PSC's Service Contractor Magazine - June 2015 by Professional Services Council

June 2015 / The Voice of the Government Services Industry

The Ripple Effect

Market Shifts that Matter 6

Sounding board: adjusting to market shifts

ALso inside:

SharED services special report

Highlights from the 2015 Cio and ciso survey

WHY the mid-Tier matters

June 2015 T h e Vo i ce o f t h e G ove r n m e n t S e r v i ce s I n d u st r y

10 the NSSC...It’s not rocket science...It’s everything else

Sharing Services:

Steps to Building a Stronger Marketplace

Cover photo: shutterstock.com/Christopher Ewing

4 President’s Letter 6 Sounding Board 19 Bill Tracker 31 Policy Spotlight

32 Council Corner 33 Member News 34 PSC Scene & Heard

highlights from thE 2015 psc/grant thornton federal cio and ciso survey

27 the mid-size squeeze

Service Contractor

is a publication of the Professional Services Council 4401 Wilson Blvd., Suite 1110 Arlington, VA 22203 Phone: 703-875-8059 Fax: 703-875-8922 Web: www.pscouncil.org All Rights Reserved For advertising or to submit articles or items for the Member News section, contact: Elise Castelli

P S C S ta f f

Stan Z. Soloway President & CEO soloway@pscouncil.org Alan Chvotkin Executive Vice President & Counsel chvotkin@pscouncil.org Donald Baumgart Manager, Vision Forecast baumgart@pscouncil.org

Matt Busby Director, Membership busby@pscouncil.org Joe Carden Vice President, Marketing & Membership carden@pscouncil.org Elise Castelli Senior Manager, Media Relations & Publications castelli@pscouncil.org Charlene Dowdy Membership Associate dowdy@pscouncil.org

Professional Services Council

Paul Foldi Vice President, International Development foldi@pscouncil.org Karen L. Holmes Office Manager/ Receptionist holmes@pscouncil.org Ryan Jennings Executive Assistant jennings@pscouncil.org Michelle Jobse Director, Vision Forecast jobse@pscouncil.org

Roger Jordan Vice President, Government Relations jordan@pscouncil.org Jeremy Madson Senior Manager, Public Policy madson@pscouncil.org Melissa R. Phillips Vice President, Events & Operations phillips@pscouncil.org

Robert Piening Vice President, Finance piening@pscouncil.org Jerome Punderson Senior Vice President, Defense & Intelligence punderson@pscouncil.org Ivory Smith Marketing Associate smith@pscouncil.org Jean Tarascio Senior Manager, Events tarascio@pscouncil.org

Matthew Taylor Manager, Public Policy taylor@pscouncil.org Dave Wennergren Senior Vice President, Technology Policy wennergren@pscouncil.org Erin Whittaker Senior Manager, Events whittaker@pscouncil.org

Service Contractor / June 2015 / 3

PRESIDENT ’S LETTER

s the year hits the halfway point, at PSC we are in the final stages of a restructuring, to include the full integration of the TechAmerica offerings we inherited as a result of the acquisition in February. At their heart, our internal efforts are all designed to greatly enhance our ability to deliver value to our members in a changing and challenging marketplace. We will be announcing and implementing the results of those efforts soon. From a marketplace perspective, we’ve talked about some of those changes before, often more than once: the convergence of products and services into an “as a service” world; the impacts of budget pressures and low price buying by the government; new human capital challenges; and much more. In this issue of Service Contractor, we explore some of them through different lenses. One recurring theme in the pantheon of change is shared services. The concept has been around for a while and has experienced several fits and starts. Is this a time when shared services becomes a more significant component of the federal government’s business models? In this issue, we’re pleased to offer a couple of perspectives on shared services, one from Austin Price of the Partnership for Public Service, and the other from Mark Glorioso, who runs NASA’s shared services center. A shared services strategy has many implications for the government and the marketplace. That’s why PSC has taken a significant role in the Shared Services Legislative Coalition, which is working to promote possible congressional action on the topic. Our and the coalition’s objective is to ensure that whatever Congress does is done right. We were also curious as to what some of our member company CEOs think have been the most impactful changes in the marketplace over the last year or two. To that end, we are most appreciative for the perspectives of PSC Board members Greg Baroni (Attain), Carey Smith (Honeywell), and Bill Parker (Salient Federal Solutions) in this issue’s Sounding Board. On a separate but connected topic, longtime

4 / Service Contractor / June 2015

PSC board member Gail Bassin (JBS International) shares her thoughts on the value of mid-tier companies and thus, why we should all be concerned about the balance of the industrial base. And then there is the perspective of our colleagues in government. This month we will release the 2015 CIO Survey, conducted in partnership as always with PSC member company Grant Thornton. What did we learn from it? What changes or challenges are federal CIOs facing today or worried about for tomorrow? George DelPrete of Grant Thornton and Dave Wennergren of PSC tell us in an executive summary of the survey results. One theme, and area of potentially important change that you will undoubtedly hear more about from us in the months ahead, is what I have been referring to as the “quiet war” on commerciality. From proposed statutory changes to the definition of commercial items and services, to other policy changes and court cases, we are seeing more and more pressure put on the government’s ability (and, in some cases, willingness) to use and capitalize on commercial buying authorities. PSC’s Executive Vice President & Counsel Alan Chvotkin explores the implications of two such recent developments: the new GSA transaction reporting rule and proposed class deviation from GSA regarding commercial supplier agreements. As always, this issue of the magazine also includes a close look at the work of our internal councils, a legislative report and much more. And as always it is our hope that the content is informative and contributes in a meaningful way to both your perspectives on the marketplace and the broader, very important dialogue about it. Thanks for your support of PSC.

Stan Soloway President & CEO

Professional Services Council

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SOUNDING BOARD: In each issue, PSC asks members of our board of directors

to offer their perspectives on key challenges facing the government services industry.

Adjusting to

Market Shifts As you look out across the market landscape, what is the biggest change you have seen over the last 12-24 months and how have you been forced to adjust to it?

Greg Baroni

Chairman and CEO, Attain LLC

s we all know, the procurement landscape is in constant flux with various policy changes and initiatives. However, the recent past has been relatively free of new, major sea changes that have significantly affected the federal contracting market generally or Attain, in particular. The constant themes of changing regulation and oversight, budgetary uncertainties and constraints, heightened competition, and the war for talent have all become norms for our market. There may be ebbs and flows of each, but collectively they are a constant—always influencing the way we operate and inherently affecting our decision making. What I believe the recent past has deemed as critical as, or even more critical than, unpredictable market conditions are factors such as the pace of innovation as it continues to increase, the evolution of “fast-moving streams” (emerging and growing markets), and the next revolutionary wave of technology. Each of these factors should play an integral role in influencing the refinement of strategies—whether deepening capabilities, forging new partnerships, or developing go-to-market strategies—so we are ready to act, evolve, and achieve success both for our firms continued on page 14

R Carey Smith

President, Defense & Space, Honeywell Aerospace

ight now your credentials, personal identification and financial information could be stolen. Right now a hacker could be trying to access the power grid. Right now a nation state could be accessing a government facility and stealing classified information. These are just some examples of the critical threat posed by cyber exploitations, a rapidly evolving field with seismic changes just in the past few years. Cyber attacks began as early as 1988 with the Morris worm exploiting weaknesses in the Unix system. Since that time and with the rapid adoption of the Internet over the past few decades, the need for cybersecurity has dramatically increased. Today cyber exploitations are rampant and have impacted nearly every person, company and government agency worldwide. It is estimated that these attacks cost $400 billion per year, according to Quartz. Looking to the future, the cybersecurity challenge must be addressed holistically and as both a technical and business imperative. The cyber threat is complex, increasingly sophisticontinued on page 16

William Parker

Chief Operating Officer, Salient Federal Solutions

continued on page 18 6 / Service Contractor / June 2015

Professional Services Council

photo: shutterstock.com/Sashkin

he professional services community has experienced a substantial shift in the market in recent years as the government increased its use of “lowest price technically acceptable” (LPTA) processes for government procurements. It is the right of the government to fairly define a market and it is our right to choose to participate or not. But this expanded use of LPTA has been highly disruptive to the market and the government’s access to solutions. Patriots must speak up when LPTA is unwisely used, putting missions at risk, in an attempt to procure complex and risky requirements. Fortunately, we have a remedy in the procurement process—we must protest when we understand fully the problem, before submitting a proposal. We all agree that there are totally appropriate uses for the LPTA process. In the past, LPTA was used only when buying commodities. Recently, its application has been expanded significantly to include services when there is a low risk of failure and specifications and performance expectations are clear and effectively communicated, and where rigorous values and metrics for acceptability of services are well defined. After some significant mistakes as the LPTA process be-

