In its bid to win the hearts and minds of Afghanistan’s teeming population, the United States has spent more than $55 billion to rebuild and bolster the war-ravaged country.
That money was meant to cover everything from the construction of government buildings and economic development projects to the salaries of U.S. government employees working closely with Afghans.
Yet no one can say with any authority or precision how that money was spent and who profited from it. Most of the funds were funneled to a vast array of U.S. and foreign contractors. But according to a recent audit by the Special Inspector General for Afghanistan Reconstruction (SIGAR), there is no way of knowing whether the money went for the intended purposes.
“The audit shows that navigating the confusing labyrinth of government contracting is difficult, at best,” SIGAR said in releasing the audit. “USAID, the State Department and the Pentagon are unable to readily report on how much money they spend on contracting for reconstruction activities in Afghanistan.”
One large part of the problem is that the United States is not demanding accountability for outgoing funds from U.S. companies which have little incentive to fully disclose where the U.S. money is going. Add to this the many Afghan companies that have minimal accounting capabilities and you have a recipe for a massive misappropriation of funds. The money flows from Washington to Afghanistan, with little oversight and accountability, and at every step along the way someone else takes a cut.
“There’s no mechanism to track where this money is going,” said Scott Amey, general counsel for the Project on Government Oversight, an independent, nonprofit group that investigates government corruption. “Security problems persist and this money doesn’t seem to be accomplishing a real mission.”
As staggering amounts of U.S. tax dollars virtually vanish down a black hole, many of the government projects designed to foster improved relations with the Afghan people and undermine the appeal of the Taliban have fallen far behind schedule or simply aren’t completed. In October, SIGAR found that six Afghan National Police buildings were so poorly built that they are unusable. They were constructed at a cost of $5 million by Basirat Construction, an Afghan construction company.
Another report found that the United States has spent nearly $200 million on Afghan security service buildings that cannot be used. SIGAR also found that the U.S. Agency for International Development (USAID) couldn’t account for nearly $18 billion that was paid to some 7,000 U.S. and Afghan contractors for development projects. Afghan contractors often pay kickbacks to local warlords, like Ahmad Wali Karzai, the president’s brother and the so-called “King of Kandahar.” Their actions often undermine the work of the coalition.
Botched construction projects aren’t the only U.S. failures. Earlier this summer, coalition forces cleared Malajat, a longstanding Taliban stronghold in the eastern flatlands just outside of Kandahar City. But after they were forced out in September, many of the residents of Malajat remained sympathetic to the Taliban’s cause.
In an effort to project provincial and national authority and strengthen Afghan infrastructure, Canada’s Commander’s Emergency Response Program and the USAID ordered the construction of four government buildings in Malajat where local residents could meet with government officials to air grievances. The complex was meant to symbolically supplant Taliban power and influence.
In accordance with U.S. General David Petraeus’ plan to expand contracting awards to Afghan firms, Afghan companies were hired late in September. The contractors then hired Afghan subcontractors to begin construction in the shadow of a fortress built by Alexander the Great around 330 B.C.
Since then, however, little work has been done and the project has fallen behind schedule. As of early November, Afghans earning about a dollar a day had only dug holes for the foundation of the building complex, which was optimistically scheduled to be completed by July.
Work Habits, Cultural Mandates
Most Afghans do little work in the winter months. Despite numerous inquiries, U.S. and Canadian officials could not estimate the cost of the project. Gen. Ben Hodges, a former top U.S. commander in Kandahar, told The Fiscal Times that the success of the Kandahar offensive will depend in part on the United States and its allies building Afghan economic, political and security infrastructure over the winter. Projects like the Malajat government building are essential to keeping the Taliban out once the fighting season resumes next spring, especially as the U.S. strategy review has shown tenuous progress here. But there is little confidence among soldiers and development workers that this project will be completed in time.
“We can pour as much money as we want into this and it’s not getting done by the spring,” said an official with the Kandahar Provincial Reconstruction Team (KPRT), a civilian and Canadian-led organization jointly operated with the United States. “These people [Afghan contractors] have no accountability.” Thomas Ford, a spokesman for the KPRT project, said he could not reveal the identities of Afghan contractors involved because of security concerns. He also said he did “not have the exact cost figures in front of [him]”and declined to provide them. Canadian forces, along with KPRT, are scheduled to leave next summer. The United States is expected to assume sole responsibility for their projects.
Petraeus, commander of the NATO International Security Assistance Force (ISAF) and U.S. Forces Afghanistan, acknowledged in a September memorandum that the contracting process in Afghanistan has been deeply flawed for years and needed to be changed if the Afghan war is to be won.
“With proper oversight, contracting can spur economic development and support the Afghan government and NATO’s campaign objectives,” wrote Petraeus. “If, however, we spend large quantities of international contracting funds quickly and with insufficient oversight, it is likely that some of those funds will unintentionally fuel corruption, finance insurgent organizations, strengthen criminal patronage networks and undermine our efforts in Afghanistan.”
