OMB Issues Guidance for Agencies to Cut Costs by 7% and Reduce Reliance on Outside Vendors

In guidance issued by the Office of Management and Budget (OMB) on July 29, the office unveiled contracting reforms with a goal of saving $40 billion a year.  The guidance requires agencies to reduce contracts by at least 7%, particularly focusing on what it terms “high risk” arrangements such as non-competitive contracts and cost-plus contracts where there is potentially little incentive to controls costs.

According to the OMB press release, spending on government contracts has more than doubled since 2002 (reaching $500 billion by the end of 2008).  In this same time period, contracts awarded non-competitively increased from $82 billion in 2002 to 182 billion (while this is a clever presentation of numbers, the percentage of non-competitive contracts relative to total spending has not increased in such a dramatic way).

The guidance also dealt with reducing the overall reliance on outside consultants, as well as tracking contractor performance in a more centralized manner for evaluation purposes.

IMPLICATIONS

Certainly, vendors may find themselves impacted by this new guidance.  Contractors who have traditionally offered services based on Time & Materials will find greater pressure to move to a Firm Fixed Price model (although this may backfire on the government as FFP prices may rise to cover the contractor’s risk).  Others having a history of sole-source agreements may find future requirement specifications loosening to bring in new, non-traditional competition.

Now is a good time to proactively analyze cost performance, contract stipulations and relationships.  Buyers will most certainly appreciate a vendor who brings unsolicited cost-cutting or efficiency-enhancing measures to the table.  In all, government buyers will continue to find ways to utilize contractors offering strong value.  Those with a shaky story may find themselves a casualty of OMB scrutiny.

-LBB

The Government Contract Sales Call

Taking a break from working on an economic stimulus grant to think about keys to success for selling to government.  Truth is, it’s not much different from selling to private business.  You need to establish credibility, understand processes, and present strong value propositions…just as you would in any selling activity.  In government markets, credibility comes from different places, the processes are almost always different, and value propositions are skewed toward delivering services and efficiency.  Otherwise, no significant differences.

Rules for the sales call are very similar, too.  Mary Scott Nabors, CEO of Strategic Partnerships, Inc. writes a handy article in her newsletter.  Summarized here:

  • Make brief credibility comments as an opening.
  • Use examples of success.
  • Exhibit energy and passion.  Don’t disparage competitors.
  • Speak for less than 20 minutes, then conduct Q&A.
  • Do not read PowerPoint presentations; speak off the cuff.
  • Show a risk-deverse offering.
  • Be genuine, credible and trustworthy.
  • Use stories when possible.
  • Establish next steps.
  • Leave succinct materials behind (with your contact info included).
  • Thank your audience for their time, and their service.

Way to go, Mary!  Your comments are right on the money.  One thing to add:  Don’t hesitate to ask your prospects questions.  Anyone else have suggestions?

Now, back to economic stimulus.  (I’d rather be making a sales presentation.)

Rick

APCO Says Broadband Eligibility Rules Unfair to Public Safety

In a post today on www.govtech.com, the article covers statements made by the Association for Public Safety Communications Officials (APCO)regarding eligibility rules for public safety agencies applying for broadband stimulus funds.  According to Richard Mirgon, the association’s president-elect, eligibility requirements for stimulus grants will exclude many public safety agencies since the law mandates network partnering with community institutions such as universities or health-care providers.  Mr. Mirgon argues that while certain partnerships may be appropriate, many will not work when sensitive or secure data is involved.  APCO will send a letter to the NTIA in the next few days requesting a rule change.

-LBB

How Far Does the U.S. Really Lag Behind Other Countries in Broadband?

America’s movement toward greater broadband capabilities is a hot issue currently.  The American Recovery and Reinvestment Act (ARRA) included a $7.2 billion allocation for the Broadband Technology Opportunities Program (BTOP) with a goal of bringing broadband to “unserved” and “underserved” communities and “improving access to broadband by public safety” (watch for our upcoming blogs about the public safety part).  Commonly cited as the reason we need major investments in broadband is the United States’ ranking of 15th in the world with regards to broadband penetration–a fact that disturbs many in the country.

However, a recent report by the Technology Policy Institutes takes issue with this analysis to a degree.  It says penetration numbers should not be derived on a per-capita basis, but instead on a per-household basis.  Doing this provides a more accurate comparison across countries, and raises our ranking to somewhere around 8th in the world.  For comparison, consider telephone penetration.  Currently 95% of homes have telephones, but applying the same per-capita measures and comparing across countries, the U.S. ranks 45th in the world.  Per household is clearly the more accurate measure.

And, penetration rates are growing so rapidly, it is likely they will reach saturation points in the next few years.  So does this mean all of the excitement (and money) surrounding BTOP is for naught?

IMPLICATIONS

Not necessarily.  It does help guide where money should be spent, however.  While certainly infrastructure investments are needed in communities where this is lacking, generally speed, applications and other collaborative initiatives that foster greater internet adoption should receive the greatest amount of attention. 

For example, this same study showed the U.S. lagging behind most wealthy nations–not in penetration–but in speed.  At a roughly estimated average of just over 4 kbps, the U.S. ranks between 12th and 15th in speed depending on the source used. 

