Georgia Tech Procurement Assistance Center

Update on government contracts ramifications of the Trump administration

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In December 2016, Jones Day issued “ Government Contracts Ramifications of the Trump Election,” a Commentary in which we discussed several likely impacts of the Trump Administration in the government contracts arena. Specifically, we discussed that the new Administration would:

  • Seek repeal of numerous Executive Orders affecting government contractors.
  • Reject some Obama Administration procurement policies, such as: the preference for fixed-price type contracts; the preference for lowest-price technically acceptable (“LPTA”) evaluation schemes; and the preference against outsourcing government jobs to private companies.
  • Embrace Commercial Item contracting.
  • Increase government spending for defense, cybersecurity, infrastructure, and immigration-related activities.
  • Decrease spending by many agencies, including the Department of Education, Environmental Protection Agency, and Internal Revenue Service.
  • Focus on compliance issues such as rooting out fraud, waste, and abuse, and ensuring compliance with the Buy American Act and Trade Agreements Act.
  • Withdraw from, or renegotiate America’s participation in, certain trade relationships, which could affect companies’ supply chains.
  • Decrease the federal workforce, which could result in understaffing and undertraining within the acquisition workforce.
  • Appoint the members of the FAR Council, including the Office of Federal Procurement Policy (“OFPP”) Administrator, Secretary of Defense, Administrator of National Aeronautics and Space Administration, and the Administrator of General Services Administration.

Since the issuance of our earlier Commentary, President Trump has taken several actions that provide additional insight into the impact his Administration will have on government contractors.

Keep reading this article at: http://www.mondaq.com/unitedstates/x/564798/Government+Contracts+Procurement+PPP/Update+On+Government+Contracts+Ramifications+Of+The+Trump+Administration

Government contracts under the Trump administration

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President-elect Donald Trump will usher in a new era for government contractors, much like Presidents Barack Obama, George W. Bush and Bill Clinton before him.

What impact will the new president and administration have on the field of government contracts?

Click on this link to read about the 10 areas to watch: https://www.law360.com/articles/881546/government-contracts-under-the-trump-administration

Here is Air Force’s $49.5 million plan to outsource cyberweapon and counterhack software

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The Air Force is finalizing a $49.5 million plan to hire private sector coders who, by developing software, can sabotage adversary computer systems and thwart incoming hack attacks.

An official contract for the “Offensive Cyberspace Operations Defensive Cyberspace Operations Real-Time Operations and Innovation Cyber Development Custom Software Engineering Services” program is slated for publication Jan. 29, 2016.

SHELTER, the nickname for the mouthful of a project title, is a 5.5-year deal that would add to the Defense Department’s growing arsenal of cyberweapons.

Keep reading this article at: http://www.nextgov.com/cybersecurity/2015/12/here-air-forces-495m-plan-outsource-cyberweapon-counterhack-software/124066

See draft RFP Documents for Offensive Cyber Operations (OCO)/Defensive Cyber Operations (DCO) and Real Time Operations and Innovation (RTO&I) Shelter Project at: https://www.fbo.gov/?s=opportunity&mode=form&tab=core&id=b76b22fac14eef97d94e90ee8cd4d982&_cview=0.  Interested Contractors may submit questions concerning the draft RFP no later than 3:00 pm CST on 18 December 2015.

5 things contractors need to know during a shutdown

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If the federal government closes its doors on Oct. 1, it won’t be like past shutdowns for one big reason: contractors.

“The 2013 shutdown was different than every other shutdown that had come before it,” said John Cooney, a former counsel for the Office of Management and Budget and current partner at Venable LLP. “Many more government services are delivered through contracts, they’ve been outsourced. There are just that many more functions that are delivered externally and that complicates everything.”

Professional Services Council - PSCCooney was part of a Sept. 21 Professional Services Council panel that spoke on how to prepare for a government shutdown.

And as the threat of a shutdown looms large on Oct. 1, many in Washington are harkening back to their 2013 recollections of the last government closure.

Keep reading this article at: http://www.federaltimes.com/story/government/acquisition/contracts/2015/09/23/5-things-contractors-need-know-during-shutdown/72677568/

For more information, visit PSC’s shutdown resource page.

For more information on managing during a government shutdown, see: http://gtpac.org/2013/10/02/how-to-manage-a-federal-contract-during-the-government-shutdown/

As local governments shrink, private consultants reap rewards

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“I would probably bring in McKinsey,” Mitt Romney once told the Wall Street Journaleditorial board, explaining how he might, should he win in November, hire management consultants to help shape a presidential cabinet.

Romney, a devotee of corporate culture who began his career at the Boston Consulting Group, promises to transfer that technocratic ethos and private-sector reverence to the Oval Office. Indeed, management consulting firms are already marketing themselves to state and municipal governments as professionals with the necessary business savvy to help manage a downsizing austerity state.

