Soloway's 5 questions shaping the federal market

Stan Soloway might talk about the government market like it’s the snapshot of chaos, but he sees enough order in it to outline the five questions that will shape the market going forward.

At Grant Thornton’s annual contractor survey event Thursday morning, Soloway, president of the Professional Services Council, talked about the five questions that will shape the market in the coming 18 to 36 months:

1. How does a company drive value in a market that doesn’t recognize its importance?

Everything is coming out lowest price, technically acceptable, Soloway said, and while the government leaders are beginning to understand the impact of this kind of procurement, “they’re not ready yet to take any sort of aggressive, focused action,” he said.

“In our industry, it’s not always about driving price down; it’s about driving performance up, and they don’t always go together,” he added.

Companies are also challenged to differentiate themselves in today's market because thinks all contractors look alike. They are seen as "vanilla."

2. Will profitability drop to dangerous levels?

Profitability matters because of how much it has dropped. “We’re not talking about excessive profits dropping to reasonable profits; we’re talking about reasonable profits dropping to unreasonable,” Soloway said.

3. Can companies continue to access, invest in and retain the talent needed to perform at high levels?

There have been a number of cases related to re-competes where the workforce requirements have been dumbed down from what they were on the original contract, Soloway said.

What happens then is that the incumbent's workforce is automatically over-graded, the company bids because the government wants them to bid, and then there’s the question of “what does it mean for the technical outcomes on the other side,” he said.

4. How regressive will the compliance regime become?

Compliance requirements continue to grow and add costs to company operations, he said.

5. Will the government ever get its small business policies right?

“What we’re seeing too often is an emerging industrial policy, where, in order to meet the political objective of saying we hit our percentages, agencies are increasingly segregating entire functional areas for small business,” Soloway said.

This has two impacts: the first is that it discourages small business outside of that functional area, and the second is that, for the companies that are included in that area, they will grow to the point where, “a year or two later, they’re going to have nowhere to go, and for mid-tier or other firms who are in that space, they’re out of the market."

It makes no sense, Soloway said, and makes it harder to maintain a balanced industrial base.

The current policies have good intentions of supporting small businesses but the "wrong outputs and unintended consequences,” he said.