At Kandahar Airfield, a base the size of London’s Heathrow Airport located just outside of Kandahar City, contractors provide transportation, food service, sanitation and construction, among other services. According to a July 2010 Congressional Research Service report, as of last March private contractors made up 57 percent of all personnel in Afghanistan employed by the Department of Defense. “This apparently [represents] the highest recorded percentage of contractors used by DOD in any conflict in the history of the United States,” the study found.
According to the report, there were 68,197 Pentagon contractors in Afghanistan, compared with 52,300 uniformed U.S. personnel. Of the Pentagon contractors, 9,300 were U.S. citizens, 52,000 were Afghan, and 7,000 were third-country nationals. There has been a 300 percent increase in contractors since 2007, according to the Defense Contract Management Agency.
Outside of U.S. bases, Afghan firms are primarily employed due to security concerns in places like Kandahar City. As with the Malajat buildings, locals are hired for construction projects that U.S. military commanders have said are key to demonstrating Kabul’s central authority, especially in provinces reluctant to recognize Afghan President Harmid Karzai as their ruler. Afghan contractors have also been hired to help train Afghan police.
As a result of U.S. pressure, the Afghan government recently arrested American Roy Carver, CEO of Red Sea Engineers and Constructors, a company that has received $500 million in Pentagon contracts to construct buildings at U.S. bases. Carver is charged with not paying his Afghan subcontractors.
Amey, of the Project on Government Oversight, said the situation in Afghanistan mirrors the U.S. experience in Iraq: Security concerns made it difficult for foreign contractors to work on the battlefield, forcing reliance on local contractors with little accountability. It’s an endless cycle of frustration and failure.
“It seems as if there wasn’t a lessons- learned approach carrying into Afghanistan, which is not to waste federal taxpayer dollars on contracting projects like this,” Amey said in an interview with The Fiscal Times. “We can build an embassy and things can work around that, but what are we doing around the rest of country? If our money is going to security and the rest is going to impractical projects that aren’t being completed, then the government has to reevaluate the model.”
This article originally appeared on The Fiscal Times - Dec. 27, 2010.
Thanks to the Small Business Administration (SBA), there is a new set of government contracting resources available to you — all via the Internet.
Want some expert insight and guidance about working with the government? You can listen to podcasts on these two subjects by clicking on the links below:
There also are several free online courses are offered by the SBA to help prospective and existing entrepreneurs understand the basics about contracting with governmental agencies. Each of these is about 30 minutes long:
Finally, there are two video interviews with successful entrepreneurs who explain how they’ve achieved success in the government marketplace. You can see these interviews by clicking here.
Small-business trends will be influenced this year by passage of the Small Business Jobs Act of 2010 (H.R. 5297).
According to the SBA, the new law provides approximately $30 billion to small banks (those with less than $10 billion in assets) for lending to small businesses, offers approximately $12 billion in tax breaks to small businesses and expands the loan limitations of the SBA.
For women-owned businesses, there may be even more loan opportunities. Banks may be able to offer credit to small businesses that might not have qualified previously. (According to the SBA, in the first week of the Small Business Jobs Act, the agency provided nearly 2,000 loans totaling nearly $1 billion.) State funding programs and community banks also will receive more federal dollars to lend to small businesses. And the law provides $50 million in grants to Small Business Development Centers to fund counseling and training.
The following is a more detailed look at the trends this new law may inspire in 2011:
- Increased business lending. Two things will influence this trend: 1) businesses will start asking for credit again and 2) SBA dollar volume is expected to increase. At the annual conference of SBA lenders in Anaheim last fall, executives predicted that the volume of loans will double in 2011. More businesses will be willing to make investments and borrow money, and banks are more willing to lend when they can make use of SBA risk enhancements such as guaranteed loans.
- Enhanced renewable energy lending programs. In 2011, expect more small businesses to make improvements such as adding energy-saving solar panels to their businesses. Some banks will offer specialized programs to incorporate solar-panel improvements into SBA loans. This applies not just to large businesses but smaller ones as well. They’ll be able to save energy by using solar to heat and power their businesses.
- Revised refinancing. Now may be the time for small businesses to refinance real estate loans. The new law allows SBA 504 loans to be used for refinancing real estate loans on owner-occupied commercial property. The SBA also has increased the maximum 504 loan amount to $5 million ($5.5 million for manufacturers and energy loans), and waived fees for banks and borrowers.
- Increased exporting. The new law offers various incentives for small businesses to export goods, including turning a pilot loan program into a permanent program with 90 percent guarantees for loans up to $350,000. Loans between $350,000 and $500,000 receive 75 percent guarantees.
- Increased certification for government contracts. The new law strengthens small businesses’ ability to compete for federal contracts. Women-owned businesses that are certified can compete for federal and state government contracts. Government agencies award millions of dollars in contracts to small businesses every year. See the SBA website for details.
– by Heather Endresen, senior vice president, manager of SBA and government lending for Union Bank. Published December 20, 2010 – WomenEntrepreneur.com
Filed under Contracting Tips · Tagged with Air Force, Army, DHS, DISA, DoD, government contracting, IDIQ, IT, NASA, NIH, OPM, technology, US AID, USPS
In our annual roundup of the 20 most important contracts that are about to hit the market, Washington Technology culled data from FedSources and Input. The contracts are ranked by the dollar size of their ceilings. Actual business that will flow through these contracts likely will be less.
