teams led by Interpublic Group’s creative shop FCB, Omnicom Group’s DDB, and IPG-owned McCann World Group, as well an Accenture-led team that included people from creative shop Droga5.

For the record, the story also claims that Y&R beat the other agencies in the “technical” ranking, which somehow quantifies the abstract by assigning a number to indicate how well each respective shop could “perform the work.” It also notes that, according to unnamed sources, the agency has  been discussing a possible partnership with PwC to handle what will obviously be a large, complicated account. Y&R unsurprisingly declined to comment to us and the WSJ regarding a contract worth $415 million over three years.

We hadn’t heard about Y&R’s alleged pitch strategy before the WSJ story ran Tuesday. That said, the federal contract for the business makes for an interesting read — especially the part in which the government answers agencies’ questions about how the media partnership portion of the deal will go down.

You’ll have to download the PDF here and wade through a lot of verbiage to review the whole thing, but given the recent brouhaha about the 4A’s and the agency world’s relationship with various media outlets, we think you will find the part about small business media partners particularly interesting.

The contract stipulates that 49 percent of the winning agency’s ultimate subcontracting spend on the U.S. Census account must go to “small businesses.” This number is quite high, especially given that very, very few media organizations or other major ad buyers would qualify as “small” by any real measure.

From page 41:

“The Contractor shall submit an updated Small Business Subcontracting Plan within twenty (20) business days after contract kick-off and then each year thereafter with task order proposals. In addition the contractor shall submit a quarterly report that includes the progress towards small business subcontracting goals that includes first, second, and third tier subcontractors.”

A January 11 version of the RFP includes questions and answers, with the questions submitted by the competing agencies and the answers provided by the Census organization itself. Here is one key exchange:

Question: A portion of subcontracted work may be National Broadcast Media Vendors. The majority of these vendors are Large Businesses and not available to meet the Small Businesses goals without significant compromise to the government’s ability to receive the financial discount benefits of a large buying agency. Would the U.S. Census provide a waiver of these vendors against the Small Business Goals?

Answer: No. The small business subcontracting goals applies to the overall contract value and not to specific subcontractors.

In other words, the unnamed agency was asking the Census whether it could get a waiver that would classify its national broadcast media partners as “small businesses.” Here’s the official requirement table for some context:

small business

One can tell the agencies are nervous about this requirement.

Question: Small Business: 49% of the total contract value Is the 49% small business goal evaluated on a quarterly basis or as an average across multiple years?

Answer: [It’s “based off of total contract value.”]

Here’s another exchange in which an unnamed agency asks whether potential media partners can “self-certify” as small businesses:

Question: It is our understanding that SBA regulations permit small, small women-owned, and small disadvantaged businesses to self-certify. Please confirm this to be the case.

Answer: Yes, this is the case.

No word on which businesses this question might be referring to, what their actual size might be, or whether the government would subject their self-certifications to any sort of review.

In other words, it could be a great way to satisfy the requirement that 49 percent of your spend goes to “small businesses” even if some of the partners in question would not normally qualify for such a designation under any other circumstances. This would be especially easy if the government chooses not to review each of those claims individually.

Another agency had an interesting idea on that front:

Question: The Government’s requirement is that all printing be accomplished through the GPO and its vendors. By limiting Contractors to printing through GPO and its approved vendors, the Government is missing an opportunity for use of small and/or Economically Disadvantaged Small Businesses; this requirement also eliminates the opportunity for Contractors to work with vendors to negotiate the most effective and efficient terms for the Government. Can Contractors assume that printing costs for work conducted through GPO are not included in the Contractor’s budget?

Answer: No, the Contractor cannot make this assumption.

You don’t get that level of bureaucracy on most pieces of business. This should be a simultaneously fascinating and tedious account to work on.