Tag Archives: government contracting

Government Contractor Tax Day Tidbits – “Food for Thought”

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tax day

“THE PROJECT ON GOVERNMENT OVERSIGHT”

[On] the federal tax filing deadline, the Project On Government Oversight (POGO) offer[ed] some tax-related contractor oversight food for thought:

  • ” The Treasury Inspector General for Tax Administration (TIGTA) found that the Internal Revenue Service (IRS) awarded contracts to at least 20 companies that owed more than $5 million in delinquent federal taxes. TIGTA also found that 11 contractors owing $4.3 million in taxes were awarded more than $356 million in IRS contracts and an additional $3.7 billion in contracts from other federal agencies
  • POGO tracks tax violations in our Federal Contractor Misconduct Database, which shows that contractors have paid $3.64 billion to resolve cases with local, federal, and foreign revenue collection authorities. The bulk of this amount comes from GlaxoSmithKline’s record-breaking $3.4 billion payment in 2006 to settle IRS charges of under-reporting profits.
  • There are some noteworthy tax misconduct cases pending against the large federal contractors, including actions by New York City and State against FedEx and United Parcel Service for allegedly trafficking in contraband cigarettes, and a complaint filed with the IRS accusing ExxonMobil of violating tax laws to wage a campaign attacking climate science.
  • Earlier this month, the IRS launched a program employing private debt collection companies to recover delinquent income taxes. This is the third time since 1996 the IRS has tried to outsource tax debt collection—both previous attempts were dismal failures.
  • Congress has taken another stab at passing a law that would prevent individuals with seriously delinquent tax debts from obtaining federal employment, contracts, and grants. Similar bills introduced in 2011, 2013, and 2015 ultimately failed to advance. The Senate is also attempting to strengthen protections for those who blow the whistle on tax fraud.

So get those tax returns out the door! You can rest assured that POGO will do its best to make sure the government collects what it is owed and does not waste that money.”

http://www.pogo.org/blog/2017/04/tax-day-tidbits.html

 

 

 

Secrets That Highly Successful Government Contractors Use Everyday

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“WASHINGTON TECHNOLOGY”

“What does it take to deliver at least 20 percent revenue growth year after year?

Last month, we released a new study of high-growth firms, including 445 government contractors. We found three key findings from that study that your  business can use to improve your growth prospects.

Each of these findings can be folded into a cohesive strategy. And a characteristic of high-growth firms is that they often employ all three.

Strategy 1: High-Growth Government Contractors Specialize

Our first finding was that high-growth government contractors tend to specialize. Interestingly, so do the firms that exhibited little or no growth. The difference was what they chose to specialize in.

As you can see in Figure 1 below, high-growth firms often focus on solving a particular challenge or providing a specialized service. In fact, high-growth contractors were two-and-a-half times more likely to be highly specialized. No-growth firms that described a specialty usually specialized in an industry.

~ most valuable digital content

Why does specialization matter? In a related finding, 68 percent  of buyers cited specialized skills and expertise as their top criterion when selecting a firm. Specialization implies expertise, and buyers value that.

Takeaway: Try to define an area of focus for your firm. As you do so, consider building it around a specialized service or common client challenge.

Strategy 2: High-Growth Contractors Are Well Differentiated

According to our research, high-growth firms are three times more likely than their no-growth peers to have a strong differentiator.

Differentiation is the way in which a business separates itself from other similar firms. Usually this difference is expressed in the language a contractor uses to describe itself or its services. But there is more to a differentiator than lip service. It has to meet three criteria. A differentiator must be:

  1. True
  2. Relevant
  3. Provable

And of course, it must be different from most of your competitors. Figure 2 lists the differentiators cited most often by the high-growth firms in our study.

~ most valuable digital content

Now, this data begs the question, how can a characteristic that’s favored by over 80 percent of high-growth firms still be a differentiator?  After all, isn’t the point of a differentiator to be different?

The answer is that many of the responses in Figure 2 are aggregated and categorized. That means “The expertise of our team,” for example, represents a diverse range of answers that are more specialized than the generic category name implies. A firm that differentiates around its expertise might have deep experience in a narrow discipline, such as conducting insider threat risk assessments or designing secure but welcoming embassy facilities.

Takeaway: Figure out how you are different from your competitors and develop messaging to convey this to your audiences. Make sure your differentiators really are in fact truly different.

Strategy 3: High-Growth Firms Invest in Marketing Techniques that Build Their Visibility and Reputation

While high-growth firms grow much faster than their peers, they actually invest less time and money doing so. That means their marketing is more efficient. Figure 3 lists the 10 most favored marketing techniques of high-growth and no-growth firms.

~ most valuable digital content

One thing you will notice is that high-growth firms tend to use more marketing techniques overall than their no-growth brethren. Now let’s look at the five techniques high-growth contractors identified as having the most impact on their business.

~ most valuable digital content

All five of these share two characteristics: 1) they build the firm’s visibility, and 2) they leverage their expertise to enhance their reputation.

The top technique, partnership marketing, deserves a little explanation. Traditional partnership marketing is a strategy in which a firm seeks out other firms, associations or organizations that share one or more target audiences with the firm but don’t directly compete with them. The two parties then pool their resources and market jointly to their audience. For instance they might conduct joint webinars or promote each other’s services to their client lists.

In the case of government contractors, however, partnership marketing takes an interesting twist. Often the partnering firms are direct competitors, but because they have different characteristics, they need each other from time to time to qualify for an RFP or comply with a regulatory requirement, such as 8(a) or HUBZone certification.

Takeaway: Don’t waste your limited marketing dollars on timeworn tactics that no longer produce results. Instead, model your marketing on today’s most successful government contractors.

If you are wondering why your firm is stuck in the doldrums while others grow quickly, take heart. There are changes you can make to change your fortunes.