The contracts this year weigh heavily toward IT support and professional services. Support for the military is the most common driver behind many of these contracts.
For more coverage of the critical trends driving the market in 2011, click here.
1. Strategic Services Sourcing 2nd Generation
Agency: Army Materiel Command
Value: $30 billion
RFP: November 2012
Award: December 2014
Solicitation No.: N/A
Purpose: This is a follow-on contract to the current S3 contract. The Army uses the contract for engineering services and logistics and business operations support for command and control systems. The contract is a multiple-award contract. The current contract has seven incumbents that have done more than $4.5 billion in task orders.
2. Enhanced Army Global Logistics Enterprise
Agency: Army Materiel Command
Value: $30 billion
RFP: February 2011
Award: January 2012
Solicitation No.: W52P1J10RXXXX
Purpose: The contract has four functional areas: supply, maintenance, transportation support, and plans and operations. The contract will primarily support logistics operations. It is replacing the Army’s Field and Installation Readiness Support Team contract and some other smaller vehicles. This will be a multiple-award contract.
3. Communication and Transmission Systems
Agency: Army
Value: $19.5 billion
RFP: May 2011
Award: February 2012
Solicitation No.: W91QUZ10CTSPWSQA
Purpose: This contract will be used to acquire a variety of communications services, including satellite, microwave, fiber optics, over-the horizon, radio and wireless. The contract also will be used for equipment, hardware and support services. The Army is looking for turnkey solutions on this contract as well. It is expected to be a multiple-award contract.
4. Defense Language Interpretation and Translation Enterprises
Agency: Army
Value: $15 billion
RFP: Expected by the end of calendar 2010.
Award: March 2011
Solicitation No.: W911W410R0011
Purpose: This contract will be used by the military and other U.S. agencies to acquire foreign language and regional expertise to help the government meet its missions. Translators and analysts will work on-site and remotely. Services will include translating and interpreting from English to other languages in addition to from other languages into English.
5. Federally Funded Research and Development Center Support
Agency: NASA Jet Propulsion Laboratory
Value: $14.4 billion
RFP: March 2011
Award: December 2011
Solicitation No.: NNN10AA01S
Purpose: The contractor will manage and operate the Jet Propulsion Lab, including maintaining the infrastructure needed by the lab to carry out its scientific and research mission. Missions include projects in Earth orbit and deep space, and they cover Earth science, planetary science, heliophysics and astrophysics.
6. Global Tactical Advanced Communications Systems and Support Services
Agency: Army
Value: $10 billion
RFP: March 2011
Award: June 2011
Solicitation No.: W15P7T11RC001
Purpose: The multiple-award contract will be used to buy hardware, systems and services for a wide range of tactical command and control systems, including logistics support, testing and engineering services.
7. Next Generation Enterprise Network
Agency: Navy
Value: $8.8 billion
RFP: Fiscal 2011
Award: To be determined
Solicitation No.: MKTSVY4623E
Purpose: NGEN will replace the Navy Marine Corps Intranet contract held by Hewlett-Packard. This time, the Navy is expected to divide the contract into five parts. The NGEN program also will cover the One-Net contract held by General Dynamics, the naval network outside the United States, and afloat networks. NGEN will cover desktop computers, local-area networks, enterprise networks and the Navy’s IT infrastructure used by 450,000 people.
8. Electronic Commodities Store IV
Agency: National Institutes of Health
Value: $6 billion
RFP: April 2011
Award: December 2011
Solicitation No.: N/A
Purpose: This longtime multiple-award contract has been used by many agencies looking for a vehicle to buy hardware and software. The contract carries commercial items such as desktop PCs, laptop PCs and handheld devices. It also has lots for telecommunications equipment, scientific research workstations, software and support services.
9. Design, Development, Demonstration and Integration
Agency: Army Space and Missile Defense Command
Value: $5 billion
RFP: November 2010
Award: November 2011
Solicitation No: W9113MD3ISS10
Purpose: The contract will support development of requirements for missile defense, space and other warfighter solutions. Work will include platform and sensor technologies, communications networks, missiles, rockets and re-entry vehicles, and space technologies.
10. Information Technology Enterprise Solutions-3H
Agency: Army
Value: $5 billion
RFP: June 2011
Award: January 2012
Solicitation No.: W91QUZ10ITES3H
Purpose: This contract is used to acquire hardware such as Unix servers, Windows servers, workstations, desktop PCs, laptop PCs and storage systems. The Army also will use this contract to buy networking equipment, printers, video equipment and uninterruptible power supplies. This is a follow-on contract held by Apptis Inc., CDW Government, Dell Federal systems, IBM Corp., World Wide Technology and GTSI Corp.
11. Medicare Prescription Drug Integrity
Agency: Centers for Medicare and Medicaid Services
Value: $4 billion
RFP: March 2011
Award: September 2011
Solicitation No.: N/A
Purpose: CMS will use this multiple-award contract to help implement Part D prescription drug benefit regulations. However, the regulations are not yet finalized. Services will include reviewing compliance plans, investigations and audits and developing data systems to track fraud and abuse. There are eight incumbents, including Hewlett Packard, Maximus, Perot Systems and Science Applications International Corp.