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Service Contractor / June 2015 / 7

S HARI NG C E E V S R I S:

by Austin Price, Partnership for Public Service

Steps for building a Stronger Marketplace 8 / Service Contractor / June 2015

Professional Services Council

he head of Veterans Affairs, Secretary Robert McDonald, recently selected a point person on shared services to look for ways to change how support functions are delivered, with the aim to “improve efficiency, reduce costs and increase productivity across VA.” VA is one of numerous federal agencies seeking to implement programs and policies and carry out their mission more efficiently by fixing how support functions are delivered. In particular, agencies have faced challenges in the areas of acquisition, financial management, human resources and information technology. To address the issue, the Obama administration in 2014 made shared services one of its cross-agency priority goals. Leaders at agencies such as the Department of Commerce and the Department of Housing and Urban Development are considering such an approach as a way to improve results and redeploy resources to the core mission. Yet, despite previous federal efforts and demonstrated success in the private and public sectors, progress on federal shared services has been slow, and successful migrations of cabinet-level agencies’ functions to shared services are few and far between. Recognizing this challenge, the Partnership for Public Service established the Shared Services Roundtable, a community of industry and federal stakeholders dedicated to improving the state of shared services in government. Over the past 18 months, the roundtable has convened provider and customer agencies, managing partners of federal lines of business, and governmentwide policy offices. Members concluded that the federal government does not have the governance, funding mechanisms or market infrastructure to deliver on the promise of shared services, an approach they believe could create more effective and efficient government operations. The lack of a centralized, transparent and competitive shared services marketplace impedes the ability of federal agencies to assess providers based on past performance, drive competitive pricing and ensure compatibility with current systems. The roundtable’s recently released report, Building the Shared Services Marketplace: Recommendations from the Shared Services Roundtable, outlines recommendations to move from the current state to a point where federal shared services are provided in an open, dynamic, and well-governed marketplace that relies on innovation, economies of scale, competition and choice by well-informed buyers. The report has four major recommendations:

Collage/illustration: Studio25

one:

A governance structure should be created to guide strategy and management of federal shared services. A governance framework that sustains growth and mitigates risk is the cornerstone of a strong federal shared

services marketplace. As the breadth, complexity and demand for shared services grows, there is a need for a standard approach and governing agency to manage shared services across federal agencies and lines of business.

two:

An effective market infrastructure should be set up using innovative service-acquisition models. A sustainable market that maximizes the benefit to federal agencies would: keep costs relatively low, both for longterm operations and when switching providers; match customer agencies with the best solution; help agencies innovate and adopt new technologies and processes; offer cost and quality transparency; and decrease risk to providers as well as customers. This could be achieved through several changes, including interoperability among providers, and new acquisition strategies that separate transition services from the activities involved in operating and managing shared services platforms.

three:

A standard performance-assessment model should be established. It is critical to develop consistent and transparent cost and quality metrics that enable customer agencies to compare service options and quantify the benefits of shared services. Metrics should be designed to ensure accountability on the part of customers as well as providers.

four:

An interactive government-wide catalog of available services and providers should be implemented. Once the market is fully defined, and standards for services and providers are established, there is an opportunity to increase the use of shared services and drive competition by developing a new online navigator—an interactive website for customers to compare services and providers based on cost, service offerings and past performance. The Shared Services Roundtable’s recommendations would involve realigning agency business processes and the integrating mission-support services—major changes that likely would be difficult for agencies. However, our government is at a critical point where workforce, technological and fiscal pressures demand a substantive departure from the status quo. Leaders at the Office of Management and Budget are tackling many of these issues, but the payoff—in terms of increased effectiveness, cost-savings and avoidance, and customer satisfaction—requires a long-term, sustained effort across government and administrations. The roundtable will continue to provide opportunities for collaboration and for developing concrete tools to help advance the shared services approach. The reward would be a leaner, more innovative federal government better able to serve the American public. 3

Austin Price is a program manager with the Partnership for Public Service, a nonprofit, nonpartisan organization that believes good government starts with good people. Professional Services Council

Service Contractor / June 2015 / 9

TH E

C NSS

C 10 / Service Contractor / June 2015

Professional Services Council

“It’s Not Rocket Science...

It’s Everything Else! ” by Mark Glorioso,

Executive Director, NASA Shared Services Center

Collage/illustration: Studio25

iming is everything. Without question, I was in the right place at the right time for the opportunity to become the Executive Director of the NASA Shared Services Center (NSSC) in March 2014. I launched my NASA career more than 30 years ago as an engineer at NASA’s Johnson Space Center. It has been an amazing journey, and I believe my best days are still ahead of me. The NSSC opened for business March 1, 2006, and is located at NASA’s Stennis Space Center near Bay St. Louis, Mississippi. The states of Mississippi and Louisiana made major contributions to the initial success of the NSSC. The Mississippi legislature passed an appropriations bill for $33 million, which was signed into law by Governor Barbour, to underwrite construction of the NSSC facility, and both states contributed funds toward the training of the local workforce. The NSSC performs selected business activities for all NASA Centers in the areas of financial management, human resources, information technology, procurement and business support services. Since going live in 2006, more than 60 activities/services have transitioned from 10 NASA Centers and Headquarters to the NSSC. Over the past nine years, we have developed several applications to improve and promote customer self-service and standardization. Examples include: providing grants’ status on our customer website; a Web-based ethics program tracking system; Accounts Payable (AP) work management system; the use of standardized electronic forms; and a uniform look and feel (branding) of all NSSC applications. We target

lowering costs by improving service in a number of ways: optimizing processes, reducing overhead and broadening the service base. One of the things I began doing after coming onboard was visiting NASA’s Centers and Headquarters to meet with senior leadership. During each visit I ask three questions: 1) What is the NSSC doing well?; 2) What can we do better?; and 3) What more can we do? The answers have been enlightening and affirming and are helping us to plan for the NSSC’s future.

What is the NSSC Doing Well? Overwhelmingly, the Center leaders with whom I meet consistently give us high marks for customer service and satisfaction. NSSC employees are very customer oriented and are well-trained to respond to problems quickly. They say good things about services provided in each of our functional areas. For example, in procurement, the highest compliments were given to the Enterprise License Management Team (ELMT), the Grants and Small Business Innovation Research (SBIR) team and the agency’s Purchase Card Program. The ELMT is steadfastly committed to the NSSC vision of providing “unparalleled service” by fervently seeking best-value procurements that will realize cost avoidance and savings opportunities for the agency and provide NASA with the means to make informed decisions concerning enterprise license management through centralized contract management, asset inventory and financial transparency. The SBIR and Small Business Technology Transfer (STTR) Programs provide an opportunity for small, high technology companies and research institutions to participate in government-sponsored research and development efforts in key technology areas. The NSSC functions as the Lead Agency Program Coordinator (APC) for NASA’s Purchase Card Procontinued on page 12

Professional Services Council

Service Contractor / June 2015 / 11

from page 11

gram and serves as the contracting officer for NASA’s charge card contract with the bank contractor. As the Lead APC, we develop best practices and procedures for the P-Card Program, ensure purchase card managers are properly trained and fulfill requirements set forth by the Office of Management and Budget (OMB), the General Services Administration (GSA) and NASA, as well as maintain content of the agencywide online training course. I also hear many stories about the great work we are doing in human resources, especially in retirement planning and benefits counseling/processing. NASA is among the best, if not the best, in the federal government in providing this service. I’m reminded of an article in the Washington Post by Joe Davidson in 2012, in which he talked about the Office of Personnel Management’s (OPM’s) delays in retirement processing. He cited that a significant part of the problem with the delays in retirement processing was due to the incomplete information agencies send to OPM for processing; he noted that some agencies had an error ratio as high as 50 percent. He also noted that at the other end of the spectrum was NASA, with an error rate of zero. All retirement packages for NASA employees go through the NSSC before going to OPM, and I am proud that we continue to have a zero percent error rate. Davidson added at the end of his article, “Moral of the story: Work for NASA.” Affirmations like this make me very happy. Additionally in human resources, NASA’s Voluntary Leave Bank Program, Awards and Senior Executive Service (SES) case documentation are very well received and appreciated by leadership at NASA’s Centers.