Reposition your firm as a specialist, clearly articulate how your firm is different, and look to the high-growth firms in your industry to uncover what marketing techniques are most effective.”

About the Author

Elizabeth Harr is a partner with Hinge Marketing and leads the firm’s technology and consulting practice. She is the co-author of two books, the Visible Expert and the Buyer’s Brain.

https://washingtontechnology.com/articles/2017/04/14/insights-harr-differentiation-and-success.aspx

 

Military Contract Manufacturing There When You Need It

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Electronic Contracting

“MILITARY AND AEROSPACE ELECTRONICS”

“The nation’s prime defense contractors often find themselves with too many orders to handle with in-house expertise.

That’s where electronics contract manufacturing comes in.

With the rapid expansion of high-tech military equipment and componentry, thousands of small specialty manufacturers have come into being, with the initial big boost during with the Space Race of the 1960s.

Throughout that period – and with even greater frequency since the turn of the century – contract manufacturing of military electronics grew into a major industry in its own right. Working primarily for systems integrators, contract manufacturers typically focus on specific areas, such as machining; mechanical and electrical assemblies; power systems; lasers; optics; sensors; robotics; vehicular controls; RF systems; satellite instrumentation; environmental stress screening; G-force testing; and electronic circuit card assembly.

“In the last 10 years, if you look at industry consolidation, that tends to support systems integration, which intuitively should mean more contract manufacturing,” says Matt Turpin, CEO of contract manufacturer Zentech Manufacturing Inc. in Windsor Mill, Md. “Given the peaks and troughs of the mil-aero business, any company that tried to stay vertically integrated would probably die. Given the rate of technology change, vertical integration would not, in general, be able to keep up.”

The role of industry consolidation

This is the primary reason that big systems integrators like Lockheed Martin, Northrop Grumman, and L-3 rely on best-in-breed contract manufacturing,” Turpin says. “The economics don’t really support them trying to do it all in-house. If you try to bring in that capability for just your stuff, you can’t even out the troughs in mil-aero the way an independent contract manufacturer can.”

Contract manufacturing of military electronics is significantly different from the model in use in many other industries, where the contract manufacturer produces complete products under the contractor’s brand.

In the military market, the contract manufacturer may produce unique components designed by the contractor or provide its own designs, developments, prototyping and modeling, assemblies, fabrication, tooling, manufacturing, qualification testing, procurement, and logistics services to meet the contractor’s requirements.

Representative of that is Jabil Circuit Inc. in St. Petersburg, Fla. With $18 billion in annual revenues, Jabil is the third largest contract manufacturer in the world – behind Taiwan’s Hon Hai Precision Industry (Foxconn) and Singapore’s Flextronics International Ltd.

Trailing closely behind Jabil in size are U.S. contract manufacturers Sanmina Corp. in San Jose, Calif.; Benchmark Electronics Inc. in Angleton, Texas; and Plexus Corp. in Neenah, Wis.

Jabil promotes its second largest division, Defense and Aerospace, as providing a skilled workforce for aerospace and defense manufacturing, design, and supply chain management for high-mix, low- to medium-volume products and electronic and mechanical solutions to complement original equipment manufacturers’ core competencies and reduce program costs.

“Systems integrators are still doing a lot of work in-house, but are outsourcing more each year, although the increase is not that great,” says Mike Matthes, president of the Jabil Aerospace and Defense division.

Demonstrating Value

“We have to provide a value proposition to show it is more advantageous to outsource electronics manufacturing than to keep it in-house, which allows them to focus more on their strategic plans and not worry about the actual manufacturing,” Matthes says. “Jabil is moving into a new capability – aerospace machining – and entering into agreements to provide that to defense and civilian companies.” Contract manufacturers also have to grow their capabilities to retain that value, he points out.

“We do electronic manufacturing and systems integration, but not the machining portion,” Matthes continues. “At Jabil Green Point, our largest division, we do machining, mostly in China, but not for aerospace. It’s not an easy capability to master and we’re working with our customers to develop and launch that. Some of that will be based in the U.S., other parts in Asia. Military contracting would have to be done in the U.S., including a new facility. Almost everything we have at this time is commercial aerospace, but we will be working toward that.”

Jabil’s high volume of non-military contract manufacturing is fairly common among the larger contract manufacturers, much of it for overseas customers, although many of the smaller companies have focused their efforts tightly on items in demand by U.S. military contractors. While the vast majority of such contracts are with industry, some contract manufacturers do have direct contracts with the military services and the U.S. Department of Defense (DOD).

“It’s a combination,” says Zentech’s Turpin. “We have two divisions, one with a long history of direct contracts, primarily with the Navy. The other does fewer direct contacts, but in the last five years contracts with the Army at Aberdeen Proving Ground and a blanket purchase agreement with the Navy have increased. But most are with industry,” he says.

“For us, the U.S. government – and certainly DOD – are huge customers with lots of opportunity, predominantly subcontract work for primes, especially as we come out of sequestration, where defense dollars really did shrink a lot,” adds Jabil’s Matthes. “As we move forward under the new administration, there certainly are possibilities for increased defense spending.”

Prime defense contractors are reluctant to surrender their manufacturing capabilities to contract manufacturers.

“The primes have their own manufacturing and to move it out they would have to cut jobs and close factories, which is never palatable for anyone,” Matthes says. “And moving jobs and changing the labor landscape is never popular, even if the work remains in the U.S. It does become popular when the benefits outweigh concerns, so our job is to show where that value is.”

Industry diversity

U.S. military electronics contract manufacturers come in all sizes, representing the full gamut of needs from systems prime contractors and, to a lesser extent, the military services themselves. By focusing their efforts and investments in specialty technologies and workers, they can make themselves too valuable to the defense industry at large to be taken in-house by individual companies.