12. Automated Desktop Extended Processing Technology III
Agency: U.S. Postal Service
Value: $2 billion
RFP: January 2011
Award: April 2011
Solicitation No.: N/A
Purpose: This contract will supply desktop PCs, mobile devices, peripherals and support services to the U.S. Postal Service. Services will include repair and maintenance. Services and products will be delivered across the country. Hewlett-Packard is the incumbent contractor.
13. Economic Growth for Poverty Reduction
Agency: U.S. Agency for International Development
Value: $2 billion
RFP: November 2010
Award: March 2011
Solicitation No.: AIDEGATEG4PR
Purpose: The contractors on this multiple-award procurement will work on a variety of stability fronts, including trade and investment, financial sector, economic opportunities, and private-sector competitiveness. The services and projects are geared toward alleviating poverty in developing countries by helping to build the governing structures needed for economic growth and stability. USAID has a variety of contractors working on these types of programs.
14. NASA Enterprise Data Center Consolidation
Agency: NASA
Value: $1.5 billion
RFP: March 2011
Award: December 2011
Solicitation No.: NNK09274726R
Purpose: NASA has 78 data centers with 15,000 servers. This contract will be used to rationalize management of the data centers, including where they are housed, hardware issues, hosting and what kind of infrastructure to put in place. The contract will be used to create a more uniform management and implementation plan across NASA. The agency has multiple contractors providing these services now, and it is expected that this will be a multiple-award, task-order contract.
15. Training and Management Assistance Support
Agency: Office of Personnel Management
Value: $1.45 billion
RFP: June 2011
Award: February 2012
Solicitation No.: N/A
Purpose: This will be a five-year contract to support training, including the development of custom training and learning systems. Other services include developing training and products and services such as technology-based training products, instructor-led materials and knowledge management systems. There also will be solutions for the analysis and design of programs and other services such as human resources, consulting and business process engineering.
16. Global Information Grid Services Management — Engineering, Transition and Implementation
Agency: Defense Information Systems Agency
Value: $1.4 billion
RFP: January 2011
Award: September 2011
Solicitation No.: HC102810R2001
Purpose: The contract supports the Global Information Grid, including systems engineering and integration, architecture, telecommunication standards development, telecommunication network security and information systems engineering, IT systems, and other services. The contract is expected to be awarded to several small businesses. The current contract-holders are Science Applications International Corp. and SETA Corp.
17. Integrated Mission Planning, Training and Execution
Agency: NASA
Value: $980 million
RFP: November 2010
Award: March 2011
Solicitation No.: NNJ10ZHD002L
Purpose: Lockheed Martin Corp. is the incumbent on this contract, which supplies NASA with technical support for mission planning. Work is done at the Johnson Space Flight Center in Houston. Details on the acquisition strategy have not been released yet.
18. Expeditionary C4I Systems and Technical Support Services
Agency: Space and Naval Warfare Systems Command
Value: $900 million
RFP: November 2010
Award: July 2011
Solicitation No.: N6523609R0202
Purpose: Services under this contract include systems engineering, test and evaluation, maintenance and site support, configuration management, logistics and training, and program management. The contract will need a top-secret clearance. This is a new contract, so there is no incumbent contractor.
19. Application Support Centers
Agency: Homeland Security Department
Value: $750 million
RFP: February 2011
Award: September 2011
Solicitation No.: N/A
Purpose: DHS’ Citizenship and Immigration Service continues to need support for its biometrics programs. Support includes biometrics capture, testing, program management and scheduling support. Northrop Grumman Corp. is the incumbent on the contract. The bureau is in the early stages of developing the recompete of this contract.
20. Advisory and Assistance Services for Global Engineering Integration and Technical Assistance 11
Agency: Air Force
Value: $650 million
RFP: March 2011
Award: January 2012
Solicitation No.: FA890311R8002
Purpose: This contract is used to support a variety of Air Force agencies with management and professional services, studies, analysis and evaluation services, and engineering and technical services. There are several incumbents on this long-running program, including Booz Allen Hamilton. Booz Allen captured more than half of the task orders issued under the program.
About the Author: Nick Wakeman is the editor of Washington Technology – 11/10/2010.
Filed under Contracting Tips · Tagged with Alliant, Army, DoD, government contracting, GSA, IDIQ, innovation, IT, OMB, SBA, small business, task orders, technology, VA
Be prepared for more competition, tighter margins and big opportunities for politically savvy, nimble-footed companies
The economy — and specifically the federal market — might seem stuck in dirge mode, but it is changing, in subtle, sometimes dissonant ways. And woe to the company that doesn’t alter its step to match the new tune.
To record and distill those changes, Washington Technology talked for several hours with four federal business gurus to create a chapbook for federal contracting in 2011.
