Government cuts cause contractor revenue losses and strategic changes

December 30, 2013 by

Sequestration forced revenue losses among almost two-thirds of contractors in 2013, according to a survey by two consulting firms released last week.

Almost 31 percent of the 220 firms that responded to the survey by Market Connections Inc. and Lohfeld Consulting Group Inc. said their revenue fell by more than 10 percent, while another 30 percent reported declines of nearly 10 percent.

In response to government market pressures, contractors are re-architecting by expanding into adjacent markets (45 percent), modifying lines of business (35 percent), and putting greater emphasis on the front-end of the life-cycle to improve capture strategies an

More contractors are pursuing new opportunities in state and local government, international markets, and energy in 2013 than in 2012. Pursuit of healthcare opportunities is still high on the list of new and adjacent markets contractors are pursuing:

  • State and local government: 48 percent in 2013 vs. 29 percent in 2012
  • Healthcare: 39 percent in 2013 vs. 38 percent in 2012
  • International markets: 36 percent in 2013 vs. 29 percent in 2012
  • Energy: 33 percent in 2013 vs. 20 percent in 2012

“It is clear that sequestration and the government shutdown have had a tremendous impact on the government contracting community,” said Lisa Dezzutti, president and CEO of Market Connections, Inc. “Contractors need to think outside the box, leverage their expertise in adjacent markets and focus on business development and capture strategies that will increase win rates.”

Contractors are making the following investments in the front-end of the lifecycle to enhance the business development and capture process and increase win probability:

  • Improving capture and proposal processes: 40 percent
  • Adding more business development/capture personnel: 39 percent
  • Enhancing capture and proposal tools and infrastructure: 28 percent
  • Increasing use of consulting services: 19 percent
  • Adding more technical personnel to support business acquisition: 15 percent
  • Adding personnel to write proposals: 12 percent

A full copy of the survey results can be downloaded at: 

New military spending deal includes help for small business contractors

December 27, 2013 by

In unusually speedy fashion, Congress this week approved both a new federal budget and a military spending bill, both of which provide a sense of clarity to small business owners, particularly those who sell goods and services to the federal government.

But there’s also a little something extra for small business contractors in the latter deal, called the National Defense Authorization Act (NDAA), which authorizes military spending for the coming year and was approved by the Senate late Thursday. In fact, there are two little somethings.

The 2014 version of the legislation, which President Obama is expected to sign in the coming days, included two amendments born earlier this year in the House Small Business Committee, both of which are meant to help small firms in the procurement arena.

The first changes the way prime contractors are allowed to tally up the amount of subcontracting dollars they pass along to small businesses. Currently, the federal government can take into account every small business that works on a given project, even if they are a subcontractor to another subcontractor, when calculating the amount of federal awards that went to small companies in a given year.

Second, the bill includes a rule meant to clarify some confusion over rules concerning the amount of work small prime contractors are allowed to subcontract to large firms.

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Couple sentenced in huge State Department fraud scheme

December 26, 2013 by

A former State Department contractor and her husband were sentenced to prison on Dec. 6, 2013 for orchestrating a multi-million dollar fraud scheme.

Kathleen McGrade will serve two years under the sentence meted out in federal court; Brian Collinsworth will serve 18 months for his role in the convoluted scam, according to court filings and a news release from the U.S. attorney’s office for the eastern district of Virginia.

In an August plea agreement, the couple admitted to defrauding the government and money laundering. Along with prison time, they have to forfeit houses, a yacht, a Steinway piano and other property valued at almost $7.9 million, the release said.

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OFCCP director says contractors won’t be violated for missing goals

December 24, 2013 by

Republican lawmakers charged that federal contractor benchmark hiring goals for veterans and the disabled burden contractors and amount to quotas, at a Dec. 4, 2013 House Education and Workforce subcommittee on workforce protections hearing.

But Office of Federal Contract Compliance Programs (OFCCP) Director Patricia Shiu told the panel that they are simply goals and contractors can’t be penalized if they don’t meet them as long as they show evidence of trying.

The Labor Department finalized two rules Aug. 27.  They include a new 7 percent hiring goal for people with disabilities and an benchmarking requirement for veteran hiring.  Both rules, which apply to contractors and subcontractors with 50 employees and $50,000 in government contracts, go into effect Feb. 27, 2014.

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GSA may offer more cost-reimbursable contracts

December 23, 2013 by

The General Services Administration (GSA) is considering adding cost-reimbursable options to its supply schedules, according to a top agency official.

Tom Sharpe, the commissioner of GSA’s Federal Acquisition Service, said in a statement to Federal Times that the agency is conducting an assessment on “a wide array of issues, and will not be a short-term action.”

He added that GSA’s planned OASIS contract vehicle for professional services will offer a cost-reimbursable option available to agencies, and GSA plans to award the contract soon.

Contracts on the GSA federal supply schedules currently use time-and-materials and fixed-price pricing terms.

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Critics say federal design-build construction contracts stifling competition

December 19, 2013 by

As lawmakers examine possible reforms to the contracting process for federal building construction, they heard on Dec. 3, 2013 from industry advocates who say current agency practices are chasing away perfectly qualified contractors, wasting money and stifling competition.

The issues surround the government’s use of design-build contracts for federal buildings — a setup in which the architectural work and the actual building construction are bundled into a single contract. Agencies can award those contracts in either a one-step or two-step process, and architects and builders who work in the federal space say they’re seeing problems with both.

