For contracts professionals, it was a day to remember. Or else.
On July 15, 2010, OFPP Administrator Daniel Gordon told the Senate Budget Committee’s Task Force on Government Performance, “Agencies are moving away from pricing arrangements … to more prudent, fixed-price contracts.”
Shay Assad, director of defense procurement and acquisition policy, chimed in: “Before embarking on new programs, we must first consider affordability.”
Welcome to the new world of contracts and procurements, where every contracts professional’s job just got a little tougher. Ever since President Barack Obama issued a memo in March 2009 ordering the Office of Management and Budget to lead an in-depth review of the government’s contracting efforts, a series of new reporting requirements have ensued. And so have industry challenges.
“It’s obvious we’re headed for more audit oversight, more fixed-price work, reduced spending, and more protests delaying acquisitions, all in the face of constrained government acquisition resources,” said Bill Colangelo, director of contracts for Raytheon Intelligence and Information Systems.
Yes, just when contracts leaders were beginning to navigate new demands associated with organizational conflict of interest and inherently governmental, as well as additional self-reporting rules and clauses tied to stimulus projects, new requirements continue to arrive.
Among the more pressing: FAPIIS, or Federal Awardee Performance and Integrity Information System.
“This is a very serious reporting requirement that may prevent some companies from receiving future contract awards — everyone needs to understand it,” said Joe Kopfman, vice president of contracts and administration for AMERICAN SYSTEMS.
Then, there’s the interim rule to the Federal Acquisition Regulation, which requires contractors to report executive compensation and first-tier subcontractor awards on certain contracts. Plus, proposed legislation to the 2011 National Defense Authorization Act, which stresses factors other than cost and price in evaluating proposals.
New Regulations: Par For The Course?
The sea of new regulations suggests one thing: Prepare. Or perish.
“Those companies that operate efficiently and ethically can continue to prosper, and eventually the pendulum will swing back,” Raytheon’s Colangelo said.
It’s a sentiment shared by others in industry.
“Reporting requirements change every day,” said Steve Weiss, executive vice president of government business operations for CACI. “It’s an evolving environment, probably one of the most evolving in the last 10 to 15 years, so you really have to stay in tune with what’s coming up.”
Technical Assumptions: Keep Assuming
Staying in tune with what’s ahead takes communication. And lots of it. That’s especially true now as the government shifts toward fixed-price contracts.
“In some instances, the statements of work from the government are not specific enough to address all the areas that might drive increased cost,” said Cynthia Hyland, vice president of contracts, pricing and procurement for Northrop Grumman’s Information Systems. “In many instances,” she added, “we have very short turnaround times on these proposals.”
Hyland’s team isn’t taking any chances. “We’re tying to make sure that we work closely with our government customers to fully clarify the statement of work — that’s key,” she said. That process goes beyond an extensive Q&A process. “We’ll typically put some technical assumptions around our offering to try to better clarify our understanding of the requirements in the event there are uncertainties,” she said.
Your Team: Sharpening Business Acumen
Making technical assumptions requires that your team sees its role more fully, as business advisers to the line, said Lora Drewer, senior vice president of corporate contracts and procurement with CACI International, Inc.
“We encourage our team to meet with the technical side and understand the challenges they face with their clients in the government space,” said Drewer, whose team includes about 175 contracts and procurement professionals.
That approach extends to government customers.
“Understanding the pressures they’re under is critical,” she said.
To advance that understanding, the company offers an online resource, CACI Virtual University. It includes hundreds of courses, covering various compliance protocols related to contractual and programmatic requirements. Participation, meanwhile, is tied to a career hierarchy. CACI procurement is currently working on a training matrix.
“Employees will be able to see what classes they need to complete in order to get to the next level,” Drewer said.
