So, you want to contribute to a political candidate?

Welcome to the continuing beta testbed  of the Government Services Insider Web service.

The following appeared today on the Washington Technology Web site today, under the byline of  the Insider’s editor and publisher:

The Supreme Court decision issued on January 21 makes the head spin with visions of apparent opportunity, as well as major corporate damage.  The ruling rolls back prior federal law that bars companies from contributing to candidates from their general funds.

The popular concern is that well funded companies can do more than influence elections; they might buy them.  Of sectors that might just try for big advantage, financial services, healthcare, and energy come immediately to mind.

But what about government contractors?  Companies could bankroll candidates who fund, authorize, and judge the programs and spending of   their companies’ federal client agencies.  One could imagine that the companies could literally shape the composition of Congress, influencing the nature and extent of oversight and procurement legislation.

But that aggressive vision comes with a grizzly set of risks.  What if a company-funded congressman or senator gets voted out of office?  What about a  whole administration?   What are the odds of payback?  What if you get in an arms-race of political funding of a candidate with your top competitors?  And do you think Wall Street financial analysts and institutional investors (e.g., CALPERS) might care whom you fund?  And then there are the various ethics police.

It’s easy to imagine some industry players who don’t want the change.  Small business, clearly, could be disadvantaged by free-spending big companies with pots of money for political candidate contributions.  Companies with activist, conservatively ethical boards, plus watchful institutional investors just might be queasy –and vocal–about making political contributions.

Selected Congressmen are already gearing up legislative proposals to shut the door on company contributions to candidates.  And the president has already vocalized his displeasure with the Supreme Court ruling.

The White House actually has a ready-to-use rope to strangle candidate contributions from contractors.  It is in plain sight, and would require no Congressional action.  Over multiple administrations the government has put in place policies and regulations and progressively strong enforcement of organizational conflict of interest regulations.  Isn’t a cash contribution to a political candidate by an organization that would benefit the most obvious of organizational self-interest?  Try saying:  “organizational conflict of interest.”

Let lawyers slug it out, but we think that label can be made to stick.  Then companies shrug their shoulders and disclose the organizational conflict of interest.  Contributions would be a matter of public record anyway.

But it’s then up to the customer agency to determine if the OCOI is acceptable and needs mitigation. That’s an interesting hand grenade for an executive agency to pick up and examine.

Imagine the analysis. Connect the dots regarding a prospective contract award to the company making contributions to a new or incumbent political candidate and with the company’s present and future business interests and prospects.  Be sure to triangulate the candidate with his/her committee assignments and ties with a federal facility or agency program or employee labor unions.   Then, make a judgment about whether it is permissible for the contractor to both fund candidates and accept federal contracts.

We’ll let the administration, the Congress, and the courts decide.  Meanwhile there will be a new spectacle of the usual acquisition pundits and skilled industry lobbyists doing their thing.  This is just what we need in the federal acquisition community, another sideshow that will drain valuable time and attention from the many persistent and vexing issues, while threatening the interests of both  customer and company alike.

Contractor Regulation Growth Spurt—Don’t Bet On It

When the Obama administration took over, there was already a set of new, and a backlog of in-process, regulations washing over the industry.  They focused on, among several thrusts, increasing transparency and nurturing competition.  As  political momentum and a pipeline for regulations are now fixtures, we haven’t seen the end of regulatory increases.

And it is a one-way phenomenon for the most part.  When was the last time that you saw the withdrawal or the softening of regulation of contractors?

But we were wrong nearly a year ago when we prognosticated that regulation of contracting would rise as a secondary effect of the understandable loud calls to re-regulate with some stringency Wall Street and other financial services industries.  While still necessary–in terms of public opinion polls and the sincere or postured mutterings from Congress, and even some business leaders–it seems clear we will not see that. Somewhat reminiscent of health care reform, we are seeing a dilution in sentiment and political feasibility for making significant financial regulation a reality.

Not only officials of the last administration, such as Treasury secretary Hank Paulson, but also current officials have softened their stance on financial industry regulation.  As a result, financial regulation will turn out to be wimpier and partial. 

Accordingly, we do not see a marked increase of business regulation generally, including on federal contractors.  Again, we are talking about an acceleration in the pace and boost in stringency of regulation, not the pre-existing baseline trend to progressively more regulation of the industry.

Cyber Alliance Raises Mores Questions Than It Answers

On November 12, 14 companies that play in the cyber security business announced an alliance. Built around some well known capabilities in software (such as RSA’s in encryption), hardware, and services, the group offered itself as a  collective resource to the government and other customers.

So What? Right now, the government can draw on almost any combination of companies and universities it wants through a variety of vehicles. Funding is increasing smartly, but product and company differentiation are hard to achieve.

This alliance is purely for marketing, as well as creating some identity for upcoming cyber bids. Some of the 14 firms already team—or compete.

The 14 companies clearly believe there is magic in their assemblage, led by the biggest government contractor, Lockheed Martin. Last week LM christened a laboratory and testing facility, with capabilities that other, larger players in cyber
security, such as SAIC and Booz Allen Hamilton, already have for cyber solutions research and evaluation.

In addition, with some potentially vexing legal and business challenges to form an alliance, and the government’s  hesitance to say what incentives are acceptable between alliance members, customers  may have some reluctance to deal with the alliance.

