2015
PSC Annual
Conference Intelligence Report
Compliance and Agility
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2015 annual conference sponsors.................2 Opening Keynote...................................................... 4 James Clapper........................................................................................................
Cybersecurity............................................................6 closing keynote.......................................................8 Deborah Lee James..............................................................................................
Ding, Dong: Auditors Calling...........................10 keynote....................................................................... 12 Tom Linton...............................................................................................................
Lunch Session........................................................... 14 Breakouts.................................................................. 16 workforce management................................... 20
ABOUT PSC PSC is the voice of the government technology and professional services industry. PSC’s nearly 400 member companies represent small, medium, and large businesses that provide federal agencies with services of all kinds, including information technology, engineering, logistics, facilities management, operations and maintenance, consulting, international development, scientific, social, environmental services, and more. Together, the trade association’s members employ hundreds of thousands of Americans in all 50 states.
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Dear Readers: PSC is pleased to present our 2015 Annual Conference Intelligence Report, a comprehensive guide to the keynotes, panels, and discussions held at the Greenbrier from October 4-6, 2015. It was my pleasure to chair the PSC Annual Conference Committee this year and I am proud of the agenda we put together and the crowd of nearly 500 industry and government executives we convened for these important discussions. I would like to thank my fellow industry executives on the committee who worked so hard to make this conference a success. As you will see in the following report, we covered a wide range of topics and program areas—from opening keynote speaker Director of National Intelligence James Clapper’s inside assessment of the intelligence community’s top national and cyber security challenges, to closing keynote speaker Air Force Secretary Deborah Lee James’ assessment of the state of the “aerospace nation,” and the panels in between exploring audits, expansive regulator regimes, new contract management styles, workforce engagement and new technology delivery methods. I hope you will take the time to read our reports from the conference floor, view pictures of the event, and request their presentation slides from our membership team. You may even find some of your social media comments in these pages! I want to thank our sponsors and conference presenters for making this event possible, particularly the sponsors of this report—Microsoft GovCon Alliance, Hewlett Packard Enterprise, and MCR. It is only with their support that we are able to put on such a great event and make real progress toward a productive governmentindustry partnership. You’ll find a list of our sponsors in the following pages and we hope you will join us back at the Greenbrier on April 17-19 for the 2016 PSC Annual Conference. Cheers, Brad King, CEO, Robbins-Gioia Chair, PSC Annual Conference Planning Committee
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Table of contents
2016PSCSponsorships
for details!
Articles by Elise Castelli, PSC Senior Manager, Media Relations and Publications; Jeremy Madson, PSC Senior Manager, Public Policy; and Matthew Taylor, PSC Manager, Public Policy Photos by Ivory Smith, PSC Marketing Associate, and Greenbrier Photography
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2015 annual conference sponsors Diamond Sponsors
TM
Platinum Sponsors
Box represents protected space
Global. Innovative. Trusted.
Gold Sponsors Unisys Corporation Systems Planning and Analysis, Inc. Social & Scientific Systems, Inc. Serka Federal Services, LLC Salient Federal Solutions, Inc. 2
Silver Sponsors Jefferson Consulting Group, LLC Global Dynamic Consulting Arnold & Porter LLP
PSC Annual Golf Tournament Wiley Rein LLP JAMIS Software Corporation Government Service Administrators Capital Edge Consulting
After Hours Celebration BAE Systems
Wine Tasting Phoenix Management, Inc. (PMI)
Networking Happy Hour McGladrey LLP FCE Benefit Administrators, Inc. Eagle Ray, Inc.
Sunday Social CliftonLarsonAllen LLP CALIBRE Systems, Inc. The Boon Group, Inc.
Sporting Clays Broadway Insurance Services
Conference Essentials SponsoRS Thought Leadership Compendium Sabre Systems, Inc. Hewlett Packard Enterprise Alion Science and Technology Corporation Kelley Drye & Warren Greenbrier Access Baker Tilly
Daily Digest Email Honeywell Technology Solutions Inc. Conference Intelligence Report Microsoft GovCon Alliance MCR, LLC Hewlett Packard Enterprise
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Individual Event Sponsors
Mobile App SRA International, Inc.