“When crisis strikes consultants are called. Consultants thrive on chaos,” says Tom Rodenhauser, managing director at Kennedy Consulting Research & Advisory, which tracks the industry. “When a municipality is facing huge budget issues, and they can’t solve the problem themselves, they’ll call in consultants and make the tough choices that either politically or practically elected officials can’t make.”

Consultants, like Romney, have the appeal of “real-world” experience which, in early 21st-century America, means experience in the hard-nosed competitive marketplace outside of the public sector’s one-time easy comfort. Since August 2008, the number of public employees has already been cut by 662,000 nationwide. Consultants draw on experience from a private sector that has relentlessly slashed employment, broken unions and outsourced work for decades.

Keep reading this article at: http://www.theatlanticcities.com/politics/2012/10/local-governments-shrink-private-consultants-reap-rewards/3648/

Companies lost more folks in 2011 due to insourcing

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In a recent survey of more than 100 companies, 60 percent of them reported they had lost employees to the government insourcing initiative.

It’s a 13 percent increase from 2010, according to the consulting firm Grant Thornton in its 17th Annual Government Contractor Industry Survey, which was conducted in 2011. Grant Thornton released it in 2012.

Agencies have more aggressively insourced work from companies in recent years as Congress and the Obama administration have said the government relies too much on the private sector to do its work. Spending on contracts increased greatly under the George W. Bush administration and the Barack Obama administration has proudly said it’s cut back on contract spending.

Obama’s former administrator of the Office of Federal Procurement Policy, Dan Gordon, reiterated that the government needed to “right-size” the balance between government employees and contractors. More importantly, federal employees need the in-house knowledge and expertise to handle those contractors’ jobs to release the government from an over-reliance on companies.

Government officials have also said they would save money with federal employees doing the same work instead of contractors. It’s stemmed a heated debate and both sides of the argument have generated their facts to prove their point.

From Grant Thornton’s perspective, thinking that insourcing saves money is an “unsubstantiated and frankly unimaginable belief.” In 2010, defense officials said they could find no evidence of savings from insourcing work.

In the survey report, Grant Thornton expressed some hope for those who dislike the insourcing initiative.

“Based on experience, we assume that this desire to grow government at the expense of the private sector is another initiative that will eventually be reversed, most likely when the political climate in the country changes,” wrote the author of the survey report.

In other words, the pendulum will swing back.

— by Matthew Weigelt, Federal Computer Week, on Apr. 09, 2012 at http://fcw.com/blogs/acquisitive-mind/2012/04/insourcing-companies-lose-employees.aspx?s=fcwdaily_110412.

Insourcing savings difficult to predict

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Insourcing saved the Homeland Security Department $2.3 million since mid-2010, a DHS official said, even while counterparts at the Defense Department said their initial estimates of cost savings to be had from converting contractor positions into full-time civil service jobs were overestimated.

During a March 29 hearing of the Senate Homeland Security and Governmental Affairs subcommittee on contracting oversight, Debra Tomchek, executive director of the DHS balanced workforce program management office, said efforts underway at DHS since mid-2010 to rely less on contractors and to hire more civil servants have produced about $2.3 million in savings as of January 2012.

According to Tomchek’s written testimony, DHS calculates the cost of a contractor to a civil servant using a “DHS Modular Cost Model” that includes “one-time and recurring costs associated with establishing new positions.”

During the hearing, Chuck Grimes, Office of Personnel Management chief operating officer, emphasized that savings shouldn’t be calculated by just comparing labor costs.

When the Defense Department began an insourcing initiative in 2009, then-Defense Secretary Robert Gates estimated the Army could produce $400 million worth of savings and that conversion of contractor positions would save 40 percent on employment costs.

“We had two instances over different periods of time where we achieved anywhere from about 16 to 30 percent savings. And really the percentage savings are really dependent upon the function that’s being in-sourced and the location where that’s occurring,” said Jay Aronowitz, Army deputy assistant secretary for force management, manpower and resources.

Lack of a good cost model to compare the true costs of retaining civil servants versus hiring contractors has long been an obstacle to cost transparency and decision-making. The Center for Strategic and International Studies proposed in May 2011 a cost estimation taxonomy that would permit a comparison based not on labor costs, but the costs that federal agency would incur if it tried to meet its needs by internally running the equivalent of a private sector consulting firm.

— by David Perera, Fierce Government IT, Apr. 3, 2012 at http://www.fiercegovernment.com/story/insourcing-savings-difficult-predict/2012-04-03.

Are contractors at risk of a flame out?

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Retired Vice Adm. Lewis Crenshaw Jr. is a former Navy aviator so you have to forgive his aviation analogy, but in presenting accounting firm Grant Thornton’s annual contractor survey he made a convincing case that many companies in the market are dangerously close to stalling out.