Representatives of that diversity include: NEO Tech in Chatsworth, Calif., with a focus on advanced IP protections systems, anti-counterfeit protection, and upgrading or replacing out-of-date legacy systems for its aerospace and defense customers.

“The obsolescence of electronic components is a serious challenge in the aerospace and defense markets. Many of the ICs designed into systems have shorter life cycles than the end products in these markets,” according to a company document. “NEO Tech has implemented a supply- chain design for the industry that can support long product life cycles. NEO Tech Obsolescence Mitigation helps customers through the obsolescence process so disruption to ongoing programs is mitigated.”

Many contract manufacturers also are prime contractors themselves, typically on smaller systems for the military services.

One such is Sparton Corp. in De Leon Springs, Fla., which focuses on specialized technologies like embedded systems, RF, lasers, optics, sensors, and robotics for uses as varied as undersea warfare to cockpit controls to satellite communications, as well as aerospace and military printed circuit board assemblies.

Sypris Electronics in Tampa, Fla., a division of Sypris Solutions in Louisville, Ky., offers complete electronic manufacturing services (EMS) from circuit card assemblies to complex box builds and systems integration. Their approach is based on a Lean/Six Sigma, continuous improvement culture cultivated through internal investments.

TeligentEMS LLC in Havana, Fla., another ITAR and ISO 9001 registered contract manufacturer, offers product manufacturing services in a wide range of technologies, including unattended ground sensors, GPS tracking devices, spread spectrum transceivers, and handheld communication devices. The company promotes its capabilities in “technically complex defense projects, combined with strong configuration management capabilities and organizational flexibility.”

Specializing in electronic, electro-mechanical, and electro-optical equipment, the engineering group at TRICOR Systems Inc. in Elgin, Ill., develops complete packages for their customers, from concept to operating manuals. That has included a broad array of products, under contract and for sale directly by TRICOR, from extremely complex to simple test equipment, hardware and software simulators, illuminator systems, and airborne black boxes.

Steady work flow

Commercial and non-military government contracts provide the ability to “even-out the troughs” as defense spending changes from year to year and administration to administration. Homeland security, for example, has grown significantly as a market in which contract manufacturers can find customers and is expected to continue to grow for the foreseeable future. That also applies – primarily in the U.S. – to investments in cyber-related hardware and chem/bio-detection equipment. Globally, industry experts say there has been a stated focus on improving commercial air fleets.

The resulting increased demand for contract manufacturers has led not only to growing competition but also to closer industry oversight.

“For existing EMS companies, if there is more demand for military equipment, most U.S.-built, there will be an uptick of military assembly work in the U.S., but it also is likely to incentivize people to get into the market, either through acquisitions or expansion,” says Zentech’s Turpin. “To an outsider looking in, military electronics may seem pretty simple, but hiring and maintaining a skilled workforce, and maintaining a balance through the peaks and troughs is a different story.”

About three years ago, industry standards group IPC – Association Connecting Electronics Industries in Bannockburn, Ill., came up with a list of trusted sources. “Competition to receive that is brutal,” Turpin says.

IPC describes its origin and purpose on its website: “IPC Validation Services was created to answer a recognized need identified in an industry survey – 75 percent of responding engineers and executive management from OEMs, EMS providers, and industry suppliers viewed a supplier qualification program as vital to their business. For EMS providers and industry suppliers, IPC Validation Services provides the opportunity to become part of a network of trusted sources that industry will look to first and foremost when evaluating existing and potential business partners.

“Participating EMS providers and supplier companies will be audited by IPC Validation Services – the authoritative, objective source for quality conformance and data reporting – to earn certification through the Qualified Products List (QPL) and Qualified Manufacturers List (QML) programs. Once certification is achieved, EMS companies and industry suppliers earn the right to a high level of visibility throughout the industry,” the IPC description reads.

Disruptive technologies

Industry leaders largely agree that coming disruptive technologies, including further advances in miniaturization and evolution of the Internet of Things, also will change the world of electronics contract manufacturing.

“There are many disruptive technologies being developed right now, but nobody knows which ones will actually displace an existing technology in a way that is efficient and effective in meeting military SWaP [size, weight and power] requirements or commercial requirements for quality. Everything active will be disrupted by such things as nanotech, nanostructures, new fabrication techniques other than 3D printing – which itself is changing so fast, making prototyping faster and less expensive, for example,” Zentech’s Turpin says.

“Quantum computing is another that will change everything in the future, if and when they get it nailed down – how manufacturing and product development are done,” Turpin continues. “As relates to EMS companies, all that further underscores and exacerbates the issues surrounding capital investment. These technologies are not cheap and it doesn’t make sense for a prime to invest in such technologies with only relatively small production requirements.”

As more new and disruptive technologies come out, it will be incumbent on the primes to determine which EMS companies have the right people and equipment to build their products and properly use those technologies. Those in charge of contracting complex, high-reliability, military and aerospace assemblies will have to place even more emphasis on who is building those components by fully understanding the problems, challenges, and risks involved.

“If you use the wrong electronics contract manufacturer, no matter how good they may be, if they don’t have the right people or equipment, you could end up killing your own business,” Turpin warns.

Jabil’s Matthes agrees, but does not believe such new developments constitute an immediate concern for military electronics contract manufacturing.

“I see disruptive technologies that will take hold, but not in the short term,” Turpin says. “When you have a force out there fighting, if you are going to change the equipment they are using, you will have to do a lot of testing before making that move, which could take years. It could be a long time before it finds its way into the field to any large extent,” he predicts.

“So in the next few years, I don’t think disruptive tech will be a big changer; it will be more policy, funding, and outsourcing strategies from the primes,” Turpin says. “The big technology trends are going to make their way in, but will require a lot of time to mature and meet pretty stringent reliability and operating requirements. So while those will slowly become part of it, they will be slower to adoption than on the commercial side.”