In the one-step version, contractor teams have to submit virtually all of the technical details of their proposals all at once, and so do all their competitors.

That’s an expensive process. Charles Dalluge, an associate with the American Institute of Architects, said the average design-build proposal costs a company about $260,000.

“Teams must complete up to approximately 80 percent of the design work in advance, they must determine space needs, mechanic, electrical, structural, HVAC and other systems, building supplies and materials and, of course, the cost of construction,” he said. “As federal buildings become more complex, this work requires a considerable investment of time from the professionals on each of the design build teams.”

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DoD to cut hundreds of staff and contractors for $1 billion savings

December 18, 2013 by

The Office of the Secretary of Defense will get smaller over the next five years as Chuck Hagel plans to cut 200 positions from his office, saving the Pentagon about $1 billion.

In July, Hagel ordered a 20 percent reduction in the front office budget to comply with sequestration reductions. The Joint Chiefs of Staff, service chiefs, combatant commanders and 3-star headquarters will reduce their staffs, as well.

“Some of these savings will be achieved through significant reductions civilian personnel; much of these savings will be achieved through contractor reductions. We are still finalizing the details, which will be available when the budget is submitted next year. But we will save at least $1 billion over the next five years,” Hagel said during a press briefing at the Pentagon on Wednesday.

In addition to eliminating 200 positions, several departments will reorganize to “reshape and strengthen” their staff. The Office of the Undersecretary of Defense for Policy will “re-balance” some of its workload to assistant secretaries of defense. The Office of the Assistant to the Secretary of Defense for Intelligence Oversight and the Defense Privacy and Civil Liberties Offices will be combined into a single office, as well.

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GAO says agencies need to comply with Congressional requirements for bundled contracts

December 17, 2013 by

Federal agencies sometimes can achieve savings by consolidating requirements from separate, smaller contracts into fewer, larger contracts.  However, consolidation may negatively impact small businesses.  Generally, when consolidation makes a contract unsuitable for small businesses, the contract is considered bundled, which is a subset of consolidation. Agencies must justify their actions for both consolidated and bundled requirements.

In a new report issued by the U.S. General Accountability Office (GAO), it’s noted that the Department of Defense (DoD) and the General Services Administration (GSA) — which accounted for more than 80 percent of the consolidated contracts reported by all federal agencies in fiscal years 2011 and 2012 — do not know the full extent to which they are awarding consolidated contracts.  This is the result of contracts being misreported in the federal procurement data system (FPDS).

GAO reviewed 157 contracts — more than half of all DOD and GSA contracts that were reported as consolidated — and found that 34 percent of the DoD contracts and all of the GSA contracts in fact were not consolidated. GAO also identified four DoD contracts with consolidated requirements that were not reported as such.

GAO’s study found that DoD generally justified contracts with consolidated requirements in accordance with existing regulations, but DOD and GSA have not yet implemented 2010 changes in the law.   Eighty-two percent of the 100 DoD contracts confirmed as consolidated followed existing regulations pertaining to conducting market research, identifying alternatives, and justifying decisions. Most of the contracts that did not comply were justified, but the determinations were not made by an official at a level senior enough to meet defense regulation requirements.

The study also found that the Small Business Administration (SBA) does not collect complete information on bundled contracts and has not reported to Congressional committees as required by federal law.

To read the full GAO report, please visit:

This group could make — or break — FOIA reform

December 16, 2013 by

A proposed advisory committee to modernize how agencies comply with the Freedom of Information Act could herald a major improvement in relations between government agencies and the researchers, journalists and others who seek documents from them, a privacy advocate says.

If the committee is poorly composed or led by agencies like the Justice Department that have typically advocated more latitude for agencies to deny records requests, however, it could prove little use, said Ginger McCall, federal policy manager at the Sunlight Foundation, which advocates for government transparency.

“At the very least it would do no harm, and it has the potential to do great good depending on the composition,” McCall said. “I’d want it to include people who are knowledgeable about FOIA and passionate and willing to take agencies to task. If it’s stacked with people who are very friendly with agencies and more concerned about maintaining their relationship with agencies, then that would not be good.”

Ideally the committee should include groups from outside government that have deep experience both requesting documents under FOIA and litigating over documents the government refuses to release, she said.

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Navy contractor from Georgia sentenced in $18 million scheme

December 11, 2013 by

The founder of a U.S. Navy contractor from Georgia must serve three years in prison for his part in a kickback scheme that cost the Navy $18 million, a federal judge in Rhode Island ordered Wednesday.

Anjan Dutta-Gupta, of Roswell, Ga., founder of Advanced Solutions for Tomorrow, or ASFT, is the fourth person to be sentenced in a federal probe into a 15-year scheme led by former civilian Navy employee Ralph M. Mariano. Dutta-Gupta pleaded guilty in 2011 to bribery and was not sentenced until Wednesday while he cooperated with the investigation.

The sentence imposed by U.S. District Judge Mary Lisi matched the recommendation of both prosecutors and the defense, who said Dutta-Gupta’s extensive cooperation almost immediately after he was charged meant he should be shown some leniency. Otherwise, he could have faced as much as 15 years in prison.

Mariano worked for the Naval Undersea Warfare Center in Newport, R.I., and was most recently based at the Navy Yard in Washington. He had the power to approve payments on Navy contracts and used it to sign off on false invoices submitted by ASFT and subcontractors, which would then funnel kickbacks to Mariano and others. ASFT, which also had offices in Middletown, R.I., went under soon after the charges were brought.

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