Get any group of experts together, and differences of opinion and points of agreement will arise. So it was with our four: Ray Bjorklund, senior vice president and chief knowledge officer at FedSources Inc.; Philip Kiviat, partner at Guerra Kiviat Inc.; Kevin Plexico, senior vice president of research and analysis services at Input Inc.; and Warren Suss, president of Suss Consulting Inc.
On some points, such as opportunities for the big score, they were unanimous: It ain’t happening.
“We’re definitely seeing a shift away from large-scale, single-award contracts that are intended to build, develop or integrate something,” Plexico said.
“Most of the top opportunities in this year’s [Input top 20 opportunities for 2011] were multiple-award, indefinite-delivery, indefinite-quantity vehicles,” he added.
“Many of the contracts that have driven our community in past years have been the large single-award programs that companies around the Beltway are geared up to respond to,” Suss said. But “the world is going to change, and companies will need to come up with different models to respond to a larger number of small opportunities.”
“Fiscal 2011 will be the year of the task order,” Suss said.
Our gurus also gave politics a stronger new emphasis in their calculations.
“The most important thing I can say when I talk to IT people — who tend to view IT as the most important thing in the world because it’s changing everything — is that IT is important, but it’s not immune to the influence of politics,” Kiviat said.
The recent shift of power in the House will especially bear watching, Bjorklund said. “The White House submits a budget, but Congress does the appropriating,” he added.
And with the collective Republican eye on reducing the federal budget, “everything in IT contracting is a target for political scrimping,” Kiviat said.
“We’re already seeing fewer large procurements” as a result of the Office of Management and Budget’s suspension in June of new financial systems at major agencies, he said.
In September, OMB canceled upgrades at the Small Business Administration and Veterans Affairs Department and is trimming financial IT projects at the Environmental Protection Agency and Housing and Urban Development Department.
The Army’s Enhanced Army Global Logistics Enterprise (EAGLE) contract, set for award in the second quarter of fiscal 2011, has been touted as a $30 billion opportunity, subsuming five programs and about 200 other contracts.
“But when we added up what’s being spent on the contracts it’s replacing, we came up with more like $10 billion, which is still a lot of money,” Bjorklund said. “But it’s not $30 billion.”
EAGLE has a big IT component, although its emphasis is not on conventional IT, such as networks. The contracts that EAGLE replaces have research and development projects, but the new contract has no R&D component, Bjorklund pointed out in FedSources’ Army EAGLE Reality Check report.
OMB’s system slashing is an effort “to reduce the size of large programs, make them more manageable and reduce the risk of failure,” Kiviat said. But it also will contribute to less innovation, he said.
“Whenever you do anything large or innovative, you increase risk,” he said. “Democrats did try to increase innovation, which means increasing risk-taking — what’s the saying? If you’re not failing, you’re not trying hard enough.”
However, Kiviat added, “failures could well be fodder for political grandstanding, so agencies will tend to put themselves up as targets less often, which means less innovation. That’s bad for contractors, especially those companies that are innovators. It will also take people who are interested in innovation and make them look elsewhere: in the commercial market.”
Bad, Getting Worse
To recap for a moment, we’ve got fewer single, big-dollar opportunities, politics stirring the pot more than ever before, trimmed budgets and less risk-taking. Look for those trends to alter the competitive landscape, put pressure on established federal market players and create openings for new ones.
Together with the general pinch and sag of the U.S. and global economies, “overall contract spending dropping by 4.8 percent,” Bjorklund said. “Whenever that happens, many new interests flock to federal government contracts, believing they’re going to be the saving grace for their business.”
Not all will succeed. “Particularly in the federal space, there are steep barriers to entry,” Plexico said. “But once you’re in, you have the credibility you need for agencies to spend contracting dollars.”
Many of the large IDIQ contracts, from the General Services Administration’s $65 billion Alliant to the Centers for Disease Control and Prevention’s $5 billion CDC Information Management Services, have already been awarded.
Contracts that are still to be awarded, in addition to EAGLE, include the Health and Human Services Department’s $30 billion CIO-Solutions and Partners 3 and the Defense Department’s $15 billion DOD Language Interpretation and Translation Enterprises.
Getting on those contracts guarantees nothing. But whether new to the federal market or an old hand, getting on them “is important from a positioning point of view,” Plexico said. “Take an agency like the Homeland Security Department, which may do 40 percent of its work through [DHS' Enterprise Acquisition Gateway for Leading Edge Solutions contract]. If you’re not on EAGLE, you don’t have the opportunity to compete.”
But even when the contract is in place and the money ostensibly is there, it can disappear.
“Companies are going to have to be much more careful in qualifying prospects,” Kiviat said. “It’s not just about: Are the dollars there? But will they stay there? Some already planned procurements may be canceled because of the unknown emphasis of what Republicans will do.”
Take OMB’s halting and trimming of financial system modernization projects, he said. “That could happen to any large enterprisewide modernization project. Say an agency says it wants to modernize human resources management in all its subagencies. The question a contractor has to ask is: Will that project withstand congressional oversight, or could it get frozen?”
Agencies will be showing up not only with smaller purses but also with bigger demands, including tighter margins and greater use.
