On policy front, procurement and GSA loom large

"This goes beyond charm school, they need to fix what is broken. GSA needs to find a value proposition," says Robert Woods, Topside Consulting LLC.

Rick Steele

For IT executives in Washington, pursuing policy goals takes a combination of offense and defense.

As Congress shifts into high gear for the spring legislative session, contractors and their representatives are promoting policy initiatives, while also fighting a growing tide of protectionism and other moves they believe may restrict competitiveness.

"Our first priority, one of our basic tenets really, is to promote competitiveness," said Olga Grkavac, vice president of trade group Information Technology Association of America.

ITAA's focus is on several major items:

» Immediately renewing the federal research and development tax credit

» Promoting a stabler General Services Administration and federal procurement policy

» Defeating a proposed rule that would restrict prime contractors in passing along subcontracting costs for time-and-materials contracts

» Guarding against growing support for "buy American" protectionism that is, in part, a reaction to the Dubai port security controversy.

IT contractors also are pushing efforts to secure cyberspace and strengthen overall information security as a matter of national security.

The top item on Grkavac's list is renewal of the tax credit, which expired Dec. 31. Without immediate resumption, companies face added costs for their research activities and may fall behind global competitors, she said.

"It needs to be reauthorized, retroactive to January," Grkavac said.

Charm school, plus

A second area of interest for ITAA is procurement reform. For months, federal IT contractors have watched anxiously as GSA has gone through a series of upheavals, including the departure in October of its director, Stephen Perry.

Agencies increasingly have shunned GSA governmentwide contracts, and instead created their own acquisition vehicles, putting GSA's revenue into a tailspin.

If the situation does not stabilize soon, GSA may find itself out of a job ? and that could set thousands of federal contractors adrift, said Robert Woods, president of Topside Consulting LLC, Vienna, Va. Woods retired in 1997 as commissioner of GSA's Federal Technology Service, and is a past chairman of the Industry Advisory Council.

"This goes beyond charm school," Woods said. "They need to fix what is broken. GSA needs to find a value proposition."

Perhaps Congress could re-strict other departments from launching new acquisition vehicles to ensure that GSA receives adequate business, Woods said.
Federal IT contractors have a stake in what happens. They would face higher marketing costs if they have to win awards on multiple-agency acquisition vehicles, rather than solely on GSA's.

"This will take a piece of industry's hide," Woods said of the growing proliferation.
A large part of the problem can be traced to the void left by Perry's departure, said Woods and others. On April 6, President Bush nominated Lurita Doan to that post, but she has yet to be confirmed by the Senate.

Walls are rising

Another item of concern to federal contractors is Congress' interest in buy-American provisions. The protectionism trend has gained attention following the failure of the Dubai Ports World deal. The United Arab Emirates-owned company would have overseen port security in six major U.S. ports. Under pressure from Congress and negative public opinion, the company said it would find an American buyer for that part of the business.

"We are concerned about a fortress mentality," Grkavac said. "The Dubai ports deal has exacerbated it."

Rep. Duncan Hunter (R-Calif.), chairman of the Armed Services Committee and a chief critic of the Dubai deal, introduced H.R. 4881, which would re-quire substantial U.S. citizenship rep-resentation on the boards and among executives of companies that receive contracts for U.S. critical infrastructure protection for national security.

The legislation places limits on foreign ownership and control for such companies, including the citizenship of CEOs, chairmen and board members.

If approved, the restrictions may affect U.S. subsidiaries of foreign companies. Such companies active in the federal market include several on the Top 100 list: BAE Systems Inc. (No. 11), Pearson Government Solutions Inc. (No. 36), Apogen Technologies Inc. (No. 51), Serco Services Inc. (No. 52), CGI-AMS Inc. (No. 53), Thales North America Inc. (No. 56) and Westar Aerospace and Defense Group Inc. (No. 94).

"It's just not realistic to do things like dictate the citizenship of shareholders or people on boards," said Trey Hodgkins, ITAA director of defense programs.

Also on federal contractors to-do list is stopping proposed rules for time-and-materials and labor- hour contracts.

In time-and-materials contracts, services are billed at specified hourly rates that cover wages, overhead, general and administrative expenses, and profit. Prime contractors are allowed to blend rates for companies added to a program after the initial award, in a manner reflecting the prime's risk and overhead. Modifications to the Federal Acquisition Regulation would seek to eliminate such blending of rates.
The goal of the changes is to cut unnecessary costs to the government by reducing the amount of subcontracting overhead that can be passed along. Unintended consequences, according to those opposed to the change, may hurt small federal contractors.

Regarding cybersecurity and IT critical assets, the IT Sector Coordinating Council by September will have drafted a sector-specific plan for protecting the nation's computer networks against a terrorist attack or disaster.

The council, formed by the IT industry in November 2005 after the government released the National Infrastructure Protection Plan, also is considering setting up a national IT disaster response apparatus.

Another IT industry group, the Cyber Security Industry Alliance, has criticized the Bush administration's inaction on cybersecurity and the absence of a top IT official at the Homeland Security Department. Secretary Michael Chertoff in July 2005 said he would appoint an assistant secretary for cybersecurity, but the position is still vacant.

"Without a doubt, the absence of an individual filling this slot almost a year later is not a good-news story for the department and for our level of preparedness in the event of a large-scale cyberevent," Paul Kurtz, director of the alliance. n

Staff Writer Alice Lipowicz can be reached at alipowicz@postnewsweek
tech.com.

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