On the surface, some of the numbers look good: 50 percent of the respondents said revenues were up. But that is down from last year’s survey that showed 55 percent reported growth.

Also troubling, is that 29 percent reported a decrease in revenue, compared to 22 percent last year.

Companies also reported profit margins in keeping with previous surveys, but the profits aren’t coming from revenue growth, Crenshaw said, but from controlling costs.

The aviation analogy for Crenshaw, now the national practice leader for Grant Thornton’s aerospace and defense market sector, is that you can only slow your airplane down for so long before it stalls and then you crash and burn.

“Next year’s numbers should be very interesting to look at,” he said.

Another warning sign is the assets to liability ratio, where 60 percent of companies reported a ratio of two or less.

“You’re not in good shape with that and it supports my stall analogy,” he said.

Grant Thornton’s annual survey asks companies about a variety of financial and business factors, including financial statistics, compensation, business strategies and contracting issues such as delays and terminations and issues dealing with government customers.

The accounting and consulting firm uses the survey to present a benchmark of the market and as a platform for discussing trends in the market.

Some of the highlights of its findings include the fact that firm-fixed-price contracts have not grown in use, according to the respondents and remains at about 20 percent of contracts.

“Despite the rhetoric it hasn’t changed year-to-year,” Crenshaw said.

Companies reported that the use of task order contracts rose by 50 percent and that less than 45 percent of revenue came from these contracts.

Another interesting finding was that 81 percent of the companies reported that they were asked to do out-of-scope work on contracts and 84 percent of those did the work. Surprisingly, only 25 percent filed for adjustments to their contracts.

“Out-of-scope work might become a bigger issue if more contracts go to firm-fixed price,” Crenshaw said.

About the Author: Nick Wakeman is the editor-in-chief of Washington Technology.  This article was published on Mar. 7, 2012 at http://washingtontechnology.com/articles/2012/03/07/grant-thornton-contractor-trends.aspx?s=wtdaily_090312.

DOD tries to calm industry fears

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Government contractors shouldn’t fear the looming defense budget cuts, the private sector still has a critical role to play, said the leader of the military’s acquisition arm on Jan. 6.

Frank Kendall, undersecretary of defense for acquisition, technology and logistics, said in a conference call that the department convened a joint DOD-private sector task force to determine the potential effects on industry of impending budget cuts and the military drawdown in Southwest Asia.

The task force has helped guide some of DOD’s strategy outlined Jan. 5 by President Barack Obama and Defense Secretary Leon Panetta, Kendall said. He was optimistic despite a new report from the task force that revealed worries over the projected spending decreases.

“The industrial base was considered throughout the review as part of total force structure,” Kendall said. “The department is dependent on the industrial base as a partner in the defense enterprise. But less is less…you cannot expect the market to continue to grow as it has in the past.”

But despite his optimism, defense industry executives are worried about the cuts. Their concerns were outlined in a report dated Nov. 11, 2011, but released Jan. 6.he

“This report paints an alarming picture for the future of the aerospace and defense industry,” Marion Blakey, president of the Aerospace Industries Association, said in a release. “Yesterday Secretary Panetta outlined very severe reductions in the defense budget. Any further cuts will cripple crucial industrial base capabilities in the national security sector.”

AIA was part of the Defense Industrial Base Task Force; other groups included the Professional Services Council and the National Defense Industrial Association.

Kendall said technology remains one area that likely will still see investment and the private sector’s partnership would remain critical to military operations.

“Our continued dominance will rely on technological superiority,” he said. “While we will be taking budget cuts, there will be high priority areas of investment,” including cyber, intelligence, surveillance, reconnaissance and space.

The task force’s report assessed the effects of two scenarios: the $480 billion defense spending reduction over 10 years that Obama and Panetta outlined Jan. 5, and the $1 trillion across-the-board cuts that could result from sequestration triggered by the congressional supercommittee’s failure to agree on federal budget cuts.

“Cuts beyond $480 billion…would render major segments of the defense industry unable to produce critical products and components, leaving wide gaps in the domestic capacity needed to sustain an acceptable margin of military superiority in the future,” the report stated.

According to Kendall, he and Deputy Defense Secretary Ashton Carter have met with the task force, and Panetta is slated to meet with members in two weeks.

Kendall stressed that he believes the cuts and strategy implementation are doable, and that industry has a seat at the table as DOD’s leadership determines strategy.

“I believe we can execute the strategy within the context of budget constraints and still preserve military and industrial base,” he said.

About the Author: Amber Corrin is a staff writer covering defense and national security for Federal Computer Week. This article appeared Jan. 6, 2012 at http://washingtontechnology.com/articles/2012/01/06/kendall-defense-industry-task-force-report.aspx?s=wtdaily_090112.