What can the NSSC Do Better? No matter how well things are operating, we can always improve. While our customer service is regarded as excellent, there is a perception that we can add more of a personal touch. For example, some people continue to prefer having a person available to see face-to-face at their own Centers, rather than communicating via phone or email. We continue to adapt to the individuals at the Centers to alleviate this perception. Additionally, being immediately connected to the right person when calling toll-free sometimes takes

12 / Service Contractor / June 2015

longer than some would like. Still, it was noted that when a customer is connected with the right person, regardless of how long it takes, the service is good. It has been noted by some Centers that in focusing on metrics for timeliness and customer satisfaction, we may not be balancing the “good enough” solution with the cost. We are almost always “green,” meaning we meet or exceed established service level indicators in our service level agreement. We are evaluating with our customers the need (or not) to always be green, and the impact that may have on cost and customer satisfaction.

What More Can We Do?

It has been encouraging to see how the NASA Centers have come to embrace shared services and recognize it as a viable path to avoid cost by streamlining and standardizing processes for the agency. Now they are making suggestions for additional services that the NSSC can transition. Two examples are Simplified Acquisitions (purchases under $150,000) as well as Suitability Adjudication. Soon after my first few Center visits, I brought these suggestions to the NSSC Board of Directors and the Center Associate Directors for discussion and approval, and both were approved. Suitability Adjudication was approved for consolidation at the NSSC August 27, 2014, and went live January 2, 2015, and Simplified Acquisitions was approved for transition March 26, 2015, with a targeted full assumption of responsibility in January 2017. As I mentioned earlier, I am very happy to be a part of the NSSC. Shared Services is an exciting business that enables NASA to provide for more strategic management of human capital, greater focus on core mission, improved financial management, and future e-government goals. I have come to realize that, in addition to the cost savings, the NSSC provides the important benefit of more time for our scientists and engineers to focus on NASA’s core mission. I like to say, “The NSSC…it’s not rocket science…it’s everything else.” It’s catching on. 3

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Greg Baroni

continued from pg. 6

and our clients, especially as the technology lifecycle shrinks and competition continues to increase. As the pace of innovation accelerates and opportunities are scoped differently, we must be able to anticipate and get ahead of changes so we can adapt and respond accordingly. One piece of advice I often share with entrepreneurs starting out in the contracting space is to work on honing the skill of pattern recognition as a way to anticipate market opportunities. At Attain, we have leveraged pattern recognition, as well as natural adjacencies between the markets we serve, to grow our business within fast-moving streams—from investing in big data and analytics capabilities to our tremendous success in growing our federal health business into one of our largest business sectors. What I

mean by natural adjacencies is that we look at the markets we serve as ecosystems rather than separate verticals. In this way, we can position the firm to best leverage anticipated opportunities across markets. For example, we examine the impact of innovation and technology on the entire research ecosystem, from grants administration at universities to enabling research at federal research and health agencies. One step that Attain took in the last 12 to 24 months to help us better anticipate innovative changes was to hire a Chief Technology Officer whose own skill of pattern recognition we could rely on to help identify the need for various types of innovation, as well as the impact of new technologies across the federal landscape. We found such a CTO in Dr. Simon Szykman, former U.S. Department Commerce Chief Information Officer. Simon’s responsibilities include leading our efforts to create meaningful, mission-critical solutions for our clients that strengthen the Attain value proposition; guiding go-to-market strategies with corporate alliance partners; and deepening customer intimacy. Other ways that the pace of innovation is affecting the federal landscape are manifest in how consultancies are evolving and responding to our clients’ needs, given the nature of market conditions. For example, I view the rise of lowest price technically acceptable (LPTA) as a call for creativity and greater value. This shift challenges us at Attain to be innovative in the way we think about our solutions and delivery. It’s not a deal breaker that keeps us out of the game, but rather it’s an opportunity to think differently and to set Attain apart as a leading provider of innovative solutions that meet or surpass our clients’ needs, within their constraints. LPTA also reflects a trend toward the broader shift in the evolution of the business model of consultancies. The next generation of consultancies will no longer follow a model that supports large, project-based, fee-for-service work. Shorter cycles and the pressure for increased value will continue to drive the model toward one that is outcome-priced, and we, at Attain, have already begun to think this way. Whether health care, cyber, big data, or the Internet of Things (IoT), such fast-moving streams have continued to be major areas of focus, driving growth for federal contractors and consultancies such as Attain. While innovative, the transformation in these markets has been evolutionary, rather than revolutionary, over the last several years, with government responding at its typical pace of adoption. We must now work on our ability to look ahead and anticipate the next true revolutionary wave of technology so we are well positioned to enable our clients to seize the opportunities it affords. 3

As the pace of innovation accelerates and opportunities are scoped differently, we must be able to anticipate and get ahead of changes so we can adapt and respond accordingly.

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Cary Smith

continued from pg. 6

cated and changing every day. To ensure priority is placed on cyber security, it must be treated as a warfare domain, just as land, air, sea and space. Cyber disruptions are becoming increasingly complex and sophisticated. Distributed Denial of Services (DDS) attacks shut down computer and network systems by loading them with bogus traffic. Recently, well-publicized attacks on Sony and Saudi Aramco implemented a “wiper” virus, a modular computer malware that attacks Windows operating systems. Insider threat is of increasing concern where malicious personnel expose data or others unknowingly disclose their passwords. Other types of current cyber attacks target cloud servers to steal personnel credentials, access payment information from mobile devices, and redirect website visitors to an imposter website. Now that everyone has a mobile phone, security concerns abound since these devices can expose sensitive data. Hackers will modify applications considered safe and retool them with malicious code that unsuspecting users then download. Botnets are another serious network threat, where a computer has been breached by a third party and is monitored and controlled from a remote location. Our quest for convenience through technology has connected billions of devices that produce and share information. This is commonly known as the “Internet of Things.” Connected systems and devices make up the Internet of Things through people to people, people to things and things to things. This increases efficiency and productivity but it also more vulnerable and risky. Previously standalone devices, such as energy systems or appliances, are now interconnected. In the critical infrastructure world, more sensors are being added to figure out what is happening inside the systems and make them more efficient. More information makes systems more productive, but also gives hackers additional gateways to break in. The trend for both public and private sectors is to aggressively move their data to the cloud and the demand for virtual “as a service” capabilities such as infrastructure, software and security is increasing. These initiatives pose additional security risks and the need to provide protection will grow. The Internet of Things is closely tied to cloud computing since a lot of systems, devices and sensors are tied to applications as a service, or the cloud. Private and hybrid clouds offer more security than a public cloud. For applications, security must go beyond data in the cloud since desktops and mobile devices are still the weakest link and need to be protected. Social media is increasingly being used by hackers to look for employees with elevated access rights, such as those supervisory positions or in a system administrator role. In the most recent high profile attack on Anthem health, hackers obtained the credentials of the system administrator to get access to the computer systems. Finally, the globalization of technology and people brings additional challenges. As technology becomes more global, there is an increased opportunity to insert malware and defects into components and products that may find their way through the supply chain. Global, interconnected network systems pose additional threats and vulnerabilities. With 16 / Service Contractor / June 2015