Government and industry policies

For the military, then, technology changes will not be as important to contract manufacturing as new government policies, especially given the anticipated changes of the new Trump Administration. That also applies to changes in how the military does business, moving more toward autonomous systems, major improvements in battery technology, and overall energy requirements and technologies, with the commercial sector leading the way. Continuing advances in materials science also will shape that future.

Regardless of how quickly new technologies and new demands on contract manufacturing develop, they are on the horizon and primes and contract manufacturers will have to prepare themselves for them.

“Wherever there is change, there is opportunity; it just depends on how well you are positioned to take advantage of it, especially in areas in which you are investing,” says Jabil’s Matthes. “The trick is to invest in the right technologies at the right time.” Jabil’s size will be an advantage that will enable company executives to make strategic decisions rather than betting the company. “The more resources you have, the easier it is to fund that type of research and development.

“We are a Fortune 150 company, about $18 billion in annual revenue and 180,000 employees worldwide,” Matthes says. “That can be an advantage in having a breadth of resources and capabilities, but it can be a disadvantage if a customer fears we’re so large, their work might get lost. But divisionalizing our business units and keeping each customer with its own business unit manager makes the connection much more intimate and gives the feel of a smaller, more nimble company.”

For the next decade, Zentech’s Turpin sees a future depending on increased investment in manufacturing technologies for the military electronics market, in the U.S. and abroad.

“I would love to say increased profitability will mark the decade, but I say that tongue-in-cheek due to the continuing peaks and troughs in mil-aero. Nevertheless, the promise of increased military spending should be good for business,” Turpin says. “Other changes for contract manufacturing to stay in business, especially on the mil-aero side, will mean more new investments in capital equipment. When new technology comes out, you need equipment to work it and inspect it in order to compete.”

While all military electronics contract manufacturing must be done by U.S. companies at plants in the United States, successful competition for customers – primarily commercial – around the world is important to the ability of contract manufacturers to maintain a steady level of business and invest in the appropriate technologies and expertise.

Domestic manufacturing

In one of the first efforts to support advanced domestic manufacturing technologies, the U.S. Congress approved the Revitalize American Manufacturing and Innovation (RAMI) Act in 2014. It was designed to use federal and private matching funds to create an initial network of as many as 15 institutes around the country, pursuing areas of greatest interest to industry.

The resulting National Network for Manufacturing Innovation, renamed Manufacturing USA in 2016, established nine institutes in its first years of operation, with another six planned for 2017. The long-term goal is for as many as 45 public-private partnerships, each with its own technology focus area, but working toward a common goal, to secure America’s technological future through manufacturing innovation, education, and collaboration.

Seen as a major boost for prime and contract manufacturers, the Manufacturing USA network is operated by the inter-agency Advanced Manufacturing National Program Office (AMNPO), headquartered in the National Institute of Standards and Technology at the Department of Commerce. The office is staffed by representatives from federal agencies with manufacturing-related missions, as well as fellows from manufacturing companies and universities, all working with DOD, NASA, the National Science Foundation, and the departments of Energy, Education, and Agriculture.

As it has grown and adjusted to continuing rapid changes in technologies, manufacturing processes, and market demand, but the organization says it has not changed its overarching mission:

  • “to convene and enable industry-led, private-public partnerships focused on manufacturing innovation and engaging U.S. universities; and
  • “to design and implement an integrated whole-of-government advanced manufacturing initiative to facilitate collaboration and information sharing across federal agencies.

“By coordinating federal resources and programs, the AMNPO enhances technology transfer in U.S. manufacturing industries and helps companies overcome technical obstacles to scale up new technologies and products.”

Turpin describes it as the best effort to date to help contract manufacturers, primes, and the military maintain the nation’s technological lead.

Manufacturing goals

“At a macro level, the U.S. does a lot of things extremely well, but one thing it has not done well is have a national manufacturing strategy. Other countries have a very defined national strategy to embrace, enhance, and grow advanced manufacturing in their nations,” Turpin explains.

“The IPC was very active in lobbying Congress to set up the RAMI Act. The advanced manufacturing centers being created throughout the country to focus on building up the next generation of manufacturing in the U.S. should help the military and commercial worlds.”

In a strategic plan for Manufac-turing USA issued in February 2016, Commerce Secretary Penny Pritzker noted that manufacturing “innovation is the lifeblood of our economy, supporting one-third of our economic growth,” from the largest defense and commercial companies to the smallest contract manufacturers and suppliers. “Having a cutting-edge manufacturing sector that remains a step ahead of the global competition is not simply nice to have, it is a ‘must have’ for our country to thrive, now and in the future,” she wrote. “In today’s advanced manufacturing industries – those that make the highest-value goods, pay the highest wages, and export all over the world – product and process innovation are two sides of the same coin. Inventing, designing, making, and improving happen in concert, which requires a collaborative environment that brings together researchers and companies throughout the supply chain.

“America has all the essential ingredients to form innovation ecosystems, including universities and government labs that excel at basic science and technology research, top-flight original equipment manufacturers, capable suppliers, enterprising start-ups, and a new generation of workers,” Pritzker wrote. “The NNMI Program assembles our diverse competitive assets – the people, organizations, and resources – necessary for the United States to stay at the head of the pack in the global race to out-innovate – and out-produce – the competition… [laying] the foundation for American manufacturing competitiveness for generations to come.”

http://www.militaryaerospace.com/search.html?q=Contract+manufacturing%253A+there+when+you+need+it&x=13&y=1

 

 

 

 

 

 

 

 

 

Federal Government Contracts Need to Be Posted Online

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Open Contracting

“THE PROJECT ON GOVERNMENT OVERSIGHT’

“Last Week Senator Claire McCaskill (D-MO) introduced the “Contractor Accountability and Transparency Act of 2017” (S. 651), which POGO and eight other bipartisan groups supported.