Contractors brace for coming defense cuts

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As the Pentagon readies a fiscal 2013 budget expected to map out $487 billion in cuts over the next 10 years, many contractors already are bracing for a new climate of austerity, but they are heartened by the Obama administration’s pledge to preserve America’s industrial base.

At the Pentagon on Thursday (January 5, 2012) with President Obama, Defense Secretary Leon Panetta and Deputy Secretary Ashton B. Carter stressed the need for innovation and scientific progress. Both touched on the importance of innovation, maintaining the industrial base, and fostering science and technology.

“As we reduce the overall defense budget, we will protect our investments in special operations forces, new technologies like [intelligence, surveillance and reconnaissance] and unmanned systems, space and cyberspace capabilities, and our capacity to quickly mobilize,” Panetta said.

Carter said, “this guidance tells us to preserve investment, and even in some cases to increase our capabilities in key areas that are clearly important to the future — special forces in counterterrorism, countering weapons of mass destruction, building partner capacity, cyber, and aspects of our science and technology investments — making sure that we don’t simply revert to yesterday’s pre-9/11 force structure under the pressure of budget cuts.”

He offered assurance that the Defense Department does not “eat the seed corn” by making cuts that are irreversible. “As we make program changes, we want to make sure that 10 years, 15 years from now, we still have an industrial base that supports our key weapon systems even if we’re not able to buy in those areas at the rates or in the volume that we had planned before we were handed this $487 billion cut.”

The Professional Services Council, a contractors trade group, issued a statement applauding the administration for recognizing that a “strong, flexible and resilient industrial base is integral to ensuring future readiness and mission success.” But the council warned against “arbitrary cuts” to contracts, programs and personnel.

“Clearly, the planned reductions will have an impact on both the military and the industry. Those impacts could be exacerbated if the department does not pay close attention to how it can best capitalize on the capabilities of the private sector,” said PSC President and Chief Executive Officer Stan Soloway. “It is therefore more important than ever that the department buy smart and ensure it genuinely incentivizes and rewards performance and innovation rather than simply buying at the lowest price.”

The Aerospace Industries Association also was encouraged by the Pentagon’s approach, saying in a statement that officials “recognized the importance of a strong industrial base” and for planning reductions based on “a new national defense strategy … rather than simply lower numbers across-the-board.”

Richard Rector, a partner with DLA Piper who runs the law firm’s contracting practice, told Government Executive he expects “contractors’ work and the legal work to track the decline in spending, and that companies will be less willing to accept a loss on a key programs as the pie shrinks and there are fewer large programs.”

During the previous defense spending downturn, in the mid-1990s, the number of bid protests went down commensurately, he said, but companies today are apt to be “less sanguine about accepting a loss when profitability and margins are thin, and more likely to fight over things that at other times they would let slide.” That might mean more bid protests and more claims against agency contract officers for changing the scope of contract work, he added.

The American Federation of Government Employees urged the Pentagon “to take a balanced approach to spending reductions that subjects private contractors to the same cost-cutting scrutiny that has already been placed upon the civilian workforce,” AFGE President John Gage said in a statement.

“Tens of thousands of civilian jobs are slated for elimination, despite strong evidence that having civilians perform these jobs is the most cost-effective strategy,” he said. “Meanwhile, the department continues to increase spending on contractors, even though they are more costly and less accountable.”

The nonprofit Project on Government Oversight criticized both Defense officials and an advance story about the Pentagon review in The New York Times for failing to address possible savings through decreased reliance on contractors. “Beyond the secretary’s failure to provide specifics on how he’s going to achieve his budget savings, it was what he didn’t say that left us flabbergasted,” POGO Executive Director Danielle Brian said in a statement. “Not once did he mention the need to take a serious look at the more than $200 billion the Pentagon spends each year on outside service contractors.”

Brian said her group’s research shows the Pentagon spends more on service contractors than on its uniformed military and civilian employees combined, and that contractors, on average, bill the government “nearly twice as much as it would have cost federal employees to do the same jobs.”

Defense budget analysts Barry Watts and Todd Harrison of the Center for Strategic and Budgetary Assessments wrote a December 2011 op-ed in Politico underlining the importance of contractors in maintaining the industrial base and the need for a long-term Pentagon strategy that sets priorities for critical capabilities.

“For-profit companies, defense firms cannot afford to maintain a broad range of weapon design and production capabilities if there is no funding,” they warned. “In 1997, for example, the British navy wanted to develop a new class of nuclear attack submarine, only to find that the British defense industrial base no longer had the necessary design or production skills. Fortunately, the Royal Navy could turn to a U.S. firm for the lost expertise. But if the Pentagon finds itself in a similar situation, to whom would it turn?”

— by Charles S. Clark – Government Executive – January 6, 2012 at http://www.govexec.com/story_page.cfm?articleid=49718&oref=todaysnews

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