How Sept. 11 changed government contracting forever
September 9, 2011 by cs
When terrorists hijacked four planes to use them as weapons and killed thousands of innocent people in the process, a chain reaction started that quickly swept across the country.
Today we live with many of those changes, from heightened security checkpoints at airports to more requirements to get a driver’s license.
Government contractors saw their market changed overnight, with a rush of government spending on new security priorities, creating an abundance of business opportunities.
Ten years later, contractors still feel the impact, including the types of business opportunities available, the role of the financial markets and the relationship between contractors and government agencies.
But other changes have been at work as well. Some are counteractions to the reaction to the Sept. 11 attacks. Others would have happened anyway.
Either way, contractors have been in a near-constant state of evolution over the past decade. That condition is likely to extend well into the next decade.
A need for speed
The biggest game-changer was the sudden awareness of the security vulnerabilities that threatened the United States and the need to address those vulnerabilities.
“We weren’t naive anymore,” said Tony Jimenez, founder and CEO of MicroTech LLC.
Before the attacks, terrorism was thought of as something that happened somewhere else.
“What Sept. 11 brought home was that we were vulnerable,” said Cyril Draffin, vice president of homeland security at Northrop Grumman Corp.
The government reaction was to rapidly start addressing security issues, which meant the allocation of funds and the awarding of contracts. First, there was the creation of the Transportation Security Administration and then the Homeland Security Department.
Other agencies such as the Justice and State departments increased their spending on security. More money also began flowing to state and local governments in the form of grants.
The heightened security concerns also led the United States to launch the wars in Afghanistan and Iraq, and supporting those efforts also helped fuel an explosion of spending with government contractors.
In fiscal 2000, the contractors on Washington Technology’s Top 100 rankings had an aggregate of $26.8 billion in prime contracts. In fiscal 2010, the number had climbed to $132 billion. Much of that growth was driven by the need to support warfighters and to support intelligence and homeland security initiatives.
“The clock speed of contracts and task orders increased significantly,” said Paul Leslie, CEO of Dovel Technologies. “With 9/11, money moved very quickly, and companies had to adjust and modify their business development efforts and response times.”
The government wholly embraced the use of indefinite-delivery, indefinite-quantity contracts because agencies could move quickly to address a need. That trend has become a fact of life in the government market as these large task-order contracts have become the vehicle of choice for buying services and products.
“The increased use of IDIQ contracts and the quicker turnaround of those activities has changed how we do contracting,” said David Zolet, president of business development for Computer Sciences Corp.’s North American public-sector business.
Security concerns also changed how contractors and customers interacted.
“You used to be able to move on and off military facilities,” Jimenez said. “The only place they seemed to check your ID was the PX.”
The current lockdown state of many government agencies, military and otherwise, creates challenges for contractors. “It limits the ability to market your company,” Jimenez added.
There was also less need for security clearances pre-Sept. 11.
“But a lot of the changes are good because it separates the wheat from the chaff and you have to be a much more professional organization today,” he said.
Wall Street wakes up
As the market exploded in terms of spending, companies grew rapidly and, unlike the 1990s and the dot-com era, Wall Street began to notice the government market’s growth potential, said Jerry Grossman, a managing director with the investment bank Houlihan Lokey.
“You had this migration of interest to the government,” he said.
And the market lived up to its potential, with spending on IT services between 2002 and 2006 growing at 10 to 15 percent a year. The earnings of many public and private government contractors during that time were growing at 20 to 25 percent a year.
“The third leg of the equation was that the government was outsourcing more,” Grossman said. “Companies really saw their growth rates get turbo-charged.”
Wall Street’s interest sparked the initial public offerings of a slew of companies such as ManTech International, SI International SRA International, Veridian Corp., Anteon International, MTC Technologies, Sciences Applications International Corp., ICF International, NCI Inc. and DigitalNet.
The window on IPOs came to a close for the most part by 2006 as the market cooled and growth rates returned to more traditional levels.
But Grossman doesn’t expect Wall Street to walk away from those as budget cuts hit the government. “Sept. 11 planted in people’s minds — the public, the taxpayers, investors — the continuing importance of defense, national security, intelligence and homeland security,” he said.
