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Show Them the Money

July 2009
By Maryann Lawlor
E-mail About the Author

Stimulus program transforms acquisition world.

The U.S. economic stimulus package is making waves throughout government and industry. Some experts believe that it represents a sea change in government acquisition in terms of oversight, contractor accountability and transparency, which has been attempted before but never has been fully realized. Companies that wish to benefit from the stimulus package need to move—and move quickly—by positioning themselves as solutions providers and as businesses that are willing to follow the new rules.

The American Recovery and Reinvestment Act (ARRA) of 2009 aims at achieving a number of goals. In addition to stimulating the U.S. economy, the act holds government agencies accountable for their spending in a way that rarely has been seen in the past. As a result, industry will have to adjust some of its practices if it hopes to gain financially—either directly or indirectly—from the ARRA. In some cases, it already may be too late, as the government is moving quickly to release these funds. However, companies still can benefit if they act immediately, do some legwork and adjust their usual operating procedures.

Richard Hopf, vice president, knowledge and practice management, Acquisition Solutions Incorporated, Arlington, Virginia, believes that the ARRA is the first group of government acquisition vehicles created with some thought to greater transparency and a greater focus on accountability—including contractor accountability. In addition, the act challenges government agencies to demonstrate that the solutions they are acquiring will make a difference in the way their organizations operate. The ultimate judge will be the public, which will have the final word about whether or not the money has been spent wisely, he says.

Hopf contends that this represents a fundamental change in government contracting. For example, government agencies are requiring information in their requests for proposals and other solicitation documents that they seldom have asked for before. And, contracts are likely to include requirements tied to outcomes and performance, which is a change from the past. Companies are being asked to report, on a quarterly basis, about the contracts they are working on, the goals of those contracts and the status of the work. These descriptions must be written in layman’s terms so that the general public will be able to understand them, Hopf says. “In a way, the contractor community is part of this great experiment along with the agencies,” he notes.

“At the end of the day, the performance criteria associated with these contracts are going to be highly visible, and they will be subject certainly to a greater level of scrutiny than we’ve ever seen before,” Hopf states. “The oversight associated with that is going to be pretty rigorous, and whether or not both the agency and the contractor can actually produce on the promise of the contract is also going to be subject to a greater degree of scrutiny than ever seen before.”

Most government agencies are exercising more control and conducting more analysis of the products and projects they are funding, he adds. Their goal is to ensure that their purchasing activities are based on sound business reasons and, from a technical standpoint, can be achieved. “We’re not spending money just to spend money. … Yes, scientific research is great, and basic scientific research is absolutely necessary, but we do have objectives as well. It is about solving problems. That’s what we are looking for, and you have to have basic research to support that. But at the end of the day, it’s also for solving problems. We’ve got enough of them, so belly up and help us solve them,” he advises.

Increased scrutiny should involve more than just monitoring contractor performance, Hopf notes. Agency personnel should be “sharpening their pencils” regarding performance outcomes. Although this has been talked about in the past and even attempted with the Government Performance and Results Act of 1993, this sea change in acquisition gives them the opportunity to refine their focus on results in a way that is unprecedented, he says.

This goal cannot be achieved without revising the way government acquisition specialists work with contractors, he adds. “We can’t paint that picture [to the public] without contractually painting a picture for the contractor as to what that outcome has got to look like,” he says.

Hopf points out that while products and services acquired with general budget funds are required to support a mission, those purchased using ARRA monies must do more. They must in some way help the economy in the long term—beyond job creation. For example, the U.S. transportation infrastructure has been in need of repair for at least 25 years. Investing in renovating roads and bridges not only creates jobs but also ensures the routes trucks require to transport goods, which supports economic growth.

In the same way, the information network infrastructure that the United States has grown so dependent on needs attention. “It is not just roads, bridges and railroads. It is that technology base that feeds the economy. We need to worry about these issues. Maybe not everyone is catching that message, but I sure am,” he states.

Experts agree that the pace of this change in acquisition is much faster than ever before, so companies that want to profit from the ARRA already must be working—both internally and externally—to adapt to the new environment. According to Bret Wacker, managing director, public strategies, Airfoil Public Relations Incorporated, Southfield, Michigan, some critical paths to implement the ARRA already have been established. For example, decision makers have been chosen, the standards and policy committees’ members have been appointed, and timelines have been distributed. “It’s an incredibly aggressive schedule,” Wacker states.