increased global collaboration, the risks posed by cyberspace create a new national vulnerability. Today the cybersecurity budget is significant with an estimated $10 billion being spent by the Department of Defense to secure its systems. That’s just a fraction of what is spent worldwide—around $64 billion for critical infrastructure protection—and it is still not enough to keep up with the threat. In order to protect our homeland, we need to move faster and with a deliberate plan. Much of our critical infrastructure is dependent upon industrial control systems, or the electronic control systems used in industrial manufacturing, power, petroleum and heating, ventilation and air conditioning systems. These are prone to attack since they were originally designed without robust security in mind. We must improve the ability to anticipate and prevent attacks, limit the spread of the attack, minimize its consequences and rapidly return to a trusted state. The industries that are the most highly regulated also have the greatest potential for disruption and therefore are the highest threat driven. So, how should we go about accomplishing protection of our critical infrastructure? Cyber security must be approached as a holistic effort and be included as a critical part of the systems engineering life cycle. The approach must recognize that this is a rapidly evolving field, and today’s technology will not be sufficient to resolve tomorrow’s attacks. Within this context, several technology factors are important: 1) a system security engineering approach 2) architecture resilience 3) risk management framework and 4) data analytics. A comprehensive system security engineering framework that identifies, protects, detects, responds and recovers must be applied to our computer and network systems. Security engineering must be integrated into all phases of a product or solution life cycle and is equally applicable to new and upgraded systems. A system security plan that addresses key stakeholders, technologies, processes and operations must be developed and applied. We need a renewed focus on security management of personnel, networks, devices, intellectual property, software development, facilities, supply chain and material throughout the life of a project. A strong system security engineering approach will reduce threat susceptibility by building in security up front, having a strong, resilient architecture design and sustaining the security controls throughout the system lifecycle. Networks and information systems must be designed to be resilient, which means maintaining an acceptable level of service when challenges occur to normal operations. They must be architected to be difficult to exploit and, when an attack does occur, the systems must enable continued operations and prevent the attack from further disruption or potentially halting the operation. This is accomplished by having trustworthy protocols, architectures, products, services and configurations. To ensure network resilience, metrics have to be defined for the service to be protected, including measuring progress against the ever evolving threat, mitigating escalating impacts, rapidly restoring the critical infrastructure and applying standards-based automated remediation to return to a known state. Technology needs to be enabled to sense, react to and communicate changes in its security. Professional Services Council

Cary Smith

continued from pg. 16

A risk management framework is an approach to information security protection based on the combination of vulnerabilities that may be exploited by threats and the potential impact on an asset. An organization needs to define their most critical high value assets that are likely to affect security, health or safety of our economy or nation. If these assets are disrupted, damaged, or destroyed, major impact would occur. The risk management framework then prioritizes cyber security actions to apply resources where they offer the greatest risk mitigation. This includes identifying, managing and controlling risk, including high value asset segregation. A complete risk management framework includes planning, asset analysis, threat analysis, vulnerability analysis, risk identification, risk analysis and risk treatment. “Defense in depth” is one information assurance strategy that may be applied within a risk management framework. Using this concept, multiple levels of control are placed throughout an information technology system. This layering tactic seeks to delay and prevent advancement of an attack, rather than entirely stop a cyber attack from occurring. The placement of protection mechanisms, policies and procedures will help defend an IT system through multiple layers of defense. This will provide an organization time to detect and respond to an attack and hopefully mitigate the breach outcomes.

Data analytics can be applied to recognize the patterns that represent network threats. By correlating information from disparate sources, compiling previously unseen patterns and creating a common operating picture of relevant, operational cyber information, data analytics can drive actionable intelligence to predict and stop cyber attacks. This includes the use of behavioral analytics to detect insider threats. Leveraging big data tools and techniques, cyber analytics captures and processes network data, assesses network nodes and employs visualization tools to spot unusual behavior. An example is continuous monitoring solutions that detect anomalies and unauthorized privileged user activity and determine what information has been inappropriately accessed. Cyber analytics allow security and network operation centers to recognize patterns of activity that may represent network threats. Enabling technologies combined with big data analytics improve a systems security posture. Cybersecurity should be a national imperative as it impacts our safety, security and health. We must implement a holistic approach that includes system security engineering, architecture resilience, a risk based framework and data analytics. We need to move faster and with a comprehensive approach. Securing our nation’s critical infrastructure is the most important challenge facing our nation today and critical to our economic viability. 3

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Professional Services Council

Service Contractor / June 2015 / 17

William Parker

continued from pg. 6

gan to be widely used there has been effort applied by Under Secretary of Defense for AT&L Frank Kendall and others to clarify its application. But the issue arises when well-meaning guidance for the use of LPTA is misunderstood or misapplied by wellmeaning acquisition professionals that simply don’t understand the problem they are seeking to solve through their procurement. So when the bureaucratic morass is just too unwieldy to untangle garbled requirements that are being handled by less experienced acquisition professionals and after asking question after question, the only alternative is to protest before submitting a proposal. When knowledgeable bidders know that bidding the minimum requirements of an LPTA RFP cannot possibly fulfill mission needs, they are forced to bid what they know will fail. A patriot would never knowingly bid in a way that would fulfill the contract but fail the mission. At a fundamental level, this is a failed procurement and when all other means have been exhausted, it should be protested for the good of our country. No senior agency acquisition professional wants the LPTA process to be misapplied and a protest before proposal submission will require those more senior professionals to look at the acquisition process and make an experienced judgment. Experienced leaders know that if the LPTA process is misapplied, the result will negatively impact the mission and in the long run actually cost more.

Some may be concerned about getting a black eye in the midst of a procurement process by protesting before submission, but our experience has been just the opposite. However, if the only way to bid competitively based on the acquisition process is to bid what is known to be flawed, the black eye is just being delayed. Wise and experienced acquisition leaders who become aware of the flaws in a procurement through the adjudication of a protest are not likely to hold a grudge against a principled company trying to help them get their mission right. This is fundamentally not about a company’s interests, but the government’s and our shared commitment to mission success. So as the government becomes much more aggressive in its application of the LPTA process, it is incumbent on industry to more aggressively push back when that process is misapplied according to the government’s own guidelines. While this may delay acquisitions, it’s better to have a delayed acquisition than a flawed acquisition. The outcome may not be to change to a Best Value procurement, it may be to write more accurate and robust technical and acceptance requirements, which when met, could actually fulfill mission needs. In any event, if we are honestly driven to help them get it right, we owe it to our nation to use every means available to us, including an early protest. It’s the patriotic thing to do. 3

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Bill Tracker: 114th Congress-First Session (2015) NEW

Newly introduced since last issue

Major action taken since last issue

Bill became law since last issue

H.R. 55

Rightsizing Activities of Intelligence Non-Governmental Contractors Act of 2015, Jackson Lee (D-TX) Summary Would mandate a 25 percent reduction in the number of contractors with top secret security clearances that are engaged in intelligence activities. Would direct the Director of National Intelligence to conduct a study to determine the extent to which contractors are used in the conduct of intelligence activities and the type of information that they can access. STATUS Referred to Intelligence Committee on 1/6/2015.

H.R. 234

Cyber Intelligence Sharing and Protection Act, Ruppersberger (D-MD) Summary Would establish cyber threat intelligence sharing procedures between the intelligence community and certain private sector entities. STATUS Referred to Armed Services, Homeland Security, Intelligence, and Judiciary committees on 1/8/2015.

H.R. 240 Department of Homeland Security Appropriations Act of 2015, Rogers (R-KY)

Summary STATUS

Provides FY2015 appropriations to the Department of Homeland Security. Became Public Law 114-4 on 3/4/2015.

H.R. 312 Glen Anthony Doherty Overseas Security Personnel Fairness Act, Lynch (D-MA)

Summary STATUS

Would amend the Defense Base Act with respect to payment of death benefits otherwise due a widow, widower, or surviving child of an individual employed at a military, air, or naval base outside of the United States who dies as a result of a war-risk hazard or act of terrorism occurring on or after September 11, 2001. Referred to the Education & Workforce Committee on 1/13/1015.

H.R. 479 American Jobs Matter Act of 2015, Etsy (D-CT)

Summary Would require contracting officers to consider information regarding domestic employment before awarding certain federal contracts. STATUS Referred to Armed Services Committee on 1/22/2015. Related bill: S. 26. Security Clearance Reform Act of 2015, Lynch (D-MA) H.R. 490 Would prohibit the Director of the Office of Personnel Management (OPM) from awarding a contract Summary

STATUS

to any entity for investigative support services or background investigation fieldwork services if such entity has another contract in effect with the federal government to provide such services. Referred to the Judiciary and Oversight and Government Reform committees on 2/19/2015. Related bill: S. 434.

SAVE Act, Murphy (D-FL) H.R. 614 Would require OMB to issue government-wide savings goals for the strategic sourcing of goods Summary

and services by executive agencies and would require agency CIOs to report to OMB on agency efforts to identify and eliminate potentially duplicative information technology investment. STATUS Referred to 11 committees on 1/28/2015. Boosting Rates of American Veterans Employment Act of 2015, Rice (D-NY) H.R. 1382 Would permit the Department of Veterans Affairs to provide a preference in the evaluation of

NEW

Summary

offers to contractors that have a higher percentage of veterans within their workforce than other offerors. STATUS Passed the House (404-0) on 4/18/2015.