Strategy shifts
For some companies the rapid growth in the market created a management dilemma: how to balance the pursuit of short-term business opportunities with more sustainable business.
SAIC won a contract to install and integrate the communications, electronics and other command and control equipment on mine-resistant, ambush-protected vehicles known as MRAPs. The military needed a lot of them and needed them fast in Iraq and Afghanistan. The program delivered thousands of vehicles and was up and running in less than a year. But as the wars wind down, those kinds of projects won’t continue.
“That’s an example of a near-term opportunity but not something that is sustainable,” said Deborah James, executive vice president for communications and government affairs for SAIC. She ran the program, based out of Charleston, S.C., for the company. “But I certainly hope and believe that the speed and agility we gained will stay with us.”
At the same time it is critical that companies focus on more sustainable business areas, particularly in light of the current budget and economic environment. For example, cybersecurity is an area James and other executives consider a sustainable market.
“I don’t care what business you are in, cyber is important to you,” she said.
While threats to people and property remain real, cyber threats have increased in their frequency and ferocity in recent years.
In today’s current budget environment, which some executives said the boom in homeland security spending caused, cybersecurity is seen as an areas that will continue to be funded.
“Cyber would have evolved even without Sept. 11,” Draffin said. “But it is a reminder that people want to do us harm on our own territory.”
A lasting legacy
The aftermath of the terrorist attacks ushered in a new relationship between contractors and government agencies.
“We had this massive growth the first four or five years after Sept. 11, but that’s just the numbers,” said Stan Soloway, president of the Professional Services Council, an industry group, and a Washington Technology columnist.
“What has so dramatically changed in the last decade is that the government’s highest-priority missions require sophisticated technology and related skills, and that’s where the government really struggles to compete for people,” he added.
The government doesn’t have the resources to hire enough people with the high-end technology skills in areas such as cybersecurity, counterterrorism and data analytics to meet the needs of the government mission.
People with those skills can command a salary more than twice what the government can pay. “It’s not greed by contractors; it is what the commercial market dictates,” he said.
It doesn’t mean the government can’t hire any of these people, but it can’t hire enough, so the question is more of balance, Soloway said.
“How that mission-critical work is performed by the government has changed permanently,” he said. “Sept. 11 really kicked that off, and that’s the biggest fundamental change to the market of the last decade. And there is no indication that it is going to change over the next decade.”
About the Author: Nick Wakeman is the editor-in-chief of Washington Technology. Published 9/7/2011 at http://washingtontechnology.com/articles/2011/08/29/cover-sept-11-legacy.aspx?s=wtdaily_080911
Georgia DOT commissioner resigns
September 8, 2011 by cs
The state’s top transportation official, responsible for building and repairing highways and bridges across the state, has resigned under pressure from his board. Vance Smith, commissioner of the state Department of Transportation, resigned effective Dec. 31 and will only serve in an advisory capacity until then.
– by Ariel Hart – The Atlanta Journal-Constitution – 9:31 p.m. Wednesday, September 7, 2011 – at http://www.ajc.com/news/georgia-politics-elections/dot-commissioner-resigns-1161646.html
War-related contracting wasted up to $60 billion, commission reports
September 6, 2011 by cs
A staggering $12 million squandered every day for the last 10 years — that was among the findings the Wartime Contracting Commission uncovered in more than two years of investigating war-related spending since 2001.
Releasing its report on Wednesday, the bipartisan commission set up by Congress urged lawmakers to enact many of its recommendations in order to prevent billions more in wasteful spending in Iraq and Afghanistan.
It found that between $31 billion and $60 billion spent on projects in Iraq and Afghanistan over the last 10 years has been lost to waste and fraud. That amounts to as much as 29 percent of the $206 billion spent on security, infrastructure, and other projects in those two countries over the last decade. If the amount of contract fraud and waste falls in the middle of the commission’s estimated range - and at least one commissioner said he believes it is closer to the high end — the commission concluded that it comes to $12 million wasted every day for the last 10 years.
“The commission sunsets on Sept. 30, but the problems in contingency contracting do not,” said former Rep. Chris Shays, D-Conn., the commission’s co-chair. “There is still time to make a difference in Iraq and Afghanistan, and there will be new contingencies.”