Food & Beverage Sponsors Sunday Reception & Dinner Venable LLP Monday Networking Breakfast JBS International, Inc. Monday All-Day Break Service SAIC Monday Bottled Water Service Citizens Bank
Monday Reception Sotera Defense Solutions, Inc. Information International Associates, Inc. Berkeley Research Group Avascent Tuesday Networking Breakfast & Break HeiTech Services, Inc. Delta Resources, Inc. Tuesday Bottled Water Service Abt Associates Inc. Chair’s Dinner ICF International
Keynote Sponsors Opening Keynote Attain, LLC
Closing Keynote Accenture Federal Services
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James Clapper, Director of National Intelligence Director of National Intelligence James Clapper discussed budget challenges and the important role that contractors play in supporting the Intelligence Community (IC), during his opening keynote address to the 2015 PSC Annual Conference on October 5. While Clapper expressed relief at having avoided a shutdown, which could have put the United States in a vulnerable security position, “this herky-jerky uncertainty with our budget really wreaks havoc on our major system acquisitions,” he said. “It’s particularly damaging when we have to spend much of the fiscal year on a continuing resolution and there are all sorts of limitations on new starts.” Clapper also discussed the importance of government contractors in the Intelligence Community. “We absolutely should be thinking about core contractors when we do our government workforce planning,” Clapper said. “We absolutely cannot do our IC mission without them, without you.”
“We absolutely cannot meet our mission without contractor support.” James Clapper, Director of National Intelligence. Transformation Systems, Inc.
Regarding #workforce & #millennials - we have to recognize and plan for people to be more mobile, says @ODNIgov. Jeff Rangel
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Opening Keynote
18% of the workforce is contractor and it is declining although we don’t know where or when the bottom will hit.
With technology comprising nearly one-quarter of Eagle Ray Inc. the IC budget and cybersecurity occupying the top slot on the list of national security threats, the IC must look to contractors for cyber, engineering and other STEM skills needed to meet the nation’s complex national security missions, Clapper said. The IC is also migrating to IC ITE, the Intelligence Community IT Enterprise, to integrate networks across all intelligence agencies, which he said will greatly enhance security and sharing by migrating information to the cloud and allowing for continuous monitoring of anomalous behavior. More broadly, continuous evaluation of security clearance holders is also being deployed in place of the five-year recertifications to ensure “we can get help to people who need it, before a personal problem translates into something much worse,” said Clapper. Continuous evaluation will result in “better info sharing, better trust and reciprocity, and better quality of data,” which should allow for greater flexibility for both government and contractors to access the talent needed in the IC.
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Cybersecurity
What EVERY CEO Needs to Know No matter what your role in an organization, cybersecurity is now part of your job, attendees at the 2015 PSC Annual Conference were told on October 6. “It’s a team sport,” said David DeVries, the principal deputy chief information officers for the Defense Department. “The C-suite needs to be more than just aware of cyber issues.” DeVries was joined on the panel by Jeff Castelli, executive vice president for federal at Endgame; Bill Senich, corporate vice president for global cyber solutions at Alion Science and Technology Corporation; and moderator Karen Evans, national director of the U.S. Cyber Challenge. “Not everyone is a cyber expert, but everyone can be educated to a certain level so they know where they fit in,” said Senich. “Training is essential.” Castelli agreed, noting that studies show that 90 percent of cyber intrusions are a result of spear phishing. “That’s a human factor and you can’t patch humans with technology,” he said. Cybersecurity requires a topdown corporate culture that doesn’t treat cyber as merely a compliance issue, but rather manages risk and focuses on proactively protecting the company’s “crown jewels,” he said. In an era of advanced, persistent threats, data encryption and real-time monitoring are key, said Senich.
