2009 Outlook 2: Contracting for change
The pendulum seems to be swinging again between the role of federal contractors and government employees. After four administrations abetting bigger roles for government contracting, President Barack Obama has indicated a reversal. For companies doing business with the federal government, this direction has implications not only for transacting business, but for that combination of familiarity, reputation and image called “brand.”
The end of the Cold War placed a similar burden on defense contractors. Large ones consolidated into the mega-brands. The smallest ones branded themselves to these giants. Those in the so-called “no man’s land” in between faced an uphill road. While the primes addressed issues and the tertiary product suppliers talked about their wares, the mid-sized communicated their specialized systems expertise. No one could afford to be out of sight, out of mind.
The growth of government spending in the past eight years reframed the challenge. After President George W. Bush took office, the government doubled the amount of contracts with industry. The administration paid corporations more than $400 billion in 2007. Detractors of contracting have pointed to other similar statistics about the ratio of contractor to federal employees.
The wake-up call
In Green Bay, Wisconsin on September 22, 2008, in the midst of the burgeoning financial crisis, then Presidential nominee Barack Obama signaled that it was time for the pendulum to swing the other way. After declaring that he would make government more efficient, he said, “I will also save billions of dollars by cutting private contractors and improving management of the hundreds of billions of dollars our government spends on private contracts, and I will end the abuse of no-bid contracts for good.”
A position paper outlined specific steps in contracting reform:
• Cut federal spending on contractors by at least 10 percent.
• Reform federal contracting and reduce the number of contractors, saving $40 billion a year.
• Encourage the use of fixed-cost or incentive based contracts.
• When cost-plus contracts are necessary, force agencies to use mitigating procedures like incentives tied to performance goals and cost savings.
The paper further discusses the need to “hire more contract managers and improve training.” TMP Government has been very involved in this effort, which will form the topic of a future blog.
Communicating your value
On Inauguration Day, President Obama laid down the gauntlet in front of millions across the world: “The question we ask today is not whether our government is too big or too small, but whether it works.” A few sentences later, he stated, “And those of us who manage the public’s dollars will be held to account to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government.”
This call to efficiency, accountability and transparency demands a response from contractors. Few in the public sphere have ever risen up to tell the contractor’s story. Even in the moments of greatest triumph, such as the Apollo landing on the Moon, the glory has gone to the government customer. This behind-the-scenes enabler relationship, of course, is appropriate. Even with heavy dependence on contractors, the contractor role remains supportive.
Yet when the foundation of government contracting is challenged, companies, regardless of size, must rethink their collective and individual value propositions. What is the bedrock value of government contracting to the government people? What value does your company represent?
Our next blog will discuss how companies can express their value for present government crises and shifting priorities.
Next: 2009 Outlook # 3: Branding for the new era of responsibility