Meetings: Focused and Frequent
Also, helpful in fostering business acumen? “Single-subject meetings,” said Jeff Johnson, vice president of contracts for U.S. Investigations Services, LLC. “We’ll set up what we call SSMs, single-subject meetings, where we’ll focus on specific new requirements,” he said. “If you bring up another topic [in the meeting], everybody will get you back on topic.”
For Johnson, the rationale is simple.
“The SSMs, and the reporting requirements discussions during those, help you focus on what you really need to do,” he said. “Sometimes,” he added, “laws and regulations are not written very clearly — they could be vague and subject to interpretation — so we’ll drill into the meaning and determine if we need some additional expertise.”
At Aeronautical Radio, Incorporated, Vice President of Corporate Contracts and Procurements Glenn Baer is paying close attention to FAPIIS and its accompanying requirement to input data into a central contractor registration database.
“It’s probably going to require contractors to interface with FAPIIS more frequently than quarterly in order to keep that data current,” said Baer, who recommends a monthly “look-see” to update the information.
Data: Staying Consistent
Common terms and definitions matter now more than ever, especially as inconsistency can follow stand-alone systems for various business units: contracts, financial and business development.
At CACI, a new contracts-management system is underway to meet that challenge. “We’re looking to use common terms, definitions, and validation so the data is clean and we have really good data integrity,” CACI’s Drewer said.
“Our goal is to improve the technical capability by integrating that with our other core business systems … we’ll be able to feed information to our financial system and get information from our BD system,” Drewer said, of the web-based tool powered by Deltek.
Then, there’s the suppliers. At Northrop Grumman, Hyland and her team are leveraging a supplier assessment system, or SAMS.
“We assess over 200 key and critical suppliers every quarter, it’s a very robust assessment,” she said.
The same robustness is essential in gathering data on subcontractors, especially in light of recent changes to the Transparency Act. At L-3 Global Security & Engineering Solutions, Joanne Newman has incorporated a checklist that’s used when awarding contracts.
“We go through a whole checklist process to make sure we satisfy the requirements that we have under our government contract,” said Newman, vice president of contracts for the company.
Meanwhile, at Raytheon, Colangelo has found it helpful to have detailed discussions with first-tier subcontractors to fulfill reporting requirements.
“As part of these discussions, we favor the approach of requesting the information from our suppliers and inputting the data ourselves, as opposed to suppliers reporting the data under our contract, to ensure consistency and accuracy,” he said.
Regulation: Keeping Your Team Vested
The road ahead won’t be easy. Then as now, even a simple error may become a reportable occurrence — and those high stakes will put additional strain on company resources. Northrop Grumman’s Hyland is mindful of that.
“My goal is to try to ensure that we continue to have a stable and happy workforce through all of this,” she said.
Part of keeping a workforce happy is letting it know it’s heard, said AMERICAN SYSTEMS’ Kopfman. Happy workers turn to managers, unhappy ones light up company hotlines.
“We’ve not had a single hotline report in the past year,” he said. “Certainly, training and increased communications regarding our ethics compliance program can take a large part of the credit, but something I’ve learned is that the largest mistake companies make is not handling employee concerns at the line manager level.”
At L-3 GS&ES, similar strides are being realized. Over the past year, Newman has seen only one employee depart.
“The fact that we’ve been so successful in retaining such a strong team, you can tell I’m really happy about that,” said Newman, who oversees a team of 40 in contracts, subcontracts, procurement, pricing and exports.
An element in that success, according to Newman, has come in providing a sense of ownership. And promoting from within.
“That’s been a positive message that the management of the company is committed to developing career paths for folks in our company,” she said.
It’s those kinds of measures that are ensuring contracts leaders stay the course. And stay ahead. At CACI, for one, Weiss’ contracts team has helped the company grow from $1.6 billion to $3 billion over the past few years. Now, comes the next target: $5 billion.
“We’re all about setting down a foundation of an organization that we can leverage to grow and [in which] we can train our people,” he said. “I think it’s those kinds of basic things that allow your business to grow every day.”
Regardless of the regulatory climate.