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“Cybersecurity is an existential threat to all of us,” he said. “The key solution is real-time threat awareness and the goal is to detect and disrupt an attack before damage is done.” These sentiments track with the “Four Commandments of Cybersecurity” Director of National Intelligence James Clapper outlined the day before. Clapper’s commandments are: l “Patch
IT software obsessively.”
l “Segment l “Stay
your data.”
updated on the threat bulletins that DHS and FBI put out.”
l “Teach
folks, not just your clients and your staff, but also your friends and family, what spear phishing looks
like.” Some of the most important steps companies can take to secure a company or individual in accordance with these guidelines can cost less than $15, said Castelli: l Enact l Get
two factor identification for all systems users.
polarizers to shield laptop screens from prying eyes while traveling.
l Block
laptop web cams when not in use.
l Get
a “MiFi,” or personal WiFi hotspot, which, while more than $15, provides greater security than public WiFi hotspots. 7
Deborah Lee James, Secretary of the Air Force Air Force Secretary Deborah Lee James outlined the challenges facing the service—from increased ops tempo to decreased budgets—and her priorities for addressing those challenges, during her closing keynote address to the PSC Annual Conference on October 6. If the United States wants to continue to dominate the air in this “second aerospace century,” it needs to invest in the readiness and modernization of the Air Force. But budget battles in Congress have taken their toll, James said. “We need Congress to pass a full-year authorization and appropriations bill and we need the right amount of money, in the right accounts,” she said. “And we need Washington to stop treating the word ‘compromise’ as if it were a four letter word.” “There is nothing more inefficient than government shutdowns and long-term CRs,” James said. “It is hard to operate a large enterprise when you don’t know how much money you will have and you don’t know when you will know how much money you will have.” This uncertainty has been a challenge. For the last seven years, the Air Force began its fiscal year with a continuing resolution, which hinders programs and readiness and makes it harder to achieve her three top priorities, she said.
Hon Deborah Lee James @PSCSpeaks focused on making every dollar count and looking for efficiency while managing a large enterprise Eagle Ray Inc.
Long term CR worse for @usairforce - $3 B less than sequestration budget. Samantha ONeil
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closing keynote
AF Sec: DoD spent thousands of man hours preparing for possible shutdown; long term CR and shutdown not acceptable Eric Crusius
First: “We need to recruit and retain top-notch people and compensate them fairly.” The Air Force’s downsizing has gone too far and capabilities must be rebuilt to ensure readiness, she said. Second: “We need to balance the readiness needs of today with the modernization needs of tomorrow.” The Air Force needs to be ready to fight today’s threats while simultaneously modernizing to fight future threats across multiple fronts, James said. Third: “We need to make every dollar count and be good stewards of the taxpayer dollar.” In addition to the challenges posed by budget uncertainty, the drawn-out procurement process—which has led even uniquesupplier procurements to stretch to 17 months—denies the service access to the goods and services it needs, when it needs them, James said. DoD, and the Air Force in particular, must focus on “should schedule” and “should close,” as much as “should cost,” she said. Industry has an important role in driving those priorities through collaboration with the government and assistance with requirements development, she said.
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Ding, Dong: Auditors Calling
Can you survive the knock at the door? What do you do when the auditor or IG calls? Panic is not the answer. Instead, have a plan, said two former IGs and an industry expert, during the PSC Annual Conference. Line up counsel, have a single point of contact so you know what information is going to the government, and have your records in order—and complete, said former GSA IG Brian Miller, now managing director for disputes and investigations for Navigant. “Good communications with auditors helps as well,” he said. “Companies can be great companies but, through a series of misunderstandings, auditors can become convinced that there is something there when there isn’t.” Jeremy Wensinger, who has been on the industry side of an audit, agreed—companies need good communications, not just with the auditors, but with the media, Capitol Hill, their employees, their 10
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shareholders and their customers. This will be easier if companies have these relationships established before there is a crisis. There also needs to be a crisis management team in place that fully understands the intricacies of the government contractor industry. “It is too late to start educating after the event happens,” Wensinger said. While the acting IG at DoD, Lynne Halbrooks, now a partner with Holland and Knight, said she found about 90 percent of contractors to be law abiding and compliance oriented, but that communication is important to avoid falling into the 10 percent. “Not every overpayment that can’t be explained is fraud,” she said. “Often, overcharging or overpayments happen because people made a mistake or didn’t understand the rules.” Companies, through thorough inquiries, need to help auditors understand what really happened if they’re seeing fraud indicators, she said.