The commission acknowledged that many of its recommendations, such as the creation of a permanent inspector general for contingency operations and more personnel and resources to protect the government’s interests in war contracting, would require an upfront investment during a time of fiscal belt-tightening.
But several of the eight commissioners argued that the money required to implement the reforms would be significantly outweighed by the savings generated.
“Unfortunately, the current stress on the budget may discourage members of Congress from supporting the investments that some of our recommendations would require,” Shays said. “I appreciate the difficulty of proposing new spending in a time of revenue constraints, but some of the reforms require no new spending and some could be made by simply reallocating existing resources.”
But holding back funds and blocking the reforms that do require some upfront funds “would really be false economy,” Shays added.
Among its 15 recommendations, the commission wants Congress to provide resources for contingency contracting reform to mitigate the problems uncovered in the report. In addition, the commission wants lawmakers to pass legislation requiring the agencies to provide updates on their efforts to implement the recommendations.
Sen. Claire McCaskill, D-Mo., who chairs the Senate Homeland Security Subcommittee on Contracting Oversight and who pushed for the creation of the commission, said she intends “to go at this as hard as I know how.” McCaskill, a former state auditor, said the commission’s recommendations could save billions and could make it easier to find the significant cuts to the military’s budget that are expected over the next 10 years.
“Particularly in this budget climate, we cannot waste this kind of money under the umbrella of contracting practices,” she said during a teleconference with reporters.
There could be amendments as a result of the commission’s report made to the fiscal 2012 defense authorization and appropriations bills, which are both expected to move through the Senate this fall, McCaskill said. Several congressional committees are expected to hold hearings on the report after lawmakers return to Capitol Hill next week.
Shays, meanwhile, said he hopes the super committee charged with trimming the federal deficit by at least $1.2 trillion reviews the commission’s recommendations to find savings.
“We’re just one small part of their mammoth task, but if they don’t take a good look at it, it would be a failing,” he said.
– by Megan Scully – National Journal – August 31, 2011 – published at http://www.govexec.com/story_page.cfm?articleid=48691&dcn=e_gvet
NASA looks to prioritize technology spending
September 1, 2011 by cs
Scarce resources are the new reality at NASA, which sought feedback from the National Research Council to inform the tough investment decisions it will soon face. “The necessary technological developments have become less clear, and more effort is thus required to evaluate the best path for a forward-leaning technology program,” write authors of a NRC interim report [1] published Aug. 30 and commissioned by NASA’s Office of the Chief Technologist.
Gaps in technology roadmaps and little consideration for the commercial space sector highlight problems that further complicate program decision making, finds the report.
“NASA has now entered a transitional stage, moving from the past era in which desirable technological goals were evident to all, to one in which careful choices among many conflicting alternatives must be made,” the researchers say.
A later report will provide more specific feedback on NASA’s technology roadmaps and recommendations for OCT. The overall structure of NASA’s individual technology roadmaps is fine, says NRC, but the committee proposed some changes in the technology areas’ breakdown structures.
The most significant changes suggested by NRC are in area 4–Robotics, TeleRobotics and Autonomous Systems–which include broad changes in the lowest level of the breakdown structure (the “level 3″ technologies). The level 3 technology changes greatly affect the rest of the roadmap and so “the 04 roadmap would have to be largely rewritten,” conclude authors.
The report also finds NASA roadmaps fail to consider the needs of the commercial space sector or opportunities for partnership. Authors suggest NASA could include commercial space at the second level of the structure in some roadmaps.
NASA generally agrees with the interim report and “is pleased that the committee will conclude its work in time for NASA to use the NRC findings as guidance for its FY 2012 space technology investment decisions,” said [2] NASA Chief Technologist Bobby Braun in a statement.
The final study on NASA’s technology roadmaps will be issued in early 2012, says the report, and will provide specific guidance on how NASA OCT’s technology development program can prioritize projects “in the face of scarce resources.”