Professional Services Council

Service Contractor / June 2015 / 19

Bill Tracker: 114th Congress-First Session (2015) NEW

Newly introduced since last issue

Major action taken since last issue

Bill became law since last issue

H.R. 1481

NEW Small Contractors Improve Competition Act of 2015, Chabot (R-OH) Summary Includes several provisions seeking to reform federal small business contracting policies, including a provision that would spur federal agencies to report small business participation across industry sectors. It would require earlier reporting of consolidated or bundled contracts; and would limit the government ability to use reverse auctions for the procurement of certain equipment and services. STATUS Reported by the Small Business Committee on 3/25/2015. Related bill: S. 958.

H.R. 1562 Contracting and Tax Accountability Act of 2015, Chaffetz (R-UT)

NEW

H.R. 1731 National Cybersecurity Protection Act of 2015, McCaul (R-TX)

NEW

Summary STATUS

Would propose for debarment any contractor with an unpaid, seriously delinquent tax debt. Would require prospective contractors to certify that the contractor has no unpaid, seriously delinquent tax debt. Passed the House (424-0) on 4/15/2015.

Seeks to enhance voluntary cybersecurity information sharing among private sector entities and the federal government and established the DHS National Cybersecurity and Communication Integration Center as the primary cybersecruity reporting portal. Passed the House (355-63) on 4/23/2015. Related bill: S. 754

H.R. 1735 National Defense Authorization Act of 2016, Thornberry (R-TX)

Summary STATUS

NEW

Would enact a myriad of defense acquisition reforms focused on areas such as commercial item procurements, streamlining of requirements development, acquisition workforce, and small business contracting. Passed the House (269-151) on 5/15/2015. Related bill: S. 1376.

Buy Smarter and Save Act of 2015, Reed (R-NY) H.R. 1760 Would require the administration to establish an annual government-wide goal to procure goods and NEW

Summary

services using strategic sourcing, along with an annual government-wide goal for savings from the use of strategic sourcing. STATUS Referred to the Oversight and Government Reform Committee on 4/13/2015. U.S. Chief Technology Officer Act of 2015, Loudermilk (R-GA) H.R. 1764 Would codify the roles and responsibilities of the U.S. Chief Technology Officer.

NEW

Summary

STATUS Referred to the Oversight and Government Reform and Science, Space, and Technology committees on 4/14/2015.

H.R. 2039

NEW National Aeronautics and Space Administration Authorization Act of 2015, Palazzo (R-MS) Summary Would require NASA to revise the Administration Supplement to the Federal Acquisition Regulation to provide uniform guidance and recommend revised requirements for organizational conflicts of interest by contractors in major acquisition programs. Would also imposed new requirements on contractors to identify and avoid the use of counterfeit electronic parts; and would establish a â&#x20AC;&#x153;de factoâ&#x20AC;? debarment of any contractor that is criminally or civilly charged by a government entity for a myriad of enumerated offenses. STATUS Reported by the House Science, Space, and Technology Committee on 4/30/2015.

20 / Service Contractor / June 2015

Professional Services Council

Bill Tracker: 114th Congress-First Session (2015) NEW

Newly introduced since last issue

Major action taken since last issue

Bill became law since last issue

DHS Acquisition Accountability and Efficiency Act, Perry (R-PA) H.R. 2190 Would enhance a number of acquisition management and policy changes implemented by DHSâ&#x20AC;&#x2122;

NEW

Summary

Management Directorate over the past several years, including the codification of the existing Program Accountability and Risk Management (PARM) Office. Would also require DHS to develop a multiyear acquisition strategy and would require DHS to appropriately report and take corrective actions for any programs that experience significant cost overruns or schedule delays. STATUS Referred to the Homeland Security Committee on 5/1/2015.

American Jobs Matter Act, Murphy (D-CT) S. 26 Would require contracting officers to consider information regarding domestic employment Summary

before awarding certain federal contracts. STATUS Referred to the Armed Services Committee on 1/6/2015. Related bill: H.R. 479. Ensuring Pay for Our Military Act, Heller (R-NV) S. 103 Would require the government to continue to provide pay and allowances to members of the Summary

armed services, DoD civilians and contractors providing direct support to the armed services who perform active service during a government shutdown. STATUS Referred to the Appropriations Committee on 1/7/2015.

S. 434

S. 456

S. 525

Security Clearance Reform Act of 2015, Tester (D-MT). Summary Seeks to strengthen the accountability of individuals involved in misconduct affecting the integrity of background investigations, to update guidelines for security clearances, and to prevent conflicts of interest relating to contractors providing background investigation fieldwork services and investigative support services. STATUS Referred to the Homeland Security and Governmental Affairs Committee on 2/10/2015. Related bill: H.R. 490. Cyber Threat Sharing Act of 2015, Carper (D-DE) Summary Seeks to enable better sharing of cybersecurity threat indicators both within the private sector and between private and government entities. STATUS Referred to the Homeland Security and Governmental Affairs Committee on 2/11/2015.

Food for Peace Reform Act of 2015, Corker (R-TN) Summary Would establish the Food for Peace program in the U.S. Agency for International Development under the Foreign Assistance Act of 1961. STATUS Referred to the Foreign Relations Committee on 2/12/2015.

Cybersecurity Information Sharing Act of 2015, Burr (R-NC) S. 754 Would require DHS, DNI, DoD and DoJ to establish procedures that promote the sharing of cyber Summary

STATUS

threat indicator information among federal and non-federal entities, including the private sector. Would also provide liability protections to private sector entities that share such information with a federal entity. Referred to the Foreign Relations Committee on 2/12/2015.

Girls Count Act of 2015, Rubio (R-FL) S. 802 Would authorize USAID to prioritize programs that build the capacity of developing countriesâ&#x20AC;&#x2122;

NEW

Summary

policy frameworks to prevent discrimination against girls. STATUS Referred to the Foreign Relations Committee on 3/19/2015. Professional Services Council

Service Contractor / June 2015 / 21

Bill Tracker: 114th Congress-First Session (2015) NEW

Newly introduced since last issue

Major action taken since last issue

Bill became law since last issue

S. 958

Small Business Fairness Act, Enzi (R-WY) NEW Summary Would require federal agencies to consider the capabilities and past performance of each member of a joint venture as the capabilities and past performance of the joint venture even if the joint venture does not have a combined record of past peformance. STATUS Reported by the Small Business and Entrepreneurship Committee on 4/23/2015. Related bill: H.R. 1481.

S. 975 American Business for American Companies Act, Durbin (D-IL)

Summary STATUS

NEW

Prohibits federal agencies from awarding a contract for the procurement of property or services to any foreign incorporated entity determined to be an inverted domestic corporation or any subsidiary of such entity. Referred to the Homeland Security and Governmental Affairs Committee on 4/16/2015.

S. 1376

NEW National Defense Authorization Act of 2016, McCain (R-AZ) Summary Would make a number of acquisition reforms regarding DoD weapons systems acquisitions and the procurement of commercial items by the DoD. STATUS Reported by the Armed Services Committee on 5/14/2015. Related bill: H.R. 1735.

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Professional Services Council

Service Contractor / June 2015 / 23

Highlights from the 2015 PSC/Grant Thornton Federal CIO and CISO Survey by David Wennergren,

Senior Vice President, Technology, PSC

24 / Service Contractor / June 2015

by George DelPrete,

Principal, IT Service Line Leader, Grant Thornton

Professional Services Council

his year marks the 25th edition of the annual Federal Chief Information Officer (CIO) and Chief Information Security Officer (CISO) Survey led by the Professional Services Council (PSC) and PSC member company, Grant Thornton. A lot has changed since the first survey was conducted in 1990. Back then, no one had even heard of an app, cell phones weren’t widely available, and Internet connections and email were scarce. So much has evolved in technology since then—now we take for granted that a Wi-Fi connection will be available almost wherever we go, email and applications are served up from cloud-based services, and cell phones are ubiquitous—and rarely used as just phones. This year, 65 information technology leaders across the federal government took part in the survey. Almost half of those surveyed have served in their position between one to two years. Their feedback gives a clear picture of the priorities and challenges they face today.