“DOD wants to avoid having military organizations develop their own systems,” Suss said. “They want to be able to invest once in a new utility or capability, then allow its use many times by all DOD users. For example, the Army, rather than go with its own enterprise e-mail systems just handed over [that acquisition] to DISA.”
The increased competition and decreased budgets will help ensure that big protests will continue. The lack of a government acquisition workforce that is large enough and experienced enough will contribute to protests.
“Take the recent protest by Google over the Interior Department contract, which mandated use of Microsoft software,” Kiviat said. “Everyone in procurement knew that protest was coming. As long as you have acquisition people who do something like that and don’t figure out how to do deal with it beforehand, you’ll continue to have protests.”
Transform Yourself
Once hardware-heavy, contracts increasingly are shifting to services — by 50 percent during the past four to five years, according to Input.
“When contracts were for hardware, all you’d have to do was deliver it. You didn’t even have to know what it did,” Kiviat said. “In services, it’s important to know what they need to have done and how to do it.”
For those companies that know that, there will be more opportunities for providing managed services at a fixed price, Suss said. A shift to cloud-based services “will drive companies to make more upfront investments in infrastructure and technology before realizing a return,” he said. “That may create a significant disequilibrium in the federal environment.”
Thinking about cloud must go beyond the hype, beyond the buzzwords to be a viable technology for government, Plexico said. “Agencies — and contractors hoping to win their business — have to ask themselves: What’s the agency’s exit strategy for dealing with sensitive data if there’s an incident?”
It’s also “going to require a different bidding model than the current [time-and-materials] model,” Suss said. “In this new environment, shops will have to deliver quick turnarounds on proposals,” a feat not all companies will be able to pull off.
More than ever before, success in the federal market will require a defined goal and an informed strategy for attaining it, our experts said.
“Big companies sometimes have a strategy,” Kiviat said. “Small companies don’t have them; they just fight each battle as it comes up. This is time for some strategic thinking, no matter what size you are.”
With so many potential pitfalls, it’s important to keep your sense of perspective, Plexico said. “The federal space is still a healthy and vibrant market as compared to the rest of the economic environment.”
Here also, our experts found agreement. The status quo is transitory, existing only for an instant and not to be confused with a promise.
“There are going to be losers,” Suss said. “Some companies that are in business now won’t be able to stay in business next year.”
But when a window closes, a door opens. “It’s going to create a fertile ground for mergers and acquisitions, and I think we’ll see an increase in that area,” Suss said.
About the Author: Sami Lais is a special contributor to Washington Technology – 11/15/2010
A Senate proposal to apply a 2% fee to certain foreign-based U.S. government contractors could affect Gulf state oil companies that sell fuel to the U.S. military, as well as Chinese and Indian companies.
The proposal is part of legislation from Sens. Charles Schumer and Kirsten Gillibrand, both New York Democrats, that would compensate rescue workers who responded to the Sept. 11, 2001, attacks, and their families. Some of those workers died or have suffered illness related to their rescue efforts.
The bill has met with opposition from Republicans about the size of the compensation fund, which some Republicans argue is too large, and the 2% procurement fee.
Senate Majority Leader Harry Reid (D., Nev.) planned to bring the bill up for a procedural vote as early as Tuesday, a spokeswoman said. It is unclear whether the measure has support from 60 senators, the number needed to overcome procedural hurdles.
The fee would apply to contracts for goods or services provided in countries that are not members of the World Trade Organization’s government procurement pact — a list that includes Brazil, China, India, Iraq, Saudi Arabia, Kuwait, Qatar and others.
Such contracts total as much as $35 billion to $40 billion per year, according to a fact sheet released by Schumer. The 2% fee would raise $4.5 billion over 10 years to partially offset the cost of the Sept. 11 rescue workers fund.
Many of the largest foreign-based federal contractors — such as UK-based Rolls Royce Plc (RYCEY, RR.LN) and Italy’s Finmeccanica (FNC.MI) — would not be affected because they are located in jurisdictions that are members of the WTO government procurement deal.
In part because of domestic sourcing requirements for U.S. military apparel and supplies, Chinese and Indian companies are not a major player in the federal contracting arena. But passage of the bill could nonetheless ruffle feathers abroad at a time when U.S. firms are trying to win inroads into the Chinese procurement market.
U.S. business groups warned Tuesday the proposed fee could prompt China, India and others to retaliate with their own restrictions on government contracts.
“As a result, there would more than likely be net loss for U.S. exports, U.S. companies and U.S. jobs if this provision became a model for foreign governments,” wrote the groups, including the Emergency Committee for American Trade, the National Foreign Trade Council, and the Organization For International Investment.
The U.S. and Western trading partners have put pressure on China to join the WTO government procurement deal, but have rejected recent Chinese proposals as inadequate. Unlike most WTO rules, WTO members have the option to join the procurement pact or not.
Sen. Tom Coburn (R., Okla.) planned to try to block the Schumer Sept. 11 rescue workers’ bill, according to an aide. Coburn wants the bill to be funded by spending cuts, and wants to send the bill to committee for further review.
– By Martin Vaughan, Dow Jones Newswires; 12/21/2010; Danny Yadron contributed to this article.