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Tom Linton, Chief Procurement and Supply Chain Officer, Flex Today “things” are gaining intelligence the way that “things” in the 20th century became electrified, said Tom Linton, chief procurement and supply chain officer for Flex, a design, engineering, manufacturing supply chain insight, and logistics services company. The advent of “machine to machine intelligence,” what Linton calls the “intelligence of things,” will yield unforeseen innovation, he said. By 2020, the intelligence of things will bring 50 billion connected devices to market, creating a $7.1 trillion market. “When you give intelligent people a toolbox of intelligent things, a lot of great stuff can happen and spawn new ideas,” Linton said. “We are starting to see disruption caused by the internet exponentially taking off, not unlike with electricity when we went from Edison inventing the light bulb to the electrification of America.” This “intelligence of things” is also changing the delivery of the things to the world. Real-time data visibility is creating “asset velocity” in terms of delivery. “Studies have been done saying organizations using real-time data visualization achieved 67 percent greater operational cost reductions,” Linton said, highlighting the importance of this revolution not just to the customers but to the companies providing goods and services.
@Flextronics Linton reaffirms that #CSR #Sustainability is an absolute for businesses. Useful info for Gov audience at #PSCConf Jeff Rangel
Heard from Tom Linton @pscspeaks .. if a new product /process doesn’t speed up the production of your product then don’t do it.
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keynote
Eagle Ray Inc.
Corporate social environmental responsibility (CSER) is a must for commercial corps today -Tom Linton, Flextronics Market Connections
Linton calls this access to simple, impactful, realtime information “defragging the supply chain.” Just like old-school defragmentation of the computer hard drive, defragging the supply chain removes the “white spaces” to move faster. As a result of this data interaction, the intelligence of things creates an “ecosystem” for companies to cultivate information, develop that information into a product or solution, identify and leverage technology across industries, and then commercialize it into relevant solutions, he said.
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Lunch Session
The Agenda for the Next President The next administration needs to focus on results, not the process, of government contracting, PSC members concluded during an interactive session discussing a management agenda for the next president of the United States. The two PSC council chairs leading the PSC 45th Presidential Initiative held a lunchtime discussion, complete with online audience polls, to vet a list of recommendations PSC’s five councils developed for the 2016 presidential campaigns. “We have to focus on the goal,” said Anne Altman, general manager for U.S. federal and government industries at IBM, and PSC Technology Council chair. “This is a conversation for all government stakeholders, not just the 1102s.” “Good enough is not enough,” when it comes to the aging federal technology infrastructure, said Altman. “We have to create radical change and tell agencies you have to have a retirement plan for that aging structure.” To help inject the innovation needed to help agencies make the leap from status quo to future thinking, government also needs to retire its burdensome compliance system, said Kymm McCabe, founder and CEO of ValueStorm Growth Partners and PSC’s Acquisition and Business Policy Council chair. She suggested the next president call for a “compliance BRAC” to analyze the compliance burden and develop recommendations to reduce the regulatory burden on companies. 14
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Excessive oversight and compliance is “very expensive and culturally very toxic—it stifles innovation and communication between us and the government,” McCabe said. Connected to this challenge is the lack of knowledge in the federal workforce of commercial markets—how they work, how prices are established, and how they foster innovation, said Altman. Building the government and industry workforces of the future is a key area in need of guidance, according to an audience poll. McCabe agreed. “We have a community with the skill set still set to buying old things,” she noted. “We have to be in a mindset of trying to reskill those folks and change how folks do work in government.” To learn more about the PSC 45th Presidential Initiative and to read the set of recommendations PSC will present to the 2016 presidential campaigns, visit www.pscouncil.org.