A War in Cyberspace

Not surprisingly, cybersecurity topped our respondents list of concerns. Threats continue to increase both in terms of the number of attacks and their level of sophistication, and the wide range of social engineering vectors have proven extremely difficult to address. Across the government, those surveyed reported that attacks have increased. But they also noted they are getting better at tracking and identifying the threats, which could in part account for increased reporting. Agencies are responding to this escalating threat. One CIO described his organization’s regionalization of their top level security architecture. This government organization created a new Regional Security Stack that reduced the overall number of security stacks from approximately 1,000 worldwide to just 50. This action has allowed the agency to better defend their information in a cost-effective manner. Another war that is raging is the competition for cybersecurity talent. CIOs noted that competing for professionals with these highly sought-after skills is becoming increasingly difficult, especially in the federal sector where compensation is limited.

Workforce Woes

Artwork: Grant Thornton LLP.

CIOs reported that in addition to pay inequity, their ability to fill crucial jobs is also hindered by the residual effects of the 2013 sequester, furloughs, shutdowns, hiring freezes, and agency budget reductions. A top priority for CIOs is working to rebuild their talent base. CIOs have responded creatively in this area by investing in training and bringing in people from industry on term appointments to help with digital services. In addition, they have set up mobile career apps to notify users of job openings. CIOs hope that these efforts will help attract fresh, forward-thinking candidates who can begin specializing in areas including: application infrastructure, cybersecurity, systems engineering, and project management. Professional Services Council

The skills reported most in demand are in the areas of applications, infrastructure, cybersecurity, systems engineering, and project management.

Modernizing IT

The survey identified three key areas of modernization in federal IT—cloud computing, mobility and modular IT development/agile strategies. CIOs reported that initial cloud efforts focused on more simple tasks, to include email migration and websites. Now their attention has turned to more substantive efforts to include infrastructure as a service, platform as a service, and software as a service. Progress is being made in these areas, but some agencies are still moving very slowly. Respondents mentioned that they were eager to move to the cloud to take advantage of its benefits, such as cost savings, reduced capital expenditures, flexibility, improved customer service and easy access to data. However, they also noted that their enthusiasm was tempered by plans to develop comprehensive and cohesive cloud strategies to address concerns such as data security.

INNOVATE INNOVA IINNO NNOV VATE AT TE E

PROTECT PROTEC PRO P ROT TECT ECT INTEGRATE INTEG INTE GRA RAT TE

LEAD LEAD

Mobility is also an area of increased activity. By enabling mobile access to information, agencies can better serve citizens and achieve agency missions. In regard to working remotely, most CIOs stated that the majority of their workforce can work remotely from their laptops, but access to critical enterprise applications by tablets and mobile phones is still a “work in progress.” Agile development is being embraced by survey respondents with positive results. Some of the responses to the survey included: “we’re getting instant access to data it would’ve taken six months to see;” “47 percent of projects on the OMB dashboard are using agile [development] and have seen a 21-day decrease in delivery time;” and “we’re now looking at how we can use an agile set of tools for app development in the cloud.” Between the rapid pace of technological change, the ever increasing cybersecurity threat and the continuing financial uncertainty that the government will face in the years ahead, CIOs will both stay in the spotlight and need strong partnerships with industry to ensure that technology is deployed and managed effectively to deliver mission results. To obtain a copy of the 2015 PSC Federal CIO and CISO Survey report, visit www.pscouncil.org and choose the “CIO Survey” from the publications tab. Service Contractor / June 2015 / 25

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Professional Services Council

by Gail Bassin, Co-CEO, JBS International

The Mid-Size

clamp illustration: shutterstock.com/VitaminCo

The Unintended Consequence of Changing Government Procurement Practices

pportunities for industry to bid on federal professional and management services (PAMS) contracts are shrinking. Smaller government budgets, coupled with an increase in spending on Medicare, Social Security and other mandates, leave agencies with fewer dollars to spend on discretionary PAMS contracts that are critical to agency missions. The impact on the government contracting industry across the board has been cutbacks, layoffs, and slowing growth. For mid-size companies in particular, the dramatic changes in the competitive landscape challenge their ability to grow and thrive. Those challenges pose a danger to industry, the economy, and the government. There are almost 200,000 companies in the United States with revenue between $10 million and $1 billion. These mid-

size businesses account for one-third of U.S. jobs and one-third of the nationâ&#x20AC;&#x2122;s gross domestic product. Whatâ&#x20AC;&#x2122;s more, they fueled 70 percent of U.S. job growth in 2013.1,2 Compared to their small business counterparts, mid-size companies are more stable. In fact, 70 percent of mid-sized businesses thrive for at least 20 years. Only 16 percent of small businesses survive that long, and 44 percent of small companies go out of business in less than 5 years.3

How Does the Government Define a Mid-Size Business?

The federal government has not established a formal definition of a mid-sized business. For procurement purposes, the Small Business Administration (SBA) classifies businesses as small or large and uses the North American Industry Classificacontinued on page 28

Robert Sher. Mighty Midsized Companies: How Leaders Overcome 7 Silent Growth Killers. (Brookline, MA: Bilbiomotion, 2014). 2 National Center for the Middle Market, The Ohio State University, and GE Capital Corporation. The Market That Moves America. (2011). Accessed at http://www.middlemarketcenter.org/middle-market-insights-perspectives-opportunities. 3 Sher, 5. 1

Professional Services Council

Service Contractor / June 2015 / 27

from page 27

tion System (NAICS) as a basis for On the flip side, the government establishing its small business size also recently began issuing small standards. business set-aside MACs in order to In the absence of a government reach its small business contracting definition of a mid-size business, goal of 23 percent of award dollars thought leaders from academia to prime small businesses. As a 1. Entrepreneurial spirit and industry have studied and result, mid-tier companies are now 2. Subject matter depth published their own definitions. more limited than ever in their abil3. Technical niche strength Ohio State Universityâ&#x20AC;&#x2122;s Fisher Colity to compete for work. 4. Customer-centric executives lege of Business defines mid-sized In the past, mid-tier companies businesses as companies generating competed more equally under full 5. Nimble decision making between $10 million and $1 biland open competitive procure6. Developed infrastructure lion in revenues. ments. Full and open contracts 7. Re-invention as a growth strategy Meanwhile, the Professional tend to level the playing field and 8. Less pressure on financial targets Services Council recognizes two make it easier for bidders to market distinctly different mid-tier discriminating qualifications and company sizes based on analysis of capabilities directly to the agency. their membership and knowledge With the switch to MACs, of the industry: those with $25-$100 million in revenues and however, mid-tiers are less able to demonstrate the full range of a larger sized mid-tier group generating revenues of more than experience required by broad MAC past performance and work $100 million and up to $1 billion.4 Clearly, even a $100 million scopes and cannot absorb the high cost and risk involved in bidcompany is not the same as a $1 billion company in structure ding against companies with much larger business development and substance, as well the ability to market and support broadly resources. As a result, mid-tiers must often settle for marketing scoped government and agency-wide Multiple Award Contracts themselves as subcontractors, profoundly limiting their ability to (MACs). lead task order opportunities released under these MACs. Even when mid-tiers subcontract on successful MAC bids, Multiple Award Contract (MAC)s: Effectively Shut Out Mid-tier business leads on the prime MACs have little incentive to honor Government Contractors from Competition. agreements made by the proposal capture team to assign desIn the government contracting sector in particular, mid-tier ignated work areas or reward the subcontractor team members companies offer a unique value proposition: the security and for their substantial efforts during the proposal development stability of well-developed infrastructure and solid financial process. For mid-tier companies, this position severely hampers growth, with the nimble decision making of hands-on CEOs. their ability to grow and maintain their presence with their Mid-size companies also tend to be flatter overall and more able government customers. to respond directly to the changing needs of customers than The result of this changing climate has been a squeezing out their large business counterparts. That adds up to less risk for the of mid-tier competition from opportunities previously availgovernment. able to the mid-tier sector. In fact, the market share of contract But itâ&#x20AC;&#x2122;s becoming harder for the government to directly acvalues for mid-tier government contractors declined from 38 cess these mid-size companies. In recent years, the government percent to about 34 percent from 2000 to 2011, according to has substantially reduced its use of full and open single contract the Center for Strategic and International Studies (CSIS), which procurements in favor of government-wide and agency-specific defines mid-tier government contractor companies as ranging MAC vehicles. In fiscal year 2013, for example, 21 percent of in revenue from $25 million to $3 billion in contract values.6 5 Mid-tiers are positioning themselves to resist the squeeze by margovernment contract spending was procured through MACs. MACs consolidate purchasing on an agency or government-wide keting themselves as a value-added subcontractor to large firms scale, with eligibility criteria that often only very large businesses (with greater than $1 billion in revenues) and small businesses. can meet. That change has greatly impacted the ability of midThis shift addresses issues of maintenance, but it is not a viable tier companies to compete for addressable opportunities alonggrowth strategy. In addition, a decline in market share means side their larger- and smaller-tier counterparts. that government clients are losing access to mid-tier companiesâ&#x20AC;&#x2122;

