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Federal agencies spent more on products
and services in FY’19 than in any other year in the past five, according to
data sited by the Federal News Network. Multiple award contracts continued to be an
important channel through which that spending was conducted. Bloomberg Government reports that nearly one
in four dollars were spent that way.
While that number is not a statistical increase over previous years, the
number of dollars increased proportionally, indicating that MAC’s are an
important part of nearly any government contractor’s portfolio. This is especially true when selling to the
Department of Defense. The Pentagon
spent $84 billion through MAC’s last year, up from $61 billion in 2016. The two largest spend areas, nearly equal in
size, were IT and professional services. Firm, fixed price and cost-plus contracts
were the most popular. The Government
Accountability Office, however, criticized DOD for not hitting competition
goals. Only a little over half of DOD
acquisitions were competed among multiple companies, according to GAO. That number, however, doesn’t completely
match recent anecdotal evidence from contractors, suggesting that the GAO
definition of “competition” may not truly reflect the amount of pre-RFP or RFQ
competitive analyses nearly every contractor does when deciding whether or not
to bid on a specific project. Contractors
can expect strong business again this summer, though much of it may be
to continue projects already underway.
The gradual re-opening of government agencies, coupled with over
COVID-19 distractions, may not result in numbers as high as last year, but it
could be close. See the story
here for more: https://federalnewsnetwork.com/reporters-notebook-jason-miller/2020/06/federal-procurement-spending-up-120b-since-2015/
The Department of Defense expects contractors to have Cybersecurity
Maturity Model Certification (CMMC) in place for procurements that will happen
in 2020. The standards on how to asses a
company’s status are just being rolled out now, though, and no company has yet
gone through the actual process. More
than one observer has said “what’s the rush?”.
Indeed, while the idea behind CMMC, to ensure the cybersecurity of DOD
contractors, is a good one, the short time frame between when assessments
can actually take place and procurements requiring certification role out
almost guarantees that there will be problems and logjams. “It’s not clear there will be time to iron
out the wrinkles,” said Bill Solms, the general manager and president for
government solutions at QOMPLX in a recent Federal News Network
article. While DOD officials have said
there will be “pathfinders” to test the new assessment protocols, guidance from
the agency on how many companies will qualify has been uneven. DOD is also intentionally limiting the number
of assessment organizations until they get a better handle on how the
accreditation process actually functions.
All of this can leave contractors caught between a compliance rock
and a hard place. While not all
DOD procurements will contain CMMC requirements right off the bat, several
larger projects will. If FedRAMP
cloud accreditation experience is any guide, what projects are covered and the
security level needed to compete will be at least somewhat subjective. DOD
promises that the situation will become clearer once accreditation standards
are announced. That still does not
ensure that accreditation of individual companies will take place in a timely
manner, especially in time to ensure competition on important acquisitions. DOD officials should consider postponing the
implementation of CMMC to avoid a mess that may make navigating the Capital
Beltway look as easy as one of John Denver’s country roads. See the article here for more: https://federalnewsnetwork.com/reporters-notebook-jason-miller/2020/05/cmmc-accreditation-body-close-to-releasing-assessor-training-requirements/
The federal government spent over $35
billion in professional services via MAC vehicles last year according to data
sited in the article above. That number continues to rise as federal
agencies, including the Department of Defense, obligate more and more money on
service acquisitions than on products.
Yet, for all of this increase, much audit activity on these
contracts has been on whistle-blower-initiated cases on traditional topics like
Trade Agreements Act compliance.
One reason for this may be due to the complex nature of service
acquisitions. Where the money
goes, though, the whistleblowers and auditors will follow. It is essential that contractors remember
that the bulk large-dollar False Claims Act cases in this market segment are
driven by whistleblowers. Similarly, it
is important to remember who the whistleblowers are. Almost all are disgruntled former employees
who felt that they were never listened to, or competitors who know so much
about how business in a particular area is done that they can make accurate
conclusions about unethical or illegal behavior. Service contractors should not have any sense
of false security just because most False Claims Act articles focus on TAA,
Schedule pricing, or allegations of healthcare fraud. Plaintiff attorneys
and people whose 401k programs have tanked may well already be preparing
actions. Scrutiny of contract
spending in general is increasing due to concerns over how COVID-19 monies were
spent. The best way to make sure
your company is prepared is to conduct regular self-audits. Not only do these identify potential trouble
areas, they show responsibility. Both
factors can be key in eliminating or containing any problems that are
discovered.
Federal agencies that rely on user fees to
generate part of their income are now faced with the possibility of lay-offs,
just like some private sector companies. Being closed for
business may result in furloughs. The US
Citizen and Immigration Service announced such a possibility last week in a
plea for emergency Congressional funding.
While there is no word from other agencies, like the National Park
Service, that also generate a large portion of their income from user fees, contractors
need to know that this issue can easily become a distraction to federal
customers. People concerned
about furloughs may not be concerned about getting your task order issued right
away. Similarly, as the US eases
its COVID-19 lockdown, federal agencies may gradually re-open, causing concern
and confusion in a workforce that may still harbor fears about being in public
and whether they will have the ability to continue to work at home. While agencies will, for the most part,
follow local guidelines on re-opening, it is noteworthy that the Pentagon is
not. All of this means that your federal
customer may be dealing with a lot more than the transaction of federal
business. The pace of business is
likely to be slowed as workers focus on basic questions like whether they should
report to work and, if so, where that workplace might be. Some of these distractions may unfortunately
last through the end of the fiscal year.
Contractors may not be able to control much of what is happening, but
they can remember the relationship-driven aspect of their work and act
accordingly when working with customers who may have other things on their
minds. Empathy and understanding
may help drive business nearly as much as the latest technology solution.