The bill will expand the contracting information available on USASpending.gov (which now only offers summaries of contracts), make the contract information more accessible and readable, and help reduce Freedom of Information Act backlogs.

In fiscal year 2016, the federal government spent $472 billion for the acquisition of goods and services. In order to rein in spending and regain public faith in the contracting system, the government must provide public access to information on the contracting process. Posting copies of contracts—rather than summary data that offers little, if any, insights into the goods and services being purchased—is essential to learning about government activities and eliminating waste, fraud, abuse, and substandard performance.

When contract information is publicly accessible, genuine competition will increase, and the government will be better situated to get better deals, especially as budget constraints take hold. Simply stated, the government will be in a much improved position to leverage its robust buying power.

Despite concerns some have voiced about posting contracts, it can be accomplished without compromising national security information or contractors’ proprietary commercial or financial information.

In fact, many states have already adopted a more transparent contracting system without negatively impacting their ability to do business with contractors. According to a recent Project On Government Oversight report, at least 33 states proactively post some contracts online. That means two-thirds of the states are ahead of the federal government when it comes to contract transparency.

For many years, groups and Members of Congress have worked in a bipartisan manner to enhance transparency in the area of federal contract spending. In 2006, Senator Tom Coburn (R-OK), with the support of Senators John McCain (R-AZ), Tom Carper (D-DE), and Barack Obama (D-IL), introduced a bill that brought federal spending out of the Dark Ages—the Federal Funding Accountability and Transparency Act of 2006 (FFATA). That bill was signed into law (see the Notes section) by President George W. Bush, and it provided the foundation for USASpending.org and learning more about federal spending.

In 2008, all four Senators teamed up again to introduce the Strengthening Transparency and Accountability in Federal Spending Act of 2008, which proposed to enhance federal spending transparency. The new bill was intended to expand the scope of information that would become publicly available, including details about the contract bids and the award’s financial terms. Additionally, the bill would have posted searchable copies of “all contracts, subcontracts, purchase orders, task orders, lease agreements and assignments, and delivery orders.”

The 2008 election, pitting Senator Obama against Senator McCain, essentially caused the bill to die in the Senate Committee on Homeland Security and Governmental Affairs. But that wasn’t the last we heard about posting contracts online.

In addition to Senator McCaskill, Senator Jon Tester (D-MT) has also been working on the issue.  He not only cosponsored the McCaskill bill, but since 2010 and most recently on March 14, 2017, has also introduced the Public Online Information Act, which will make information from all three branches of government available on the internet, including contracts.

With annual contract spending bouncing back up to nearly $500 billion, oversight of that spending is crucial. Groups from across the political spectrum support efforts to increase disclosure of federal contracts to improve transparency and accountability in federal spending. Posting contracts online should have happened years ago. We will see if the 115th Congress is serious about transparency and accountability in federal spending. If it is, passing Senator McCaskill’s and Senator Tester’s bills will be a good start.”

http://www.pogo.org/blog/2017/03/contracts-need-to-be-posted-online-mccaskill-sunshine-transparency.html

 

 

Federal Contractors Seek Edge in Specialized Services

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Competive Edge Virtual Elves dot com

Image: “Virtualelves.com”

“NATIONAL DEFENSE MAGAZINE”
“In the cutthroat world of government services contracting, the lowest bid generally wins the project.
That trend has driven a cadre of technically specialized firms to reposition themselves in the market so they can compete less on price and more on the value of particular skills and knowledge. 
 
This shift is especially apparent in sectors like defense, space and intelligence that depend on contractors for highly complex missions. Companies that have the technical expertise are carving out niches where they can dominate and be less vulnerable to price wars. 
 
Lynn Dugle, CEO of government services contractor Engility Inc., said the company has been moving in that direction for the past couple of years, and the plan going forward is to focus more acutely on projects that are awarded based on “best value.”
 
“We are positioning our defense business to be more like our space and intelligence businesses, where we can differentiate the work we do in higher end services and engineering,” Dugle told National Defense. 
 
Dugle is finishing up her first year as CEO of $2.1 billion Engility. The company was spun off nearly five years ago from top defense contractor L-3. In 2015 it acquired the services contractor TASC and doubled its size.
 
Engility initially sought to compete in broader categories of federal support services that are awarded to the lowest bidder in so called “lowest price technically acceptable” contracting. Over the past eight months, only 5 percent of Engility’s bids have been for LPTA contracts, Dugle said. Now almost all the company’s proposals are “best value.”
 
LPTA is widely despised by companies in the defense industry and viewed as a race to the bottom. There is now a growing consensus that LPTA contracting works for nontechnical services like maintaining government facilities or staffing mess halls. Dugle has seen the Defense Department walk back from LPTA for engineering support and other “mission support.” Defense agencies frequently found that companies selected based on LPTA were technically unqualified.
 
“The market has shifted,” Dugle said. “Customers got burned on those higher end contracts with LPTA. Competitors bid really low and then they couldn’t staff the jobs.”
 
Engility is moving to hire specialized talent to shore up its defense expertise. “We are close to naming a senior VP for defense,” she said. “We need a certain percentage of our leadership to have operated and been successful at pursuing big programs, and at best value proposal writing. That’s a different skill than competing on price for smaller projects.”
 
The shift to higher end services appears to paying off. Engility reported an $11 million loss in 2016, but that was an improvement over $235 million of red ink in 2015. The numbers are “encouraging,” said Dugle. “Four contracts we won were over $200 million. That requires getting the right people with the right experience.” Engility has submitted at least 10 bids worth over $100 million that are still in source selection.
 