Eight Strengths of Mid-tier Government Contractors

continued on page 30

4 Professional Services Council. PSC Services Sector Review 2014. (2015). Accessed at http://www.pscouncil.org/i/p/Services_Sector_Review/c/p/ServicesSectorReview/ Services_Sector_Revi.aspx 5 National Contract Management Association. 2013 Annual Review of Government Contracting. (2014). Accessed at http://www.ncmahq.org/NewsPublications/ Content.cfm?ItemNumber=3939&navItemNumber=9968 6 Center for Strategic and International Studies. Structure and Dynamics of the U.S. Federal Services Industrial Base, 2000-2012: A Report of the CSIS Defense-Industrial Initiatives Group. (2013). Accessed at http://csis.org/files/publication/130827_Sanders_FederalServicesContractingTrends2000-2012_Web.pdf

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Professional Services Council

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from page 28

deep expertise, seasoned management teams and other unique points of value.

Mid-tier Government Contractors Offer A Strong Value Proposition to Government Customers.

human resources, and business development units to ensure the company meets the broad range of compliance requirements essential to doing business with the government. Re-invention as a growth strategy—Mid-size company executives know they have to continuously evaluate their strategic course to adapt to the addressable market. Changes in government procurement policy and the convergence of technology and services are two of the transformative challenges faced by all government contractors, but particularly felt by mid-size companies. These mid-size companies have relatively deeper pockets than small businesses, and a more flexible company structure than large businesses, which allows them to re-invent their business models and re-direct and right-size their businesses. Less pressure to meet short-term revenue and profit targets—Most mid-size companies are privately held. Not constrained by the need to satisfy public stockholders, they are free to focus on longer-term growth goals while ensuring their customers’ goals are met first. As a result, mid-size companies tend to be more economical when quoting prices to their government customers and performing the work.

Mid-Tiers offer agility, innovation, reliability, and customer-centricity that federal customers demand—and deserve.

Mid-tiers offer agility, innovation, reliability, and customercentricity that federal customers demand—and deserve. Their strengths that benefit government customers are: Entrepreneurial spirit—Midsize government contractors are generally started by one or more entrepreneurs who bring passion, vision, and subject or technical expertise to their work. These entrepreneurs infuse their passion into all aspects of their business—from hiring and retaining key talent, funding innovation, and taking risks to gain market penetration. These mid-size companies, especially the smaller ones, continue to draw upon and motivate staff through an entrepreneurial lens. Subject matter depth—Mid-sized companies tend to be led and staffed by seasoned professionals who have substantial experience from the field in implementing mission-focused programs. Whether it’s improving the nation’s health, supporting job growth, or ensuring military readiness, they know the operational program environments and the target populations. Technical niche strength—Mid-sized companies, especially those with a long history, bring strong niche or “boutique” expertise in areas like mobile apps, website design, program monitoring, evaluation, and training. These mid-sized companies invest in the infrastructure needed to support these niches, infuse best practices across the company, and deliver economical services and solutions to meet their customers’ needs. Customer-centric executives—The CEOs and their senior leaders devote time to getting to know their customers and to ensuring that their customers’ needs are paramount. They infuse a customer-first culture throughout the company, as well as oversee, participate in, and monitor projects from beginning to completion. Their familiarity with and deep rooted investment in the work allows them to troubleshoot any problems, to laser focus on solutions, and to add resources effectively and efficiently. Nimble decision making—Led by hands-on executives, midsize companies can respond to customer requests and changing needs more quickly than small or large businesses. These companies can typically pay a bill at moment’s notice, assign or hire new staff quickly, and address customer requests without going through multiple layers of managers and processes. Developed infrastructure—Well-run mid-size companies are generally large enough to have a solid leadership structure; right-sized infrastructure; and the in-house legal, accounting,

30 / Service Contractor / June 2015

The Industry and Government Buyers Should Mitigate the Unintended Consequences of the Mid-Size Squeeze.

This article is intended to shine a light on the value that mid-size businesses bring to the economy and the government, and to highlight the unintended negative consequences of recent trends in procurement practices related to an increased use of MACs. By stimulating a dialog about this issue, we can identify potential approaches to mitigate this unintended squeeze. One potential model for other government sponsors to look at in seeking ways to be more inclusive is the recent HHS Program Support Center MAC procurement. By offering a small business track and a large business track with more flexible criteria, a larger pool of large and mid-size companies bid and were awarded MAC contracts. HHS agencies will now have access to a rich resource of contractors who can and will bid on task orders within their expertise areas. As the government continues to streamline the procurement process, reduce procurement costs, and strengthen the U.S. economy, mid-size companies remain well-positioned to deliver products and services that meet high quality standards, reflect sound stewardship of taxpayer dollars, and mitigate risk on the government’s investment. 3

Professional Services Council

Policy Spotlight

Will New Rules and Rulings Make GSA Schedules Less Commercial? by Alan Chvotkin, PSC Executive Vice President and Counsel

s GSA undergoes its well-publicized transformation of the Multiple Award Schedules program, new rules and rulings are also going into effect that will significantly change the core of this important program.

Photo: shutterstock.com/filmfoto

Transaction Data Reporting The first significant change is called transaction data reporting. At the core of the GSA Schedules program are three major tenants. First is that the items vendors offer for sale on the Schedules are “commercial items” and, under federal law, the prices for these commercial items are, by definition, fair and reasonable. Second, in order to get a Schedules contract, a company must identify a tracking customer and disclose its commercial sales practices. Finally, a Schedule holder must agree to a contract clause that automatically gives all federal buyers a price reduction if the vendor reduces its price to that tracking customer. On March 4, 2015, GSA published a proposed rule to capture transactional data on procurements across all of GSA’s contracting vehicles, including the Schedules program. This “transactional data reporting” rule would require vendors to electronically report such data from orders and prices paid by ordering activities from both the GSA Schedules contracts as well as non-schedules GSA contracts. The rule also provides some relief from the price reduction requirements. This proposed rule, which PSC filed comments on, addresses, in part, two key recommendations from the final report of the 2010 Multiple Award Schedule Advisory Panel (the “MAS Panel”). One recommendation was that GSA should help federal agencies collect information on prices ordering agencies actually paid on Schedules transactions. Another was to provide relief from the price reduction clause that is unique to the GSA Schedules program. But the proposed rule does not go as far as the MAS Panel recommended and adds new challenges and new questions that make adoption of the proposed rule in its current form problematic. For example, GSA would implement a new pilot program initially for non-Schedules contracts by requiring contractors to submit monthly reports with the

transactional details on 11 data elements for each sale to the government under either the Schedules or a governmentwide contract. While the rule retains the price reduction clause, it deletes the requirement for companies to monitor sales to a “tracking customer” for price reductions, as required under the current price reduction clause. Regrettably, this rule offers too little benefits for agencies and companies, still holds Schedules contractors accountable for too much of the current requirements and fails to address other critical and interdependent recommendations from the 2010 MAS Panel report that would more significantly benefit both the government and the contractors.