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BREAKOUTS
As-a-service is the hottest game in acquisition at the moment. So hot that, according to most proposals, everything is “as-a-service,” even when it is not, said panelists during a breakout session of the PSC Annual Conference. “Most cloud contracts are service contracts with the words ‘cloud’ sprinkled liberally throughout,” said Mark Day, GSA’s deputy assistant commissioner of the Office of Integrated Technology Services. With everything offered “as-a-service,” government customers are struggling to define what it is, why it is valuable and how they can fund it, Day said.
Useful breakouts on #regulatory issues & ‘as-a-service’ #IAAS at @PSCSpeaks #PSCConf. Real opportunity to transform government & industry. Jeff Rangel
The panel—which also featured Peter Smith, the president and CEO of American Systems; Paul Fitzgerald, federal technology service area leader for Deloitte; and moderator Jerry Hogge, deputy group president of Leidos Federal Health’s Health Solutions Group—agreed that government market research and clearly defined requirements are the keys to success.
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Thriving in the as-a-service model: From Performance Contracts to Disruptive Pricing
Smith said government needs to decide before it goes to market whether it needs the system up all of the time (not as-a-service) or just access at the right time (as-a service). The key question is “can you tolerate give and take? If so, that’s where you can look for as-a-service,” he said. “The customer wants an innovative solution but wants to buy it in a uniquely defined way,” and that doesn’t work in an as-a-service environment, Fitzgerald said. Instead of saying “build this for me,” the government should say “this is what I want to consume” and let the company provide the solution. Another key concern for government is the loss of control over the data headed to the cloud. “What do you do when you have something in the cloud and the company goes bankrupt?” asked Day. Smith had a ready answer: “Everyone talks about strategy to get into cloud, but you also need strategy to get out of the cloud, whether it’s to change suppliers, to pull data out, or if you have to transition to new applications.”
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Breakouts Regulatory Changes That Will Rock Your World Government contractors are facing unprecedented challenges to comply with an ever-lengthening list of federal regulations—not merely because of the sheer scope and number of new rules, but also due to the cumulative, and often conflicting, effects of the evolving regulatory regime. This was the key message from a panel of legal and contracting experts assembled for a session on “Five Regulatory Changes that will Rock Your World.” In fact, there are significantly more than five rules changing the landscape for contractors, and the requirements cited by the panel as top concerns are just the tip of the iceberg. Nevertheless, companies that move at a glacial pace to adapt to their environment may find themselves left out in the cold. Helle Weeke, senior vice president and general counsel for DAI, warned of new and different responsibilities and ramifications stemming Experts talk regulatory changes from the host of labor requirements imposed that will rock your world! #PSCConf @ PSCSpeaks on contractors as a result of more than a dozen executive orders issued by President Obama. Aisha These rules are changing the definition of “present responsibility,” and their flow-down, oversight and annual reporting requirements greatly impact companies’ compliance activities. Jim Winner, Aegies Defense Services’ chief legal officer and general counsel, pointed to the cumbersome nature of documentation and notification requirements stemming from regulations combating trafficking in persons, and dueling FAR and DFARS cybersecurity requirements that are effectively forcing all companies into the IT business. PSC’s Executive Vice President and Counsel Alan Chvotkin, who both moderated the panel and provided his perspectives, noted the range of mandatory disclosure rules covering such topics as fraud, (cyber)security breaches and labor policy violations, and the importance of companies understanding when, how, what, and to whom to report. All of the panelists stressed the criticality of continuous communication with customers and company employees to set expectations and ensure compliance. The often disparate nature of individual agency and governmentwide requirements and their flow down to subcontractors further complicate the process. These challenges are compounded by the asymmetry of information and obligations between government and industry, shifting more risk to the private sector. They are also compounded by the growing tendency of agencies to unexpectedly issue interim rules that take immediate effect. The costs for companies to comply are real, both in terms of creating and maintaining the necessary systems and processes, and the consequences of adverse past performance stemming from non-compliance. As always, the companies that are best able to adapt their workforce and business operations—while maintaining focus on customer mission performance—will best be able to navigate the evolving regulatory landscape. For more on the current regulatory environment facing federal contractors and how companies are responding to it, see the October 2015 issue of PSC’s Service Contractor magazine.