“We want to be primes in large jobs,” said Dugle. The company’s government work today is 40 percent defense. Dugle predicts that share will increase. “The market itself in DoD continues to get more attractive,” she said. 
 
Like other industry executives, Dugle is bullish but cautious about the anticipated spending boost to defense and veterans programs projected by the Trump administration. Even if the increase materializes, every agency in the federal government including the Defense Department will be squeezed. A new Trump executive order requires agencies to conduct a “thorough examination” of its operations and to recommend “where money can be saved and services improved,” White House Press Secretary Sean Spicer told reporters. That could result in layoffs of government workers but also in cutbacks in the use of contractors.
 
The message for contractors is that “we have to be prepared to respond,” said Dugle. “We do a lot of thinking about scenarios and how we can be prepared. Services is always a challenging business. It’s not a technology play, it’s a people business.”
 
Dugle is especially optimistic about the possible privatization of parts of the Federal Aviation Administration. “We just won the largest contract with the FAA, the largest we’ve ever won, to help them modernize their systems.”
 
Trump’s budget has been widely rejected on Capitol Hill and many specifics remain unknown so Engility, like other defense firms, has been conservative in its future earnings and sales guidance to Wall Street. “It’s premature until we know the program details of the FY18 budget,” she said. “We believe we are more advantaged than disadvantaged in a Trump administration but we did not want to put that in a plan.”
 
The industry also will be watching congressional action led by House Armed Services Committee Chairman Rep. Mac Thornberry, R-Texas. The committee is drafting a procurement reform bill to accompany the 2018 national defense authorization act. On the list of Thornberry’s targets are services contracts. 
 
The 2017 NDAA sets limits to the use of LPTA in defense procurements. Thornberry has pushed Pentagon officials over the years to more precisely articulate the military’s needs for contracted services and how services vendors are selected.
“One of the big challenges is the definition of requirements,” Dugle said. That is partly the reason DoD has had to re-evaluate its use of LPTA contracts, she noted. “If you just write a requirement that you need five people with 10 years of experience with a particular degree, that is when people default to price.” Conversely, the government could make the requirement to accomplish a desired mission, and leave it up to the bidders to decide how to staff the job. “If you are relying on systems engineering, you have to write good requirements.” 

Make GWACS and IDIQ Contracts Part of Your Government Contracting Strategy

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“WASHINGTON TECHNOLOGY”  By Mark Amtower

“Government Wide Acquisition and Indefinite Delivery, Indefinite Quantity Contracts (GWACs and IDIQs)  will continue to grow, with or without you.

If you don’t have a prime spot, look for a partner company that does.

As new programs and projects will be on hold for the foreseeable future, agencies will be turning to contracts that are in place. As has been noted by Bloomberg Government and my research, GWACs and other IDIQs like OASIS have experienced significant growth over the past few years.

SEWP, the NITAAC contracts (CIO-SP3, CIO-SP3 SB, CIO-CS) and Alliant and Alliant SB each had banner years in in fisal 2016, and reports from each contract shop indicate that thus far this year there is continued growth for each vehicle. OASIS is experiencing similar growth.

The apparent downside to this is if you don’t own a prime spot on one of these contracts, you may be out of luck. While those with prime positions certainly have the edge, any company offering products or services that fall within the scope of these contracts has the opportunity to partner with a prime to gain access to these contracts.

The program managers for Alliant, SEWP and NITAAC have all stated publicly that this is a viable option, indeed, an encouraged option, for those not on one of the GWACs or other IDIQs.

There is a big upside for the small contractors already on these contracts. Partnering with other companies allows them to bid on more RFQs that come though the GWAC, thereby reaching a broader audience.

We know that the large contractors have gone after smaller contracts and task orders in recent years and this trend will continue.

To counteract this, small contractors, especially those with prime spots on the GWACs, need to aggressively seek partner companies to go after more of the task orders coming through the GWACs. When smaller contractors are successful in responding to RFQs that go through the small business side of these contracts, the more likely it is that more RFQs will follow. When fewer responses occur, the small business task order pipeline dries up.

To fully leverage GWACs and other easy-to-access (from the government buyer point of view) contracts, you need to create your own advantage, not wait for someone to level the playing field.

We know the proactive outreach on the part of the contract program managers helps grow these contracts. Joanne Woytek of SEWP makes a habit of meeting with all of her contractors. I know Bridget Gauer and her staff at NITAAC and Casey Kelley of the Alliant contract pursue a similar approach.

There are also several things contractors should be doing, including:

  • Proactive contractors on each contract have learned how to leverage these contracts. This includes knowing which agencies prefer which contracts and focusing efforts on growing that business.
  • Contractors that do their homework and develop a deeper understanding of and relationships with targeted agencies win more business from those agencies.
  • Contractors that know when to bring senior executives and other experts to certain meetings will win more business.
  • Contractors that communicate with and leverage the relationship with the GWAC/IDIQ program office always do better than those that don’t develop that relationship.
  • Contractors that develop deeper relationships with OEMs and focus on particular technologies tend to do much better than those who will sell anything to anyone.
  • Contractors partnering with carefully selected companies to respond to RFQs will likely have a higher win rate.”

About the Author

Mark Amtower

Mark Amtower advises government contractors on all facets of business-to-government (B2G) marketing and leveraging LinkedIn. Find Mark on LinkedIn at http://www.linkedin.com/in/markamtower.

 

 

 

 

 

 

 

Innovating Federal Contracting: Be Careful What You Wish For

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“FEDERAL TIMES” By Michael P. Fischetti

“We’re all aware of — and perhaps have participated in — the criticism of today’s model of contracting with the federal government.

However, when  change is forthcoming, criticism and second-guessing is swift in response and often before the results of such innovation are yet known.

