ANALYSIS

Beyond the budget: 9 issues you should care about

The government shutdown and battles over the budget have grabbed the bulk of our attention in recent but even if Congress and the White House were to suddenly find a solution and pass appropriations bills for the rest of fiscal 2014, there are a plethora of other issues are demanding attention.

Whether it is cybersecurity or low price contracting or the slow adoption of cloud computing, government contractors have plenty on their plates.

Here is our cheat sheet of nine issues you should pay attention to.

Cybersecurity Executive Order

President Barack Obama’s Cybersecurity Executive Order was released in February and has been going through the lengthy process of changing standards. The National Institute of Science and Technology has been developing a framework through multiple meetings and brainstorming with industry, public-sector officials and academia.

February is the deadline for the standards.

While not setting hard requirements, the framework is more advisory, like a way to be in good standing in terms of cybersecurity. Companies are waiting for the compliance guidelines so they can conform to potential agency demands, said Mike Hettinger, vice president for the Public Sector Innovation Group at the Software and Information Industry Association.

FedRAMP

Cloud service providers are standing in lines longer than some department of motor vehicles. They need the seal of approval of the Federal Risk and Authorization Management Program to certify them as secure cloud providers. However, the process is moving slowly. Less than 20 companies have been certified.

FedRAMP is a governmentwide program to standardize security assessments, authorization and continuous monitoring for cloud products and services. The FedRAMP approvals are mandatory starting in 2014.

However, some agencies are moving ahead with the certification requirement in their solicitations, Hettinger said. Those requests for proposals leave many cloud service providers missing out of potentially golden opportunities.

To get the approval, companies must invest a lot of money to upgrade their security systems to match FedRAMP requirements. The expense will cost money with no guarantee of recouping the investment.

“You’re making a bet here, betting that two years from now you’re going to be one of the winners,” said Doug Bourgeois, vice president at VMware, a virtualization software company.

International Relationships

The National Security Administration’s peeking at private information on the Internet has led other nations to separate from U.S. cloud providers. Brazil may implement rules about hosting clouds of its information within the purview of the NSA.

Before the Edward Snowden controversy, users didn’t consider where the data flowed as long as the data was available when needed. The world has changed now.

International contractors have questions about investments to continue outside of the United States. Now providers must consider how they should shift their operations, even building host sites and data centers overseas.

The impacts on international work could stretch beyond Brazil to Germany specifically, and possibly the European Union. The capital investments that comply with countries’ potential laws or policies are expensive.

“They’re not playing around here,” Hettinger said of the countries.

Lowest Price Technically Acceptable

Companies fear low-ballers. Price-conscious contracting officers are more often awarding contracts to companies that underbid their competitors. Acquisition officers are using more lowest price contract as they feel the pressure from senior agency and Obama administration officials to save money.

“Price is given the most weight,” said Robert Burton, a partner at the Venable law firm and former deputy administrator of the Office of Federal Procurement Policy. Moreover, “contracting officers are somewhat protected from challenges” by choosing the lowest price. The Government Accountability Office rarely overturns such a decision. Cost is an objective consideration versus other subjective values.

More frequently long-time incumbent contractors are losing to the lowest bidder, despite proposing realistic prices based on their experience with what the agency wants and needs, Burton said.

Down the road, the result will be poorer quality work and less innovation from the contractor.

“LPTA is the real problem for the best, high-performing companies,” said Stan Soloway, president and CEO of the Professional Services Council, an industry trade group. They must to do the same work with fewer dollars coming in when their contract comes up for a recompete.

Peter Tuttle, vice president at Distributed Solutions, Inc., a small software company, said the agencies use of LPTA could kill competition.

Hiring Decisions

When agencies opt for the lowest proposed bid, their decisions limit a company’s profit margin. That hit, in turn, hinders the ability of companies to attract the high quality of employees, because the commercial markets will offer higher salaries than the government market.

Soloway said union and watchdog groups and federal officials compare government contractor salaries to what federal employees are paid. Yet, the contractor companies work in a hybrid commercial-governmental environment. Companies are wrestling with Wall Street and Silicon Valley for talented employees. And government contractors are hindered by limits on pay.

Squelched Innovation

The government wants more commodity IT purchases to save money. The administration is pushing for bulk buying as it expands its Federal Strategic Sourcing Initiative. In addition, the House’s Federal Information Technology Acquisition Reform Act’s commodity IT centers of excellence could lead agencies away from innovative products.

“Commodity IT can make the hair on the back of your neck stand up,” Binko said. “Commodity IT rarely invites innovation. It’s left at the front door.”

New ideas and processes can take agencies’ operations to new levels, he said, but narrow thinking can squelch those ideas.

Cloud Brokerage

Agencies have an interest in being the brokers of cloud services to their constituencies. The idea has no specific policies regarding the approach, Bourgeois said. But an agency broker could take away business from cloud providers.

The Energy Department’s National Nuclear Security Administration is its own cloud broker. The state of Texas has a pilot program. The General Services Administration is exploring the idea and has asked industry for its advice.

The lack of a policy leaves an open range of issues, including the question of whether cloud hosting is an inherently governmental function or a closely associated function. If deemed inherently governmental function only a federal employee handle the work.

“It kind of looks like the Wild West,” Bourgeois said.

Consolidated Contracts

Gloria Larkin, vice chairwoman of the Educational Foundation of the Women Impacting Public Policy organization, told a House small business subcommittee in October that small firms can invest more than $30,000 in addition to billable hours to just to write a proposal for a consolidated contract. If they win a spot on the contract, it’s only a “hunting license.”

“When a small business is successful and actually wins a bundled contract, it is often only a first step. No money is actually paid,” said Larkin, who is also president of TargetGov at Marketing Outsource Associates Inc. In all, “the costs involved in pursuing a consolidated contract are astronomical.”

Tense Relationships

The relationship between contractors and customer agencies is becoming colder. Both sides are keeping their distance to avoid even an appearance of a slipup. Thoughtfulness and camaraderie are pushed the side.

Agencies want contractors to remain at arm’s length. Companies too are doing their part by keeping silent to avoid the risk of an agency canceling a contract or opting not to extend the option years. It shows the tense relationships.

Northrop Grumman declined to participate in this article because a spokesman said the company does not “publicly talk about government contracting issues as we would not want our comments to be taken out of context or misconstrued.”

Other large firms opted not to comment on their policy concerns as well.

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