Stan Soloway

OPINION

It's called human capital for a reason

It is often said, correctly, that the professional services industry is a “people” industry. After all, professional services firms, at all levels, are people-based. People are their lifeblood, their core, their greatest asset. They are the “capital” the companies rely on to deliver for their customers.

And while such a statement is more than obvious, recent events suggest it is being increasingly forgotten by the government in some of its acquisition practices. Those practices tend to ignore the investments companies make in their people, assume people are commodities to be moved around like chess pieces, and/or ignore generally accepted personnel practices altogether.

This is not an entirely new issue. The overuse of lowest price technically acceptable contract awards is one manifestation of the dynamic about which there has been much discussion. So too are concerns that have arisen around how the government is implementing its strategic sourcing initiative, how the new “category management” initiative at GSA will play out, and more. But in this case, I am talking less about broad policy initiatives and more about disturbing examples of “human capital abuse” that we’re seeing in specific agencies and on specific procurements.

While I will not identify the agencies, consider these actual examples:

One agency has a multiple award contract through which it accesses highly specialized personnel. It then requires all awardees to put all of their personnel into a common, open “pool,” from which the winning companies then have to bid for specific people to put on specific task orders, including those that are, or were, their own employees.

That’s right. It’s as if the Nationals were playing the Orioles in the World Series, but Major League Baseball required that both teams then put all of their players into a common “free agent” pool, bid for specific individuals, and then play the series.

What’s entirely missing from the equation, of course, is that the competition for talent, and the quality of talent offered by each bidder, was the primary competitive factor in the contract award. The talent the companies brought to the contract is their primary asset. Who is the government to then demand that they free up their people for competitors?

 The companies involved went along with the competition thinking that the “pooling” would not be a big deal. They were wrong. But so too, from the get go, was the agency, which through its actions demonstrated an abject lack of appreciation for the marketplace.

In another example, a mid-tier company learned that their customer was not going to exercise their option on a multiple-award contract and was, instead, shifting the work to a different, single award, small business contract (itself worth a discussion).

But what happened next was even worse.

The contracting officer began contacting each of the company’s employees, many of whom are very highly compensated, PhD-level specialists, requesting their resumes so they could be transferred to the employ of the intended new contract holder.

 While many of the employees might well opt, on their own, to make such a move, how does government justify directly interfering in a company’s internal personnel matters? That’s entirely inappropriate. It is up to the incumbent company and the incoming contractor to compete for talent.

That’s a tough enough battle without the government stepping in where it has no right or place.

We saw this dynamic play out routinely during the Defense Department’ss insourcing activities a few years ago. At the time we suggested to the department, and to Congress, that there ought to be a two-way prohibition on such direct employee solicitation similar to those that are the norm in the commercial sector.

 Our proposal also included a prohibition on companies soliciting a government component’s employees to work on a contract for which the company was bidding at that same component. Some DoD officials scoffed at the idea and denied it was the norm in the private sector—which was quite a surprise to just about every company I know. Others just didn’t see it as a serious enough problem.

But as the examples above, and others like them, demonstrate, there is a clear and growing trend in government to assume, and treat, professional services company employees as a commoditized product, rather than as the critical asset they are.

 This demeans the people, inhibits companies from being able to invest in excellence, and ultimately will further distance the government from the best and the brightest.

After all, it’s called human capital for a reason.

About the Author

Stan Soloway is a former deputy undersecretary of Defense and former president and chief executive officer of the Professional Services Council. He is now the CEO of Celero Strategies.

Reader Comments

Mon, Sep 22, 2014 Gore Puriminova

If big companies are 2/3 or more, how you say, "butts in seats," why not let the government order them around from contractor to contractor? They are just like widgets and the companies did little to find or place or nurture them. And, believe you me, the employees feel that way, w no particular attachment or loyalty to their "employer." In some ways, the government provides the "parenting" that the contractors never applied. So it goes with commodities. Companies should be happy they get any revenue from the rentals involved. One could guess that the Porfessional Services Council membership gains at least half its revenue from some rentals, no?

Sun, Sep 21, 2014

Thank you for sharing this travesty. I cannot discern if this activity and more is based upon ignorance of how the industry's staffing function actually works or arrogance. And the government wonders why some people hold its employees in such low regard....

Fri, Sep 19, 2014 Large SI VP Nova

In the old days the government was fearfull of personal services; today there seems to be no concern for this practice. I see a class action suit forming where body shop employees group together and basically claim that they deserve gov benefits as they took day to day direction and we're hired by gov employees even though their pay check listed a non gov name. I blame a weak body of COs and CIOs who look to change jobs every few years looking for their next assignment rather than making an agency really provide a good return on their service. Finally why do government agencies refresh their IT infrastructure every three years while employees are faced with zero escalation and no raises. Forego the unnecessary tech refresh and treat the employees who save the gov. Butts in a decent manner. Industry adoption of technology lags government because industry must demonstrate a ROI.

Thu, Sep 18, 2014 David Claiborne Vienna, VA

What a disgrace. Besides displaying no regard for the companies who spent time, energy and money securing top talent, the government shows a complete lack of respect for the individual consultant thinking that they can simply move them from employer to employer like cattle in a pen. Industry has to stand up to this and other examples of government intrusion.

Wed, Sep 17, 2014

Some excellent points in this column. However, the very fact of the burgeoning "butts-in-seats" business showcases the essence of commodity. No investment, easy recruiting, no project mgt,, no quality control of product--it's the favorite business of many companies and has turned a bunch from consultants to contractors. Pure body renting. Agree strongly that the govt should be prevented from poaching or re-assigning contractors from one company to another. Am afraid the "blended" workforce concept ensures that all of the human capital will be homogenized to a lower, and lower, quality commodity mix. Even a dozen years ago the labor markets of government svcs contractors and the civil service were largely different for quite a few successful companies. Now, the labor markets are mostly converged and overlapped, and prices are dropping. Revune is dropping, and profitability is a shadow of what it used to be. It is sad and it is harmful to some (not all) government functions. Look at the quality of DoD civs and contractors (one work force). And look at their accomplishments, e.g., lack of improvement in systems acquisition and evident sloth in a lot of supply and log functions. That's enough evidence of commoditization and devalued human capital. And you can't stick this one on the govt alone. The companies converted to this business model because it was ever so easy. Butts-in-seats is a set-it-and-forget-it biz--except when the contractor staff have issues.

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