Development of IP-based applications (which inherently drive greater broadband adoption) is also a needed area of focus.  Software as a Service (SaaS) (delivering software applications on-demand over the internet) is still in its infancy, yet has tremendous potential for growth and adoption.  So are possibilities for connecting public agencies with private commercial entities within community “anchor institutions” such as libraries, schools, etc..  This also increases adoption–possibly from population segments who do not currently value it.

Overall, the U.S. may be in somewhat better position than some claim, but we clearly do not lead the world in broadband.  Policymakers should take into account the real barriers and gaps in the market, creating incentives for right approaches, while not erecting barriers for factors that are working well.

-LBB

 

 

 

 

 

 

 

 

 

 

 

 

10% Unemployment?: Stimulus Total Failure or Not Enough?

A number of articles have been written over the past week relating to the effects (or lack thereof) of the stimulus on the American economy.  At the heart of the debate is the unemployment rate–a staggering 9.5% for June.  And, today the Federal Reserve said unemployment could hit 10% later this year.  The Obama Administration is taking particular heat over their unemployment projections released prior to passing the stimulus law. 

The graph below illustrates their projected unemployment rate with no stimulus package compared to the unemployment rate with a stimulus package.  These data are overlaid with the actual unemployment figures through June.  As you can see, actual unemployment is higher than anyone imagined.  Consider the 10% rate postulated by the Fed, and we’re not even on the same planet with the projections.

 

As a New York Times blog points out, some economist take a position that the original stimulus was simply not enough (add to this a slower-than-anticipated release of the money, and you get no positive economic impact).  Other economist argue the stimulus simply didn’t work, suggesting another stimulus would be a waste of money (and an economic drain on the future). 

IMPLICATIONS

Whether or not another stimulus package will be passed is yet to be seen.  What is clear from a vendor perspective is funding already committed in the current package has not yet made its way to American business.  Even the construction industry, one of the first sectors to actually see money flow, projects three-quarters of stimulus spending for 2009 will actually slip into next year

As such, contractors need to be patient and dilligent.  Alliances and partnering opportunities are more important than ever as in this environment.  Don’t wait to begin solidifying these relationships.  Focus on value creation, and pay particular attention to how your piece fits into solving the larger problem.

The rough ride is unfortunately far from over.  But times like these can help “sharpen the saw” for better days ahead.

Pace of Stimulus Spending Picks Up

The pace of stimulus spending is picking up according to an article on www.govexec.com and comments from Mike Pickett, CEO of Onvia.  Onvia is a company offering paid subscriptions for accessing consolidated government bid/RFP information.  It is also tracking recovery spending.  According to its analysis, federal, state, and local stimulus contract obligations have grown by more than 50% during the last month.

Pickett told the House Oversight and Government Reform Committee it was following $59 billion in spending contracts at the beginning of June.  It is now tracking $90.7 billion.  This includes some 22,000 projects.

IMPLICATIONS

While this is good news for many contractors wondering when the money would start flowing, it is not entirely representative of the actual dollars making their way into the economy.  The article points out these figures represent projects that have been publicly reported, though checks may not have actually been cut to vendors.  Approximately 20% of the $90 billion is still in the RFP stage.  Much of the reported total is still within the construction/transportation industry for road building or improvements so expenditures are still within a fairly narrow sector.

As such, vendors should be actively scouring various grant sources such as www.grants.gov looking for projects that fit their business offerings.  New projects appear daily, so active monitoring is crucial.  The money is beginning to move, and eventually a greater range of industries will benefit from these government expenditures.  Keeping an eye on the ever-changing stimulus landscape will possibly (hopefully) unlock the promised opportunity.

-LBB

Another Economic Stimulus?

There’s a good bit of talk of another economic stimulus law.  Administration and congressional leaders appear to be testing the waters.  Some, mostly Democrats, say another ARRA-type law may be needed.  Others, mostly Republicans, say another stimulus is not necessary, that the first one wasn’t a good idea in the first place.

With trial balloons being floated, one thing is for sure:  a second economic stimulus law is on the table now, up for debate.  The debate is underway even though a small percentage of the 787-billion-dollar ARRA has been spent.   

We’re hearing government vendors complain that they’ve not seen the promised impact of economic stimulus.  We tend to look at it more optimistically.  Although funds may not have made their way into vendors’ pockets, there’s been an impact.  The impact can be seen in government decision-maker and buyer openness to listening to strong value propositions, particularly in those areas directly addressed by ARRA. 

On one hand, we’re seeing good vendors put strong tactics into play, making sure that they’re standing out from the pack as problem-solvers during difficult times.   On the other hand, we’re seeing some vendors hide behind the tough economy and not addressing management, product, marketing and sales problems.  (This game of hide-and-seek, mostly hide, always occurs in bad economies.)

Whether there’s another economic stimulus law, we obviously don’t know.  (If forced to bet, I personally would put my money on another one.)  Regardless, the first one opens opportunity for government vendors.  There may not be a quick buck to be made…but, at least government buyers are generally open to hearing what good vendors with good stories and strong value propositions have to say.