The $2M Mistake: Why Federal Contractors Choose AI RFP Software Over Custom Builds

After eight years of evaluating and purchasing enterprise software for Fortune 50 companies, I’ve learned one crucial lesson: the build versus buy decision is never as straightforward as it seems. 

I remember my first major RFP automation evaluation — I was convinced building our own solution was the way to go. Three months and countless meetings later, I realized just how wrong I was.

Let me share what I’ve learned the hard way, so you don’t have to make the same mistakes I did.

First, let’s talk about where we are today. Gartner tells us we’re in the “Early Mainstream” phase of RFP automation adoption, with about 15–20% of federal contractors using AI-enabled solutions. But here’s what those numbers don’t tell you: the game has completely changed in the last few years.

The Real Story on Costs (And Why Most People Get It Wrong)

Let me share something that shocked me recently. I was helping a colleague evaluate options for their federal contracting team, and they had budgeted nearly $2 million for building their own solution. Why? Because that’s what it used to cost. They were floored when I showed them modern SaaS alternatives.

Today’s cloud-based solutions start at about $2,000 monthly for a team of five users. Compare this to what I’ve seen organizations spend on building their own solutions — often over $2 million before they have anything to show for it.

Can they prove their security chops? I once had a vendor tell me they could only deploy on commercial cloud infrastructure. That was an immediate red flag. Today, I make sure vendors can deploy within our existing FedRAMP-authorized cloud environment. 

Whether it’s AWS GovCloud or Azure Government, what matters is their ability to work within our secure infrastructure. The best vendors I’ve worked with have clear documentation on their FedRAMP deployment process and can demonstrate successful implementations within government cloud environments.

What Actually Matters (From Someone Who’s Been There)

After countless evaluations, I’ve developed a gut check for what really matters. 

It’s not about feature lists — it’s about answering these key questions:

Can they prove their security chops? 

I once had a vendor tell me they could only deploy on commercial cloud infrastructure. That was an immediate red flag. Today, I make sure vendors can deploy within our existing FedRAMP-authorized cloud environment. Whether it’s AWS GovCloud or Azure Government, what matters is their ability to work within our secure infrastructure. The best vendors I’ve worked with have clear documentation on their FedRAMP deployment process and can demonstrate successful implementations within government cloud environments.

The Build Trap (Don’t Fall For It)

Photo by Francisco De Legarreta C. on Unsplash

I’ve seen too many organizations fall into what I call the “build trap.” It usually starts with someone saying, “But our needs are unique!” 

Here’s the reality check I wish someone had given me years ago:

Unless you have:

  • A dedicated tech team with federal domain expertise
  • At least $2 million to invest upfront
  • 12–18 months to get to production
  • A truly unique use case that no vendor can address

…building is probably not your best option.

What Success Really Looks Like

Photo by Morgan Housel on Unsplash

Let me tell you about two different approaches I witnessed last year. One organization spent 18 months and $2.5 million building their own solution. Another deployed a SaaS solution in three weeks at $2,000 per month. The first company is still working through bugs and security compliance. The second? They’re already showing positive ROI and scaling up their usage.

Here’s what I’ve learned matters most:

1. Start small. Those $2,000/month SaaS solutions I mentioned? They’re perfect for proving value before making bigger commitments.

2. Trust but verify. If a vendor makes amazing promises, ask them to prove it. I once avoided a costly mistake because I insisted on a technical deep dive that revealed major gaps in a vendor’s capability.

3. Don’t overlook support. The best technology in the world won’t help if you can’t get help when you need it.

Looking Ahead

McKinsey predicts generative AI could add $2.6–4.4 trillion in value annually across industries. But here’s what that means for you: you don’t need massive budgets to get started anymore. Modern SaaS solutions have made this technology accessible to everyone.

By 2025, Gartner predicts 60% of major federal contractors will use AI-enabled RFP automation, but only 20% will build their own. After seeing both sides of this decision multiple times, this makes perfect sense to me. Unless you have a compelling reason to build, buying a solution is almost always the smarter choice. The technology is mature, the prices are reasonable, and the time to value is weeks instead of months.

Remember, you’re not just buying technology — you’re buying time. And in the federal contracting world, time is often the difference between winning and losing.

Feel free to reach out if you want to discuss your specific situation. I’ve made enough mistakes in this space to help you avoid the big ones.

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