For more:
- download [1] the report
- see [3] more on NASA technology roadmaps
- see [2] NASA’s response to the report
– Written by M. Bernhart – Fierce Government IT - Sept. 1 2011 – at http://www.fiercegovernmentit.com/story/nasa-looks-prioritize-technology-spending/2011-09-01?utm_medium=nl&utm_source=internal
OMB seeks to clarify 2013 budget guidance
August 24, 2011 by cs
The Office of Management and Budget is looking to clarify last week’s memorandum instructing federal agencies to submit fiscal 2013 budget requests that are between 5 percent and 10 percent lower than current discretionary funding levels.
The guidance is aimed at providing options for deficit reduction in light of the recently enacted Budget Control Act, said OMB Director Jack Lew in an Aug. 18 blog post. “This does not mean that we will institute either a 5 percent or a 10 percent cut in an individual agency’s budget or in all agency budgets,” Lew wrote.
He emphasized that the Obama administration does not want agencies to make across-the-board cuts, but rather to focus on eliminating waste and putting resources into cost-effective programs. “Thus, some agency budgets will decrease (and some more than others), some will stay flat, and some may increase (and, again, some more than others) — and the same goes for programs within agencies,” Lew said.
OMB did not return a request for comment on what, if any, feedback agencies have provided on the memo.
The Obama administration sent an Aug. 17 memo to agencies asking them to outline two budget-cutting scenarios when they devise their 2013 requests, which are due next month. The guidance instructed agencies to plan a 2013 budget that is at least 5 percent below their 2011 spending levels. Agencies also should identify additional savings that would bring their 2013 budget requests to at least 10 percent below their current enacted appropriations, the memo stated.
Such guidance from OMB is not unusual. In a June 2010 memo, then-OMB Director Peter Orszag directed nonsecurity agencies to submit a fiscal 2012 budget request 5 percent below the discretionary total provided for them in the fiscal 2011 budget.
When looking for places to cut, federal managers must step back and consider all the factors driving program and operation costs, including people, real estate and technology, said Janet Hale, a director at Deloitte Consulting LLP. Hale, who worked in government for nearly two decades — most recently as the first undersecretary for management at the Homeland Security Department — said various agencies have found significant cost savings over the years, whether through scaling back on long-term technology projects or consolidating redundant programs.
“This is a journey,” said Hale, of effectively managing federal budgets and spending. “There are lots of steps along the way. So the actions they [agencies] take in 2011 and ’12 are going to set the stage for how well they face the budget pressures of ’13, ’14 and ’15,” she said.
Hale said the executive branch and Capitol Hill have to work together to identify savings in federal programs and the most efficient ways to deliver services to American taxpayers. “Agencies are trying to do what’s right,” but often get caught in the middle of tussles between the administration and Congress, she said.
– by Kellie Lunney-Government Executive – August 22, 2011 – http://www.govexec.com/story_page.cfm?articleid=48590&dcn=e_gvet
OMB directs agencies to cut 2013 budgets
August 22, 2011 by cs
The Obama administration is directing federal agencies to submit fiscal 2013 budget requests that are at least 10 percent below their current appropriation level.
Citing fiscal pressures and the recently enacted deficit reduction package that raised the debt limit, Office of Management and Budget Director Jacob Lew sent a memo Aug. 17 to agencies instructing them to plan a 2013 budget that is at least 5 percent below their 2011 spending levels. Agencies also should identify additional savings that would bring their 2013 budget requests to at least 10 percent below their current enacted appropriations.
“By providing budgets pegged to these two scenarios, you will provide the president with the information to make the tough choices necessary to meet the hard spending targets in place and the needs of the nation,” Lew said in the memo.
To identify savings, agencies cannot propose across-the-board reductions or reductions to mandatory spending in appropriations bills, reclassifications of existing discretionary spending to mandatory, or any new user fees to offset existing spending. Agencies can include funding reduction proposals that fall into those categories as separate items on their own merits, or for consideration as alternatives to the main cuts outlined in the budget request, Lew said.
He also directed agencies to identify programs that are cost-effective and “provide the best opportunity for economic growth,” by eliminating duplicate or inefficient programs. Agencies should consider program integration, reorganization and realignment of resources.
“I know this will be a difficult year, but it will also offer an opportunity to make the hard decisions to invest where we can get the most done and pare back in other areas,” Lew wrote in the memo.