Recent examples include lowest price technically acceptable selection strategies, transactional data reporting or other transaction authority. All of these initiatives have resulted in constituencies warning, criticizing or outright objecting to their use for numerous reasons. The mantra “damned if you do; damned if you don’t” comes to mind.

So what’s the contracting officer or program manager to do? Everyone wants innovation in acquisition, but not really? Take risks, but make sure everything works out well? Leadership has your back, as long as [insert favorite oversight authority or trade association here] is supportive. Buy more commercial, but make sure [insert favorite administration, agency, industry priority, or compliance and socioeconomic statutory and regulatory requirements here] is adhered to and included.

Under a new administration, there is a sense of unpredictability. Everything is on the table across multiple government policy areas — acquisition included. Thus, along with optimism that true “reform” could actually occur, there is conversely fear as well that, yes, true “reform” might actually occur! Perhaps the many subsets of today’s government contracting community should be cautious and prudent in criticism of today’s acquisition system, and thus be careful of what they ask for. One is reminded of the line from Charles Dickens’ “A Tale of Two Cities”:

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness … [I]t was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way.”

The credibility of today’s professional pundits and promoters of acquisition change is under threat. What if change really occurs? What if the innovation we all say we want actually happens? While there will always be individual winners and losers in such a scenario, one winner might be empowering those innovative acquisition professionals in government and industry interested in program results; those invested in improving what is acquired versus how it’s acquired. Another winner might be the American taxpayer.

Time will tell. Hang on to your seats and let’s see what happens. ”

NCMA ED

Michael P. Fischetti is the Executive Director of the National Contract Management Association.

 

 

 

 

 

 

 

 

Defense Acquisition Requires Simplicity, Collaboration

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“NATIONAL DEFENSE MAGAZINE’

“The organization and function of the Defense Department is so antiquated that it may well prove unable to deliver the changes that the nation needs.

So, even as it focuses on potentially existential threats to the nation, somebody must address the conversion of the “horse and buggy,” which is the present-day Pentagon, to make it perform like a modern turbocharged vehicle.

The challenges are many, but if there is focus on simplicity the department could be improved while dramatically reducing the problems faced by small contractors. The payoff for even modest improvement could be felt most by the smaller contractors, as they are most at risk under the current system. The focus should be to enlarge and modernize commercial interaction done by the department to make it less adversarial, more collaborative, transparent, accountable and sensitive to business cash flow needs.

There is a remarkable asymmetry between the government and industry with respect to fundamental contractual and administrative execution.

The first problem is one of predictable communication and consistent government performance. As an example, when processing a government contract for a simple procurement action inexplicably takes nine months versus the three months promised, the impact at the company level is complex and potentially devastating. This problem is exacerbated when the contracting entity does not provide any communication regarding revised performance timelines. Delays such as these put small businesses in a no-win position. Many businesses live in a world without adequate cash flow and little to no backlog. So, in this situation, waiting until contract award means that long-long lead production items from the manufacturing base will not be on hand when work should start. Production lines that go dormant do not come back to life easily or quickly. Workers trained and available today can’t be stored on dry ice for the six month delay; they are either laid off or employed elsewhere.

So, for many small firms in this situation, there is no choice but to take risk and begin committing precious resources on an un-awarded contract. This in turn intensifies the dependency of the small contractor on the government who now truly controls their fate.

The government must establish and live with reasonable performance standards and timelines. When it fails to do so, it should pay compensation promptly, just as the contractor is now required to pay “consideration” when he/she fails to meet government performance standards.

When both sides have leverage on the other it will drive improved communication and partnership. Presently the burden is entirely one-sided and gives the department unfair power.

In the current calculus people don’t count — either inside or outside of government. The Defense Department should institute modern relationship metrics to measure how individual teams align to their respective missions.

Major consulting firms with international portfolios such as Gallup and Korn-Ferry assist Fortune 500 firms in executing individual employee surveys measuring internal engagement, leadership and performance annually. The first year results of such a survey done on the department’s corporate structure — to distinguish it from the operational force — would probably stun its leaders. They would be given the opportunity to confront the reality that organizational alignment, leadership, teamwork, sharing and collaboration are all capable of major improvement when compared with global norms for like-sized entities. Gathering these results on an annual basis will afford defense leaders the opportunity to evaluate leadership development programs, workforce business processes, software and a host of other factors directly relevant to improving performance. Probably as important as anything, leaders who cannot accept candid feedback on issues will be forced to confront the reality that they must either embrace the input or leave.

In a parallel initiative, there needs to be lateral entry from business to government service at the mid-tier levels. This would bring an infusion of additional talent to a limited entry profession and augment the experience and knowledge base in the bureaucracy.

In addition to internal feedback, there must be measurement of relationships with contractors. The contracting process has to be made more collaborative and timely. A lot can be learned by comparing the business experience of two recent contracting processes. One was a standard government request for proposals to make a $80,000 piece of utility equipment for delivery over a 10-year period. The other was a commercial RFP for a similarly priced comparable item for multiple-year performance. Both were competitive contract awards with multiple competitors. The differences between the two processes could not have been more obvious. The defense-related RFP was 70 pages; the commercial RFP was 27 pages. The commercial RFP was readable and straightforward; the other was complex and contained endless references to additional government standards. The commercial RFP encouraged innovation by outlining desired characteristics and inviting new approaches, the other set specific standards for performance.

The commercial process encouraged continuous dialogue and explanation of performance priorities while the DoD process was terse and regulated by legalistic formality. The dialogue with the commercial partner enabled the prospective partner to educate its customer on new and evolving technology and materials. The government’s enforced silence did nothing to generate shared understanding. But most importantly, the commercial process timeline from initiating contracting action through prototype production was 10 months whereas the government’s was two years.

In a world where collaboration and speed are essential to success, the antiquated government process is increasingly costly and inefficient.