In fact, companies that specialize in assisting government policy makers may be behind the curve now. “If somebody wants to play in the policy and standards area, that boat has almost sailed,” he states.

One of the ARRA’s focus areas is modernizing the health care system, and this is one of the arenas in which Wacker’s company specializes. He points out that while traditional defense contractors may not see a role for themselves in health care modernization, they might be wrong. The federal government, including the U.S. Defense Department, is one of the largest consumers of health care information technology, and approximately $20 billion has been designated for it. This money will be spent in many areas such as deploying personal health and electronic medical record systems and offering incentives to physicians to use them.

Because of its lead role in health care, the government most likely is going to be a major player as the driver of standards as well as in the implementation phase, Wacker says. “It’s going to look a little weird if the private sector is being forced to do something and then the veterans hospitals, TRICARE and all those folks don’t drive down the same road,” he notes.

Jennifer Becker, director of research at Airfoil, believes that the time between establishing standards and technology implementation is tumultuous. Companies will need to prepare, yet the first steps they should take have not yet been determined. “It’s not even starting from scratch. It’s almost as if the opportunity isn’t even on people’s radar,” she says. She agrees with Wacker that it is a time of tremendous potential, so the sooner businesses prepare, the more opportunities they will have to benefit from the ARRA, Becker adds.

Wacker says companies can prepare in a number of ways. First, time is of the essence, so they must begin work immediately. “You have got to have a plan and strategy. If you don’t have one, you’d better get one, and you’d better get it quick,” he says.

Part of designing a strategy is determining the company’s goals. While some organizations will focus on acquiring direct funding through the ARRA, others might only seek the information they need to create a strategic plan and still others identify themselves as second- and third-tier beneficiaries of ARRA funding.

“The first part of a strategy is that you need to understand who you are and where you are in the timeline or in the continuum. A lot of people jump to ‘Where can I get the money?’ as if that’s the deal, and that may not be the deal. The deal may be that the money is going to somebody who is going to spend it, and you’re in the downstream of the spend, for example,” Wacker explains.

Companies also must understand where the money related to their place in the market will be disbursed; it may be at a federal agency level, but it also could be paid out by a state or local agency. “It requires a lot of research, a lot of legwork. There’s no one place to go, there’s no teller that you can show up at and say, ‘This is what I do, and this is how much money I want.’ It doesn’t work that way,” he notes.

Once a firm has identified its “place in this battle,” Wacker says the next step is to develop an aggressive strategy to chase the business opportunities. Among the steps that a company should take is to raise its profile, meet directly with agency personnel, tell its story, manage its brand and protect its brand’s reputation, he advises. “They [companies] need to understand this market. They need to understand what people are buying. They need to tailor their message, and they need to tailor their strategy to the buy side and not so much the sell side,” he maintains.

Wacker points out that the multiple layers of the ARRA pose a challenge to companies. Not only do firms have to determine which level of government has the funding but they also must dig deep to uncover some of the nuances of the act. For example, hidden within the health information technology section of the act is a directive for the secretary of Health and Human Services to create a report about open-source software. In addition, the National Telecommunications and Information Administration is receiving $4.7 billion for bandwidth expansion and related technologies.

“The sheer magnitude of the money and the sheer multiple layers of disbursement would demand that you have a plan. I would also add that it is not just the disbursement and the magnitude but also the rapid timing built into the disbursement ... this is not your father’s government,” Wacker says. “So where do you go? There is nothing but hard work that has to take place. There is no answer to that question.”

Hopf also has some advice for businesses. “In a way, the contractor community is part of this great experiment along with the agencies. If I were on the industry side, I’d be very focused on that. I’d be very focused on the fact that the American public is going to be looking over their shoulders to see what they produce. They need to start managing their operations, their contract performance and their internal contract administration with those ends in mind,” he says.

He also advises that companies put in mechanisms now to improve reporting, even though the requirement for reporting has not been fully defined. Companies will need to gather information and focus on how that information is articulated. They must be managers of their own performance dashboard. “They’re going to have to look at their performance in a slightly different way. Their audience for communicating the success of what they do is much broader than it was before. It’s not just a contracting officer,” Hopf notes. Through this focus on performance, firms can create an image of themselves that demonstrates that agencies are getting not only what they purchased but perhaps even more, he adds.