Here’s what to avoid if you want to succeed in the government market.
The acquisition storm is coming, and it’s bringing with it an onslaught of new competitors fleeing the sagging private-sector economy, shrunken federal budgets, mounting award protests and new technologies demanding new investment. You could go emulate an ostrich — no one would blame you for the impulse — or you could read what four of the top IT consultants in Washington tell their clients.
Washington Technology talked with Ray Bjorklund: senior vice president and chief knowledge officer, FedSources Inc.; Philip Kiviat: partner, Guerra Kiviat Inc.; Kevin Plexico: senior vice president of research and analysis services, Input Inc.; and Warren Suss: president, Suss Consulting Inc., and asked each one this question:
How would a company in the federal market best keep its existing customers and add new ones in the coming year?
Some of their answers surprised us, but before we get into that, let’s back up a tick. Although the members of our ad hoc panel offered different strategies for achieving success, they spoke with one voice when describing the fastest route to disaster: Failure to take care of your customer.
You think that’s obvious? So did we, but listen to this: “I have so many clients — companies large, midsize and small — whose senior management (and some midlevel management) never talks with the customers — I see it all the time,” Kiviat said.
It doesn’t take long before those customers think their business is being taken for granted and start considering their options.
“You have to keep them happy,” Kiviat said, “and the only way you can do that is by knowing what they need and what they want, by continually asking: ‘How are we doing?’ ”
Don’t confuse the IT business with information technology itself. Technology is not the issue, Kiviat said. “We have so much technology today that, unless you’re on the bleeding edge, you can do many [kinds of IT implementations] quickly and in different ways, depending on the customer. The question they don’t necessarily ask but that you have to answer is: “What do they really want to do?”
If you’re not tending your customer, others stand ready and willing to take on the job. Even the most well-placed incumbents have their vulnerabilities.
For example, Bjorklund said, “I heard about this incumbent that was delivering a high level of service. The agency loved the incumbent contractor; they had a great working relationship. Then it came time to recompete the contract. The agency said: ‘We like you guys a lot, but your competitor came in with a bid that was 25 percent better than yours.’ And they were out.”
Your reaction to technology changes can make you appear either eager and able to take on new business or inflexible and mired in the past. Take, for example, the shift to cloud-based services, which typically requires an investment in infrastructure and technology networks in anticipation of returns.
“Federal contractors are not used to investing upfront,” Suss said. “They’re used to investing in the proposal-and-capture process but generally are reluctant, before an award has been made, to make these kinds of sometimes significant infrastructure investments and establish supplemental capabilities before they know it’s going to generate revenue.”
Not only is that a great way to sour a relationship, he said, but also “inattention to such changes in the competitive landscape may create openings for newcomers.”
And believe it — word of any real or perceived failure to perform well on contracts you have now will travel fast.
“If your past performance is not strong, you become a nonstarter, not only from the agencies’ point of view but also in the view of prime contractors,” Plexico said. “You’ll be digging a big hole for yourself.”
But getting your own house is in order is only the beginning of your to-do list to achieve success, because, Bjorklund said, “no single initiative or strategy will ensure a win. You must pay attention to all the subtleties.”
– Sami Lais is a special contributor to Washington Technology – 12/7/2010.
Deputy Defense Secretary William Lynn on Tuesday told Virginia lawmakers impending contracting cuts Defense Secretary Robert Gates announced last summer could be far smaller than many predicted, an aide to Rep. Gerry Connolly, D-Va., said.
In an effort to rein in costs and redirect money to weapons and troops needed on the battlefield, Gates announced major cuts to Defense Department contracting and overhead costs in August. Gates said the department would cut service support contracts by 10 percent annually during the next three years.
Confusion over what exactly the Pentagon might cut caused enormous turmoil among Defense contractors, many of whom are Connolly’s constituents. But during a meeting at the Pentagon on Tuesday, department officials said cuts would be made to a narrow band of service support contracts worth about $4.3 billion — which means the value of the reductions themselves is estimated to be about $430 million, said George Burke, a spokesman for Connolly.
“While I am still concerned about the effect of these defense contractor cuts on the economy of Northern Virginia and the Washington area, we are making progress,” Connolly said in a statement. “The impact will be less than was originally thought when Secretary Gates announced his plan last summer. Where we originally feared annual contractor cuts of as much as $14.3 billion per year, it now appears that those three years of cuts will be in the range of $400 to $430 million per year.”
Federal procurement accounts for nearly one-third of Virginia’s economy and defense spending alone is responsible for nearly one-in-five jobs in the Commonwealth.
Stan Soloway, president of the Professional Services Council, an industry association, said the Pentagon meeting provided important clarification.
“Based on today’s discussion, the department’s focus for services contract reductions over the next three fiscal years will be on a subset of advisory and assistance services contracts, primarily involving staff augmentation requirements, which had a baseline of over $4 billion in spending in fiscal year 2009,” Soloway said.
Both Gates and Ashton B. Carter, undersecretary of Defense for acquisition, technology and logistics, have targeted service contracts for greater scrutiny. About half of the $400 billion the Pentagon spends annually on contracts is for services, such as technology support, weapons maintenance, transportation and facilities upkeep.