The process of transforming major enterprises and complex relationships requires courage and persistence. The difficulty of implementing change in an organization as large as the Defense Department should not be the argument for failing to start. It is already one or two decades behind leading-edge commercial businesses and is falling further behind.

Nothing recommended above is new, revolutionary or suspect — it’s just good practice.”

http://www.nationaldefensemagazine.org/archive/2017/March/Pages/DefenseAcquisitionRequiresSimplicityCollaboration.aspx

Managing Risk in Small Business Federal Government Contracting

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The challenges and difficulties for the small business in government contracting are not so much in the areas of barriers as  they are in lack of knowledge (which I concede is a form of barrier but one that can be dealt with)

Large business and government agencies take advantage of the small enterprise lack of knowledge or make poor assumptions regarding what a small business knows about the Federal Acquisition Regulation (FAR) and associated Cost Accounting Standards (CAS). This leads directly to abusive practices.

A prime example of an abusive practice is large corporations signing  teaming agreements during proposal efforts and then not awarding  subcontracts to the small enterprise as agreed, keeping the majority of work for themselves.

Agencies take forever these days to put in place actual prime contracts after source selections and award to a small business. They do not realize that a small enterprise does not have deep pockets and must have cash flow to sustain a new program with new employees.

Funding levels on IDIQ and Omnibus programs are insufficiently committed and the small enterprise is not adequately informed about limitation of funds and  funding exposure.

http://www.smalltofeds.com/2007/09/limitatoin-of-funds-and-funding.html

I have seen enough small  businesses succeed in the government contracting field that I am  convinced that the government needs more active roles in education of  the small enterprise and more trained contacting officers that understand the limitations of a small business.

The most common traumatic situation I encounter is with newly  established businesses who have won their first government contract and  have no CAS compliant job cost accounting system in place to bill it  out. The government has assumed that capability will materialize and  when it does not they audit the bills, find no backup and shut down the  cash flow until the system is fixed. At that point the business can fail. The company should have been educated much earlier in the process about these requirements.

http://www.smalltofeds.com/2012/09/what-small-business-should-know-about.html

The number of poorly performing SETA contractors in roles not suited  to them in contract administration support is increasing in federal  agencies. These firms need to be vetted and better managed for the  omissions and commissions they contribute to the above.

http://www.smalltofeds.com/2012/07/is-small-business-federal-government.html

Not every small enterprise can get  into a class on government contracting at George Washington University,  The Defense Acquisition University or send their personnel to lengthy  and costly seminars conducted by organizations like the National Contract  Management Association. These are  great education sources but do not  come close to filling the complete requirement and they cost time and money.

The contracting officer and his staff as well as larger enterprises need to be upgraded in the skills necessary to guide – not abuse – the small business in federal government contracting.

New FOIA rules Open Contractors to More Risks of Disclosure

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“WASHINGTON TECHNOLOGY”

“The amendments create a “presumption of openness” limiting the federal government’s discretionary power to withhold requested information.

Government contractors and grant recipients must proactively respond when a FOIA request potentially targets confidential and/or proprietary data that has been shared with the government.

Last summer, Congress passed and President Obama signed into law the FOIA Improvement Act of 2016 (Public Law No. 114-185), which adds to and amends the Freedom of Information Act.

Importantly, the 2016 FOIA improvement Act did not change FOIA Exemption 4, which protects from disclosure “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.” Under Exemption 4, the government is prohibited from disclosing trade secrets or other proprietary/confidential information that any submitter has shared with the government.

Unlike with some of the other FOIA exemptions, in their interpretation of Exemption 4, courts have determined that the government lacks any discretion to disclose trade secret or commercial confidential/proprietary information in response to a FOIA request.

The 2016 FOIA Improvement Act was passed to accelerate the FOIA process and to compel government FOIA officials to provide as much information as soon as possible in response to a FOIA request. The act now imposes a penalty (i.e., the waiver of the statutory FOIA fees) on the agency for failing to provide a timely FOIA response. The act also requires that the FOIA response segregate exempt information from releasable information in the same document, as an agency can no longer simply refuse to produce any document containing exempt information.

In addition, the Act requires the agency to produce electronic copies of documents/data, which can be instantly disseminated by the requesting party, rather than paper documents, in response to a FOIA request.

Furthermore, the act requires the creation of a federal government FOIA portal that allows the same FOIA request to be simultaneously submitted to multiple agencies. As a result, submitters must be poised to respond immediately as soon as the government provides notice that a FOIA request seeks disclosure of the submitter’s data and/or documents.

As an initial step, whenever any person or entity first shares information/data with the government that it does not want disclosed to any third party, the title page and each subsequent page of the confidential document or data should be plainly marked as containing “confidential and proprietary information which is exempt from disclosure under FOIA.”

Next, when the agency contacts the submitter (as FOIA requires) to tell them that a request seeks the disclosure of their information, the submitter should promptly respond by identifying:

1) The specific information within each responsive document that is exempt from disclosure.

2) The particular FOIA exemption (there are nine) that prohibits disclosure (as stated above, Exemption 4 protects trade secrets and confidential/proprietary data)

3) Why that exemption applies to each identified section of data/information that the submitter seeks to protect.

Also, the submitter (or submitter’s counsel) should attempt to maintain an open dialogue with the assigned agency FOIA official throughout the FOIA process to promptly address and resolve any disagreements about what should and should not be disclosed before the agency takes a final disclosure position, which is often difficult to unwind.

Finally, the submitter must be ready to assert a “reverse FOIA” action to prevent the disclosure of trade secrets or other confidential/proprietary information in the event that the agency disregards the submitter’s exemption recommendations before the agency releases the submitter’s trade secrets and confidential information in response to a FOIA request.”

https://washingtontechnology.com/articles/2017/02/17/insights-proxmire-foia-advice.aspx