GSAR Class Deviation for Commercial Supplier Agreements A second significant change relates to the terms and conditions of sales under the Schedules. On March 20, GSA published a request for information with a proposed class deviation from the GSA acquisition regulations to address commercial supplier agreement terms that may be inconsistent with federal law. GSA intends to clarify the order of precedence in the GSA commercial item clause by explaining that the terms of the GSA commercial item clause controls in the event of a conflict with a term or condition in a commercial supplier agreement. The class deviation will continued on page 33

Professional Services Council

Service Contractor / June 2015 / 31

Council Corner by Alan Chvotkin, PSC Executive Vice President and Counsel

hroughout 2015, PSC’s five councils, and many in the public debate around how to reform how government buys goods and services, used two words in almost every sentence: acquisition and innovation. Typically the sentence is something like “how do we use the federal acquisition system to obtain greater innovation in the government’s outcomes?” The answer lies, in part, on where you sit in the marketplace and where you begin to answer that question. PSC’s Acquisition and Business Policy Council has been assessing the flexibility of the federal acquisition system to accommodate a range of initiatives. Its “Smart Contracting” Working Group has almost completed an effort to build a taxonomy for federal agencies to use in their decision-making process, including how to use the most appropriate contract type to encourage and facilitate the use of innovative solutions to government requirements. Another working group has almost finished work on an “Innovation Template” for the government to use throughout the acquisition process to highlight areas where government is particularly interested in seeking “innovative” solutions. The template would also allow offerors to spotlight innovative areas in their proposal when they respond to that request, including a description of how the company and the government might consider monetizing that offer. Neither of these initiatives require any change to the acquisition laws or regulations. PSC’s Technology Council has work underway to look at federal agency cloud computing contract awards and drawing from them best practices that could be replicated easily and added to the growing body of agency guidance on cloud. Another team is looking at barriers that limit agencies’ ability to move from agency designed solutions to solutions companies offer using their own creativity and “innovation.” On-going efforts also include addressing areas where agency implementation of security requirements is impeding rather than accelerating the adoption of new technologies and more effective outcomes. We also see this intersection arise across each of the three PSC market-facing councils. For example, the Council of International Development Companies has engaged with USAID’s senior leaders to explore the work of its

“Innovation Lab” while demonstrating where our member companies are already using “innovation” in the design, execution and funding of development assistance to support USAID missions. Meanwhile, the Defense and Intelligence Council has launched a joint effort with the Navy’s Facilities Engineering Command (NAVFAC) to explore ways to reduce the Navy’s total cost of ownership through a mixture of contracting practices and innovative solutions. The Defense and Intelligence Council has also been a leader in contributing to PSC’s commentary on DoD’s “Better Buying Power 3.0” principles and implementation guidance that seeks to addresses both how the department approaches their acquisition workforce’s “tradecraft in services” and in keeping the department’s global technological lead. Finally, the Civilian Agencies Council has identified many overly broad conflict of interest provisions in civilian agencies’ contracts that are inhibiting companies’ abilities to find contracting partners who can significantly contribute to fulfilling agency requirements and is beginning to work with those agencies to reduce them. This intersection of these key concepts—and our councils’ approaches to it—are also found in other components of PSC’s work. For example, PSC has been a strong and vocal advocate for critical changes to the way the Defense Department, in particular, approaches the acquisition and pricing determinations of commercial items. By erecting high barriers to company qualification or contracting officer use, the department is denying the use of proven commercial item services to meet agency requirements and challenges. We have confronted DoD on these issues and have successfully brought recommended solutions to the attention of OMB and the Hill. We know that the on-going budget pressures on agencies and the shifts taking place within the professional services market will force more agencies and companies to address more directly and more immediately this important intersection of acquisition and innovation. Yet as the Government Accountability Office (GAO) would classically conclude: “While some progress has been made, more needs to be done.” PSC, in conjunction with our councils, is on a path to do more. We welcome and encourage your engagement with us on these important initiatives. 3

Get Involved: PSC members can register for any meeting or sign up to participate on any of the PSC councils, committees and working groups by signing up on the PSC website. For registration, visit the PSC Calendar of Events. To sign up for a council, committee, working group, or network, visit your profile page on the PSC website and click on the “Committees & Preferences” link next to “Contact Information.” Make the desired selections and hit “save” at the bottom of the page to record your picks. 32 / Service Contractor / June 2015

Professional Services Council

from page 31

implement standard terms and conditions to minimize the need for negotiating commercial supplier agreements on an individual basis but it will also make unenforceable any conflicting or inconsistent terms or conditions in any commercial supplier agreement. GSA identified 15 areas where commercial supplier agreements frequently are in conflict with or are incompatible with federal law. PSC has long recognized that there are inconsistencies between these commercial supplier agreements and some federal law. While we welcomed GSA’s public outreach for comment, we cautioned GSA to proceed carefully. In our comments we said that since the GSA Schedules program is based on the premise that offers are “commercial items,” there is a strong statutory preference for the use of commercial items and for vendors to use their commercial

terms and conditions when selling these commercial items to the federal government. Additionally, a March 10, 2015 ruling by the U.S. Court of Appeals for the Federal Circuit held that federal agencies are limited in the extent to which unique government terms and conditions can differ from industry-standard commercial terms and conditions. There are still several more procedural steps to be taken before either of these changes could take effect. In the interim, we hope that GSA will look at the totality of the business relationship between vendors and GSA in the creation and operation of the current (or revised) GSA Schedules program. Certainly GSA must ensure that the Schedules awards follow federal law, but that also includes the preference for commercial items procurements. 3

MEMBER NEWS Sabre’s Tom Dickson Named Top IT Pro by Philadelphia Business Journal

In April, Sabre Systems’ Vice President of Information Technology Tom Dickson was named a 2015 Top IT Pro by the Philadelphia Business Journal. This year’s Top IT Pro Awards program recognized 17 of that region’s most techsavvy executives. In selecting the honorees, the Philadelphia Business Journal looked for “leaders whose roles have evolved from miners of communications systems and computers to indispensable strategic advisors and operations experts.”

NeoSystems Corp. Named Deltek Premier Partner

NeoSystems Corp. has been named a Deltek Premier Partner for 2015, the eighth year in a row it has earned this designation. Deltek’s GovCon and Vision Premier Partners for 2015 is the top classification among its 80 business partners. Deltek’s Premier Partners provide sales, implementation, consulting, support, and customization services and are required to meet and maintain a number of standards. In return for outstanding performance, all of Deltek’s Premier Partners receive unique benefits such as enhanced marketing and channel support, and consistent interaction with Deltek experts and thought leaders including Deltek’s executive team.

Sabre Promotes Two to New Roles

Sabre Systems announced two key staff changes in March. The company appointed Senior Executive Director of HR Deborah Kliman to the position of Vice President of Human Resources and Director of Finance Martin Buniva to the position of Vice President of Finance. Professional Services Council

Sabre Awards STEM Scholarship to Mary Lyons

Sabre Systems awarded Archbishop Wood High School senior Mary Lyons of Warrington, Pa., a $1,500 college scholarship in recognition of her outstanding STEM (Science, Technology, Engineering and Mathematics) accomplishments. Lyons was presented with her award on May 6. The Sabre STEM scholarship program was launched in 2013 in an effort help steer students into these curricula by helping reduce the financial barriers to attend college. Sabre will award a total of five $1,500 non-renewable scholarships to deserving students in locations where the company has a major presence.

Have a story for Service Contractor’s Member News section? E-mail Elise Castelli at castelli@pscouncil.org.

Service Contractor / June 2015 / 33

PSC: SCENE & HEARD

1 PSC’s Stan Soloway kicks off the

5 USAID Chief of Staff Michele Sumilas

2 A Chief Veterans Experience Of-

6 Stan Collender, executive vice president at Qorvis MSLGROUP, surveys the market landscape for threats and opportunities at the 2015 Vision Kickoff, on March 23.

3 PSC President and CEO Stan

7 Rich McFarland of the Parsons Corporation, the vice chair of the Vision Forecast Defense Conference, explains the interview process during the 2015 Vision Kickoff on March 23.

4 Dan Chenok, executive director of

8 PSC Defense & Intel Chair Neil Albert of MCI speaks with PSC Membership Development Chair Deepak Hathiramani of Vistronix and Tech Council EAB Member Randy Fuerst of Oceus Network, before the Vision Defense Strategic Planning Forum on March 3.

2015 Vision Defense Strategic Planning Forum on March 3, PSC’s first Vision event. ficer Tom Allin explains his plans to improve veterans’ access to benefits and jobs, during the April 28 Civilian Agencies Council meeting. Soloway gives the U.K.’s Business Services Association a view of the common trends present in the U.S. and U.K. government contracting markets, on March 19. the IBM Center for The Business of Government, discusses the Vision Forecast, at the 2015 Vision Kickoff on March 23.

addresses the CIDC on April 16.

34 / Service Contractor / June 2015

Professional Services Council

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