Among the subjects that must have kept quite a few attorneys and business executives busy when forming the alliance are the following:  (1) organizational conflicts of interest identification and mitigation; (2) safeguarding national security and
proprietary information held by one alliance members from others without a need to know); (3) respective roles in opportunity management and revenue generation; (4) dealing with existing contractual and teaming arrangements with
companies in and outside of the alliance.

As they are not cornering the cyber market, there’s no particular anti-competition angle to defend against, but there may not be squawks from small business if the alliance ever makes a splash.

Further, there is an elephant-in-the-room issue regarding what is permissible to bind together companies in IT-related alliances. It is coming up on two years since the Justice Department threw a chill into IT suppliers of all sorts when it joined a whistleblower’s suit regarding the incentives IT alliance team members give each other. The suit remains
unsettled, and even firms that have voluntarily come in for settlements, such as IBM, don’t know what the government will find acceptable. The three companies being sued—Accenture, Sun, and HP—show no sign of settling.

Since many of these legal issues tend to raise red flags and yellow lights, it is one more reason to view the alliance as a trial balloon at best. The mechanics–the fall out of all the issues that need to be resolved within the collective of the 14  firms—may be of more interest to government and industry than some of the cyber capabilities being offered.

Don’t Expect Dan Gordon to Move Mountains

This is no criticism of the president’s nominee for administrator of OMB’s Office of Federal Procurement Policy. He’s exceptionally well qualified to be the top government procurement policy official, a role that’s been lackluster for several years.

The usual suspects in the acquisition community had been implying for months that if only the position were filled,  reforms could proceed. Now that the position is almost filled, let’s take a deep breath.

So what? At his confirmation hearing this week, Gordon disclosed an agenda that had no surprises. It contained the same hardy perennials that the community has ruminated over for years: grow the acquisition workforce, strengthen acquisition planning, reduce the government’s risk, improve contract oversight, and cut wasteful contract spending.

To play on Hillary Clinton’s book title, it will “take a village” to reform procurement. The energizers are a committed president, an understanding Congress, agencies that give a darn, and an industry that will accommodate some changes.

Unfortunately, the White House procurement reform campaign set itself up with the $40 billion savings bogie. As a result, it is already playing oddly: forcing agencies by rote, and in the exact same proportions, to reduce contract spending and high-risk contract cuts; letting the agencies believe there is an insourcing mandate when there is
none, allowing way too many lobbyists into political posts, and letting the mice play on fair cost comparisons between contractor and government employee costs.

Congress keeps on adding regulations, some of them sensible, some over-reaching (see Alan Chvotkin’s column in the Insider). The agencies, with a few exceptions such as VA, are not buckling down to weeding their weak contracts and gearing up seriously for stronger oversight.

The industry is playing defensive ball after trying to get along with the new administration on every issue. That’s probably unavoidable.

So look for Dan Gordon to do more than fill an empty chair. He can coordinate policy better, ride herd on the agencies that are weaker in contracting, and open up a more effective dialog with industry that many in government still hesitate to
do. He can also interpret acquisition to the White House, which still is not sufficiently aware of how reform can actually be accomplished. That alone would be a great contribution. But moving mountains? That’s not Dan Gordon’s job.

Partnering: Dead? Was It Ever Alive?

Some recent public mourning of the death of government-contractor “partnering” has a nice, wistful feel.  But did partnering ever really have a pulse?

Here are seven reasons that suggest partnering never really existed, and may be unhealthy for contractor and customer alike.

1. Federal contracts don’t read like partnership agreements as known in the private sector.  There’s no equitable  risk-sharing or provisions that reflect a high degree of trust between partners. And there’s no discernible trend in that direction.  Rather, it’s for more regulation and forced disclosure of contractor business details.

2. The re-emphasis on contract oversight that emerged when Rep. Henry Waxman’s became chair of the Government Oversight and Reform Committee in January 2007 noticeably rattled the industry. Since then, the rising tide of regulation proposed and signed into law suggests the Federal customer-partner has had declining trust in supplier-partners for a few years.

3. The ever-tightening rules and enforcement concerning organizational conflicts of interest demonstrate less government faith in companies’ ability to identify and mitigate such issues. And just wait for the soon to be unveiled personal conflict-of-interest regs.

4. Both government and industry routinely show their reservations about operating more transparently. On the government’s side, FOIA transactions still seem to take forever.  Contractors’ disclosures to government and the public are almost always in response to government requirements and pressure and are often opposed by industry in the rule-making process. What publicly owned companies reveal is mainly driven by SEC regs and to please Wall Street equity analysts, not taxpayers or government customers.

5. Small businesses—the vast majority of the contractor population but with constant market share of federal prime contract dollars—act less satisfied, and often aggrieved, concerning government set-aside program spending and enforcement of the rules. The government hasn’t delivered any more dollars in percentage terms for years.  And some large companies still get a startling amount of “small-business” set-asides due to unsettled policy guidelines and  administrative error.

6. Government agencies, according to the Professional Services Council, are acting as if there were a mandate to insource, even though there is none.  The Administration has been careful to state its goals for program budget cuts and procurement and management reforms in source-neutral terms.

7. When troubled contracts and programs come to light in audits, reviews, and hearings, contractors remain muzzled by their customers, who prohibit releases of information unless approved by the government. Either (1) the customer-partner wants only its side of the story to be heard, or, (2) it is protecting the contract or contractor.  Come to think of it, there may be a spirit of partnership in this behavior, but it’s not one that’s good for the taxpayers.