Carol Bonosaro, president of the Senior Executives Association, hopes agencies target wasteful or redundant programs for cuts rather than slash funds for things like employee training.
“While agencies cannot propose across-the-board reductions, that is exactly what OMB has ordered — an across-the-board reduction, albeit while telling agencies to identify programs that are cost effective,” she said.
The largest federal employee union criticized the administration’s directive to cut spending at a time of high unemployment.
“With 14 million Americans officially unemployed, and another 10 million who have either given up looking or are stuck with part-time work when they want and need full-time work, why on earth would the administration be trying to dig an even deeper hole?” asked John Gage, president of the American Federation of Government Employees. “Spending either 5 percent or 10 percent less in 2013 than we spent in 2011 on public safety, veterans’ services, law enforcement, anti-terrorism activity and education support will not solve our problems — it will only make them worse.”
Colleen Kelley, president of the National Treasury Employees Union, called the approach “unwise and counterproductive” when it comes to ensuring agencies meet their missions.
“Budget cuts of as much as 10 percent would seriously impede critical progress at federal agencies,” she said in a statement. Kelley cited examples of programs at agencies such as the Food and Drug Administration and Internal Revenue Service that could suffer as a result of decreased funding, adversely affecting the public.
– by Kellie Lunney – Government Executive – August 18, 2011 – http://www.govexec.com/story_page_pf.cfm?articleid=48572&printerfriendlyvers=1
Congressman questions agencies on small-business advocates’ authority
August 16, 2011 by cs
Senior executives at several Cabinet-level departments received letters Aug. 5 that asked why their small-business advocacy offices have not been given the authority the law dictates.
Rep. Mick Mulvaney (R-S.C.), chairman of the Small Business Committee’s Contracting and Workforce Subcommittee, wants to know why departments’ office of small and disadvantaged business utilization (OSDBU) officials don’t have access to top officials to deal with small-business problems, such as contract bundling and paying firms promptly.
The Small Business Act requires that heads of a department’s OSDBU should “be responsible only to, or report directly to, the head of such agency or to the deputy of such head.”
It’s not happening, according to a Government Accountability Office report from June.
Only nine of the 16 federal agencies that GAO reviewed were in compliance with that part of the Small Business Act. The remaining seven agencies failed to comply with the law. Those agencies’ OSDBU directors reported to lower-level officials or had delegated OSDBU responsibilities to officials who did not meet the reporting requirement, GAO wrote.
Further, these agencies were not in compliance when GAO last examined them in 2003.
In GAO’s latest review, Social Security Administration officials said they fixed the problem. Officials at the Interior Department agreed to re-evaluate their reporting structure.
On the other hand, the Commerce, Justice, State and Treasury departments disagreed with GAO, saying they were in compliance. The Agriculture Department also got a letter because officials delegated the OSDBU director’s authority in a way that was contrary to the law.
Mulvaney wants to know more details about each agencies’ OSDBU, including the assigned functions and budget. He also asked when the OSDBU will actually have access to top officials, in addition to a copy of the new organizational chart. He expects responses by Aug. 31.
The subcommittee is planning a hearing in September to look further into this situation.
– About the Author: Matthew Weigelt is a senior writer covering acquisition and procurement for Federal Computer Week. Published Aug. 8, 2011 at http://fcw.com/articles/2011/08/08/osdbu-direct-access-department-secretary-rep-mick-mulvaney.aspx.
Veteran-preferred contracting programs rife with fraud, say VA OIG, GAO
August 8, 2011 by cs
Fraud pervades the Veterans Affairs Department’s contracting program for veteran-owned small businesses, a July 28 House panel was told.
The VA Office of Inspector General and the Government Accountability Office have found the program so rife with deceit that one lawmaker suggested the entire program be scrapped.
“I think if the American people really paid attention…[they] would blow this whole program up and start from scratch again. It is that bad,” Rep. Phil Roe (R-Tenn.) told the House Veterans Affairs’ subcommittee on oversight and investigations.
“Hopefully it will get better, ’cause it can’t get much worse.”
