What is B2G or business-to-government? Definition and examples
B2G, which stands for business-to-government, refers to the business relationship a company can have with a government institution. It commonly refers to the offering of products, services, or information online. However, we use the term for traditional business procedures too.
We also call this way of doing business B2A, which stands for business-to-administration. The term refers to a company doing business either with the government or the public sector.
Techopedia has the following definition of the term:
“Business-to-government (B2G) is a business model that refers to businesses selling products, services or information to governments or government agencies.”
B2G – bids and tenders
In many cases, government agencies work with pre-negotiated contracts. The government puts out tenders which companies bid for.
To put out a tender means to ask companies to say formally how much they would charge for a project.
We call each formal submission a ‘bid.’ The government selects one of the bidders, and that company gets the B2G contract.
These contracts exist at national, state, or local level.
‘To’ – not ‘two’
Remember that in its short form – B2G – the number ‘2‘ stands for the word ‘to‘ in ‘business-to-government.’ When you write the long form, do not write ‘business-two-government.’ That is wrong!
If it weren’t for B2G, most defense contractors, such as Lockheed Martin, would be much smaller companies. The defense market is a monopsony, i.e., a single buyer dominates the market. That single buyer, in this case, is the government.
In the US, the General Services Administration (GSA) issues these types of B2G contracts.
The GSA purchases billions of dollars’ worth of services and products through contracts each year.
The GSA may reject bids for many different reasons. If the public institution has acquired the service of a certain company before, it may reject its bid. It may also turn down a bid if the bidder already has an ongoing project with the public institution.
The GSA may reject those bids because it wants to give other companies a chance. In other words, it wants to make sure that all players compete on a level playing field.
In 2017, the GSA acquired around $45 billions’ worth of products and services. It purchased them on behalf of federal, state, and local government institutions.
The GSA purchased IT (equipment, software, and service), construction, and medical equipment and supplies. It also bought cleaning and food services.
In fact, the GSA purchased hundreds of different B2G products and services.
Some B2G networks provide a way for companies to bid to government agencies or projects.
B2G – IT
IT stands for information technology. Information technology is the use of computer hardware and software. IT includes computers, networking, storage, infrastructure, software, and the exchange of electronic data.
IT contracts between companies and government departments are very common. Every public institution needs IT goods and services.
The GSA purchases new computers, term software licenses, and wireless services. It also secures maintenance contracts and cloud computing services.
Cloud computing is a kind of computing in which remote computers store files and other data. Your computer’s hard drive does not store the information. In other words, we store files and other data in ‘the cloud.’
B2G and five others
Business-to-government is one of six business models. The others are:
- B2B (business-to-business). This means companies selling to other companies.
- C2C (consumer-to-consumer). This model involves consumers selling to other consumers. If I sell my car to my next-door-neighbor, that is a C2C transaction.
- G2B (government-to-business). This means government selling to businesses.
- B2C (business-to-consumer). In this model, companies sell to consumers. For example, a supermarket, i.e., a business, sells to us, i.e., consumers.
- G2C (government-to-consumer or government-to-citizen). When the government gives somebody a tax rebate, that is a G2C transaction.