Hopf emphasizes that this type of scrutiny has occurred in the past, but what is occurring now is the next step in the evolution of acquisition. “It ups the stakes. It raises the bar for everyone, and it’s the combination here of the emphasis being placed on making sure that we are picking the right things to finance and ensuring that we define the purpose of the outcomes up front so we’re not spending money on goofy projects. We need to make sure that when we spend that money with the contractor community, we are getting the production that we want and the results that we have defined both in terms of economic impact as well as true mission accomplishment,” he states.

He also stresses that this sharper monitoring must be kept in check so it does not lead to expecting perfection, which is not humanly possible. “If that happens, nobody will take any risks on anything. We will continue to move sideways in the government as opposed to going forward,” Hopf says.

Reiterating that the ARRA is somewhat of an experiment, he adds that the question is whether the next act of this play goes onto a broader stage. That next act would be making this new acquisition environment routine, he proposes.

WEB RESOURCES
American Recovery and Reinvestment Act (ARRA): www.recovery.gov
U.S. Defense Department ARRA: www.defenselink.mil/recovery
Acquisition Solutions Incorporated: www.acquisitionsolutions.com
Airfoil Public Relations Incorporated: www.airfoilpr.com
Market Connections Incorporated: www.marketconnectionsinc.com

Economic Stimulus Poses Opportunities, Challenges

One marketing firm is staying on top of industry’s perception of how the American Recovery and Reinvestment Act (ARRA) will affect their businesses. A survey the company conducted earlier this year revealed that most firms are aware of some of the high-level aspects of the stimulus package. However, there is some disagreement about whether the ARRA increases opportunities or challenges.

Lisa Dezzutti, president and chief executive officer, Market Connections Incorporated, Chantilly, Virginia, explains that the survey asked federal contractors about the opportunities they foresee for the next 12 months. The top four priorities the 228 respondents identified included information sharing, cyber security, health care information technology and systems modernization. This aligns closely with the main focus of the ARRA.

A number of the company’s clients are gearing up in several ways to take advantage of the opportunities. The most successful firms are keeping the lines of communication open with their clients and not only asking but also listening to the details about new requirements and initiatives, Dezzutti notes. These companies are then developing solutions based on their customers’ priorities.

“When you are working with agencies—and not all contractors do it—there can be a ‘show-up-and-throw-up’ mentality. They walk in with a solution before they have even talked to the agency about what problems it is facing,” Dezzutti explains. This is not the way to garner business in this new environment, she states.

In addition, several firms are hiring more personnel and gearing up specifically to take advantage of stimulus package opportunities. They understand that the ARRA calls for increased transparency and features new requirements. These additional requirements are likely to be identified as the act continues to affect acquisition processes, she says.

When asked what they are doing to position themselves for success, the top three responses indicate that industry understands that government acquisition will not be business as usual. Building and maintaining client relationships and staying focused on their needs and requirements ranked number one. Remaining flexible and agile to adapt to changing requirements came in at number two, and being willing to diversify and expand offerings wherever possible ranked number three.

Much discussion has taken place about whether the U.S. Defense Department budget will grow or shrink over the coming months. Survey respondents also offered differing opinions about this topic. Companies with low win rates were more likely to say that more defense contracting opportunities are on the horizon. “Perhaps they are seeing more of a level playing field with the changes that are coming,” Dezzutti offers.

In terms of obstacles and opportunities, 40 percent of the respondents indicated that they believed there will be more obstacles, while 46 percent expect more opportunities in the future. Interestingly, respondents from companies with lower win rates were more likely to anticipate opportunities, while firms with higher win rates were more likely to expect obstacles. It is not that successful companies do not believe opportunities will increase, Dezzutti says; it is more likely that they are aware of some of the obstacles they will face in the future, including a slowing of sole-source contracts.

Dezzutti recommends that small companies, particularly if they are new to the government market, look at partnerships and subcontracting to be able to benefit from the ARRA opportunities. Otherwise, small firms may be overwhelmed because they are unsure about where to go and do not know how to get their foot in the door at agencies. “Subcontracting for smaller organizations is a huge opportunity area and will continue to be an opportunity area for them going forward,” she says.

Despite reports about the downturn in the job market, survey respondents identified attracting and retaining employees as one of the major challenges during the next 12 months. The problem appears to be finding candidates with the right qualifications and security clearances to meet the needs of government contracts, Dezzutti notes.