Seventy-six percent of the businesses reviewed by the VA Office of Inspector General in a recent audit were ineligible for either the program and/or the specific veteran-owned small businesses or service-disabled veteran-owned small businesses contract award, said Belinda Finn, assistant inspector general for audits and evaluations at the VA OIG. This could total $2.5 billion in contract awards to ineligible businesses over the next five years, Finn estimated.
“Thirty-eight percent of the reviewed businesses were not owned or controlled by a veteran and over half did not meet federal incurred cost and subcontracting thresholds. In many cases ineligible businesses passed through the majority of the contracts’ work requirements and funds to non-veteran-owned businesses,” added Finn.
Ineligible businesses received awards because VA’s office of small and disadvantaged business utilization was not thoroughly reviewing business documentation and performing site visits to verify the veteran-owned status, said Finn. The OIG also found that contracting officers did not always check VA’s enterprise veterans database, business size classification codes, or properly assess subcontracting and partnering agreements.
“This program is highly-vulnerable to fraud and abuse,” said Gregory Kutz, director of forensic audits and investigative service at GAO, who added that while the veteran business verification program has made some progress, it “has a ways to go.”
“We recommend that the Congress consider providing VA with the additional authority and resources necessary to expand the verification program governmentwide. Only 30 percent of service disabled veteran contracts are with the Department of Veteran Affairs. Thus, for the other 70 percent we continue to have a self certification program,” suggested Kutz.
Finn said VA’s verification system provides strong controls, but it also needs to strengthen it’s contracting practices, she said.
“I wouldn’t give up on it yet,” said Finn.
– by Molly Bernhart Walker – Fierce Government – Aug. 2, 2011 at: http://www.fiercegovernment.com/story/veteran-preferred-contracting-programs-rife-fraud-say-va-oig-gao/2011-08-02
Small businesses share in SEWP sales
August 1, 2011 by cs
The portion of sales going to small businesses in the Solutions for Enterprise-Wide Procurement (SEWP) IV reached 42 percent last year, an increase of 7 percent from the previous year, according to SEWP IV officials.
“The NASA SEWP program office has always promoted the use of small businesses,” said Joanne Woytek, SEWP IV program manager. “Two of our four contract groups are forms of small business set-asides, which all agencies can utilize to help meet their small business goals.”
• 42 percent of SEWP IV spending goes through SEWP’s small businesses.
• 7.2 percent of SEWP IV spending goes through SEWP’s Service-Disabled Veteran-Owned Small Businesses (SDVOSB).
[Download a .pdf version of this special report at http://download.1105media.com/GIG/Custom/2011PDFS/SEWP2011.pdf.]
SEWP IV has 38 contract holders, including 21 small businesses. Of the 21 small businesses, six are 8(a) small, disadvantaged businesses and 10 are veteran-owned small businesses, including seven service-disabled veteran-owned small businesses (SDVOSBs). SEWP IV has set-aside authority for small business task orders and SDVOSB task orders. Last year, SEWP IV sales going to SDVOSBs reached 7.2 percent, up from 6 percent the previous year.
SEWP IV’s pool of small businesses also includes woman-owned businesses, Alaska Native businesses, and businesses in historically underutilized business (HUB) zones. Agencies can hold competitions among all small businesses, but then give preference to these other sub-categories in addition to the 8(a) companies.
– from Washington Technology, 7/29/2011 at http://washingtontechnology.com/microsites/2011/sewp2011/07-sewp-iv-small-business-utilization.aspx
SBA names third-party WOSB certifiers
July 8, 2011 by cs
The Small Business Administration (SBA) has approved four organizations to act as Third Party Certifiers under the recently-adoped woman-owned small business (WOSB) program. The four organizations and contact information are contained in the listing below:
- El Paso Hispanic Chamber of Commerce
- National Women Business Owners Corporation
- US Women’s Chamber of Commerce
- Women’s Business Enterprise National Council
Women Owned Small Businesses may elect to use the services of a Third Party Certifier to demonstrate eligibility for the program, or they may self-certify using the process outlined here on this website. SBA will only accept third party certification from these entities, and firms are still subject to the same eligibility requirements to participate in the program.
For complete details on the WOSB program, please read: http://gtpac.org/2011/05/heres-how-to-upload-documentation-to-sbas-wosb-repository/