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Two government officials attempted to allay industry’s concerns that category management is just a code word for vehicle consolidation and commoditization of the professional services industry, at a breakout session moderated by Casey Coleman, group vice president for civilian agencies at Unisys. Matthew Beebe, the director of acquisition at the Defense Logistics Agency (DLA), and Soraya Correa, the chief procurement officer at the Department of Homeland Security (DHS), emphasized that category management isn’t a new concept, and isn’t something that contractors should be worried about. Yet, contractors are worried. Dyson Richards, executive vice president of RGS, and the final member of the panel, highlighted industry’s concerns about category management, including the perceived Category Management panel begins with move toward the commoditization of services and @DLAMIL’s Matt Bebe & @DHSgov’s Soraya the risk of rate standardization across contracts Correa even when requirements (and other details) are Bradley Saull disparate. He also discussed the work of PSC’s Smart Contracting Working Group, which he leads, in analyzing how category management initiatives are being implemented across government. Beebe and Correa acknowledged that implementing category management for professional services—where requirements are harder to define and there is a lack of common definitions—is more challenging than it is for products. However, both remain confident that it can lead to increased saving and efficiencies. They also emphasized that category management does not mean one big contract, nor one person in charge, nor one price.
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Category Management: Reshaping Your Services Market
Finally, the government speakers emphasized that category management for services is still in its infancy, and they are open to working with industry to ensure that it is implemented carefully and correctly. PSC has been closely engaged with the government on a variety of category management initiatives, from GSA’s “hallway” in its Common Acquisition Platform (CAP) to DoD’s Functional Domain Experts (FDE), and looks forward to continuing engagement as these initiatives, and others, progress.
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WORKFORCE MANAGEMENT Building Employee Engagement Lack of employee identification with their employer is a major problem among government contractors. Employees, particularly those working on-site at a federal agency, are more likely to identify with the mission and customer than they do with their actual employer, making it difficult for companies to retain their best talent, said Anthony Smeraglinolo, president and CEO of Engility Corporation, at the PSC Annual Conference. Smeraglinolo spoke during a panel exploring how companies can attract, retain and engage employees. He was joined on the panel by Michele Bolos, CEO of NT Concepts; Brad Antle, president and CEO of Salient Federal Solutions; and moderator Kathleen Flanagan, president and CEO of Abt Associates and chair of PSC’s Civilian Agencies Council. The biggest factors causing the high turnover in the federal contracting space are government driven. The first is the inappropriate normalization of lowest price technically acceptable procurements for highly complex needs. The second is a shift against awarding contracts to incumbent contract holders. “In an environment where you need to keep costs low, having an employee in the same job for 10 years is not a reality,” Antle said. “The customer won’t pay for it, so we can’t have it.” Antle also said he had customers tell him that they never award contracts to incumbents because they don’t want employees to develop loyalty to the company; they want them to be loyal to the agency. Rules regarding the hiring of displaced employees when a contract turns over ensures agencies retain those employees and retain their loyalty. The resulting turnover is costly because it causes a loss of knowledge and time in training. Yet turnover is encouraged because “we are all going after the same workforce, trying to attract and retain the same people and skills,” Antle said. Key to attracting and retaining employees is catering to the needs of millennials, who are making up a larger segment of the workforce, said Bolos. While Boomers and Xers are baffled by what motivates the children they’ve raised to adulthood—i.e., not money—they’re finding ways to engage with them nonetheless. Millennials want communication and face-to-face interaction, even when they’re not in the employers’ quarters, said Bolos. Collaborative sites, Facetime, Skype and other tools can help with this engagement, she said. In addition, corporate social responsibility programs are highly prized by millennial employees who want the opportunity to make a difference, she said. NT Concepts creates a contest to encourage employees to team with each other to do good works, she said. Salient is also using technology to engage the next generation and keep employees of all generations informed. Newsletters, Twitter, Facebook and other social media keep employees plugged into their company and give them a stake in its success, Antle said.
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