“We don’t even have a standard way of talking about services,” Carter told reporters during a September briefing on new rules for contracting. “It’s as though you were buying weapons and never distinguished between planes, ships and tanks. There are a lot of different kinds of services; they all require different managerial structures, they all have a different industrial base. This is a very rich area and because there is so much money, we really do believe we can do a lot better for the taxpayer.
– by Katherine McIntire Peters – GovExec.com – December 21, 2010
Georgia Tech’s Alternative Media Access Center (AMAC) has received a $740,000 grant to fund development of an innovative training initiative that will help ex-offenders develop the skills necessary to produce Braille materials needed by persons with disabilities.
AMAC, a unit of Georgia Tech’s Enterprise Innovation Institute (EI2) that provides textbook support services for persons with disabilities, recently received the funding through the Second Chance Act of the U.S. Department of Justice/Bureau of Justice Assistance (BJA). The grant will support an innovative, prison-based technology training program dubbed Providing Real Opportunities for Income Through Technology (PROFITT). Partners include the Texas Department of Criminal Justice, the National Braille Press and the American Printing House.
“This initiative will help meet the critical needs of persons with disabilities while providing ex-offenders with highly-marketable skills,” noted Christopher Lee, AMAC’s director. “Our goal is to create a template that could be used by any correctional facility to provide training that can lead to long-term career opportunities.”
The project will modify the existing and proven National Braille Press training curriculum to better serve the needs of offenders slated for impending release and return to the workforce. What makes this training unique is an added focus on the generation of computerized tactile graphics, providing high-demand, transferable software skills that prepare offenders for gainful employment upon release, Lee explained. PROFITT participants will also receive specialized small business management and employment skills training and post-release placement support assistance tailored to the needs of transitioning offenders.
“As a result of the peer review process, AMAC scored very highly on the application for this grant, and we felt that their emphasis on Braille technology was cutting-edge,” noted Gary L. Dennis, BJA senior policy advisor for corrections. “Ex-offenders can utilize this training to develop entrepreneurial skills that will better position them to engage in meaningful employment when they are released from prison.”
The purpose of the PROFITT project is to produce a blueprint for use by any correctional facility interested in implementing a comprehensive, competency-based Braille training curriculum geared toward long-term, sustainable income upon release. The project will reduce the rate of recidivism by providing participants with professional skills, develop and disseminate a competency-based Braille and graphics training program that can be used in any correctional facility and provide proficiency with transferable technological skills that have multiple workplace applications.
“We are excited to be able to provide real income and employment opportunities for offenders who have served their time and are ready to return to the workforce. This project will promote small business skills and provide a blueprint for more than 20 state justice programs,” said Lee. “The ultimate goal of this project is to reduce recidivism and to create jobs for our economy. We are grateful to our partners including Texas Department of Criminal Justice, National Braille Press and American Printing House for the Blind, organizations that will help ensure the success of this project.”
Launched in 2007 with support from the University System of Georgia and membership fees from participating institutions, AMAC initially served the 35 University System higher education institutions. Since then, its mission has expanded to include all types of post-secondary institutions, K-12 education, government agencies and even corporate clients. Among its services, AMAC converts standard textbooks to formats usable by persons with disabilities.
About Enterprise Innovation Institute:
The Georgia Tech Enterprise Innovation Institute helps companies, entrepreneurs, economic developers and communities improve their competitiveness through the application of science, technology and innovation. It is one of the most comprehensive university-based programs of business and industry assistance, technology commercialization and economic development in the nation.
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Media Relations Contacts: Nancy Fullbright (912-963-2509); E-mail: (nancy.fullbright@innovate.gatech.edu) or John Toon (404-894-6986); E-mail (john.toon@innovate.gatech.edu).
Writer: Nancy Fullbright – Dec. 13, 2010
Talk of a federal government shutdown can subside until March 4 now that Congress has passed another temporary spending bill funding federal agencies through that date.
The bill increases federal spending $1.16 billion above fiscal 2010 levels but most federal agencies will see little change. Fiscal 2010 ended Sept. 30; federal fiscal years start Oct. 1.
The temporary spending measure had bipartisan support in the Senate, which voted 79 to 16 for it, but less so in the House, which broke mainly along party lines to approve it 193 to 165.
The bill means fiscal 2011 will be dominated by uncertainty for federal agencies, which find it difficult to make big commitments when funding is tentative. Some agencies use cost reimbursement contracts as a means of dealing with the uncertainty, since unlike fixed price contracts, cost contracts allow agencies to incrementally add funding.
The March 4 deadline also means that Congress likely will be dealing with two fiscal years simultaneously–the fiscal 2012 request submitted by the president on the first Monday of every February, and the remainder of fiscal 2011. Republicans have indicated they want to cut spending further and in particular target funding meant for implementing healthcare reform under the Affordable Care Act.
[Note: This "Continuing Resolution" was signed by the President on 12/22/2010. See http://thomas.loc.gov/home/approp/app11.html]
– by David Perera – FierceGovernment.com – Created Dec 21 2010 – 11:02pm