Little Known ‘alphabet soup’ U.S. Federal Government Organizations: PBGC

I have worked in and around the Federal government for a long time, so it’s sad to see how little the general public knows about the workings and services provided by the government. This is one of occasional posts about little known Federal organizations.

I’m guessing that very few people know about the Pension Benefit Guaranty Corporation (a Federal agency).  It was created by The Employee Retirement Income Security Act (ERISA) legislation passed in 1974….  Basically, It’s purpose is to insure the viability of self-funded corporate pension plans.  The companies pay into a PBGC fund based on the number of employees enrolled in their pension plans…. So this agency is self-funded, and Congress sets the rates that companies pay.

Their 10 biggest ‘bail outs’ were:

Firm and Year Terminated	Total Claims In Billions	Vested Participants	Average Claim Per Person
1. United Airlines (2005)	$7.4	123,957	$60,033
2. Delphi (2009)	$6.1	69,042	$88,475
3. Bethlehem Steel (2003)	$3.7	91,312	$40,021
4. US Airways (2003)	$2.8	55,770	$49,337
5. LTV Steel (2002, 2003, 2004)	$2.1	83,094	$25,694
6. Delta Air Lines (2006)	$1.6	13,291	$123,473
7. National Steel (2003)	$1.3	33,737	$37,811
8. Pan American Air (1991, 1992)	$0.8	31,999	$26,285
9. Trans World Airlines (2001)	$0.7	32,263	$20,717
10. Weirton Steel (2004)	$0.6	9,410	$68,064
Top 10 Total	$27 B	543,875	$49,933

According to Wikipedia…During fiscal year 2010, the PBGC paid $5.6 billion in benefits to participants of failed pension plans. That year, 147 pension plans failed, and the PBGC's deficit increased 4.5 percent to $23 billion. The PBGC has a total of $102.5 billion in obligations and $79.5 billion in assets.  PBGC pays monthly retirement benefits to approximately 631,000 retirees of 3,800 terminated defined benefit pension plans. PBGC is responsible for the current and future pensions of about 1.3 million people.

So, everyday the Federal employees at PBGC show up to work to shore up the failings of major corporations who fail to adequately fund pension plans, or whose pension investments have soured, or whose business falls apart for other reasons.

The idea that corporations do things better and more efficiently than the Federals government continues to stir the political pundit gabfests. You’ve heard many variations on the theme:

·      ‘get the government off of the backs of industry’

·      ‘the government stifles business’

·      ‘regulations constrain the job creators’

·      ‘government agencies are ineffective’

·      ‘bureaucrats don’t provide needed functions’

·      ‘government welfare only goes to poor people’

·      … and other opinions of that ilk ….

The continual denigration of Federal agencies and the valuable work they do, erodes the confidence the American public has in their government, and sheds little light on what essential functions are performed in all of those Washington D.C. cubicles. 

All too many ill-informed citizens support political positions and philosophies that are not in their own, (and other citizens’) long-term economic security interests.  They don’t realize how much the government actually does, albeit quietly, and out of the spotlight of mainstream press coverage.  It would be devastating for a citizen to lose a promised pension, after spending 30 years of their working lives trying to accumulate enough to sustain themselves in a dignified retirement.  Without PBGC there would be no safety net for them.

More ‘alphabet soup’ agency posts coming soon.  Leave suggestions in the comments.

Spiraling Federal Contract Spending

Someone asked me how much of the US budget went to contractors.  It looks like about 1/3, it may have changed since 2012 though.

The total US Budget in 2012 was $3.54 Trillion, so
it looks like about 34% if this source is even close.

Those who advocate for reduced federal spending may be missing the notion that it would result in reduced contracting, reduced (federally funded) private sector jobs. Major employers in the US build weapon systems, fighter jets, cargo planes, warships, as well as IT and other service type companies that build government systems and provide support to government functions.

Some  miss the fact that some of the government 'failures' are also partly private industry failures.  It's government's failure not to detect and cut off the failing federally funded private industry projects, but those who clamor for running the government more like business..... they are placing too much faith and credibility in the private sector where money may trump mission.  The track record of contractors in government is littered with a sufficient history failures and fraud to suggest that contractors are no panacea in providing government services and functions any better than federal employees can, and do.

Contractors who cheat

It has always puzzled me the extent to which government employees are criticized for inefficiency or laziness or general bureaucratic malfeasance or....xxx or.....yyyy....while profit making industry is often praised for the opposite qualities.  Stories like the one below usually fly below the general population's radar, while the government employee stories are front page.  
Here is a small A.P. STORY one about one of the biggest contractors in the business.  Sloppy timekeeping for a fortune 500 company is a very lame explanation.... Thanks to the whistleblowers who voluntarily told the truth.


Boeing pays $23M settlement over labor charges 

Update at 10:29 PM (10 Oct 2014)

SAN ANTONIO (AP) - The Boeing Co. has paid $23 million to settle allegations that it submitted false labor charges to the U.S. Air Force for contract maintenance on C-17 Globemaster transport aircraft.
A Justice Department statement issued Friday says the allegations centered on labor costs the Chicago-based company charged improperly for maintenance and repair work at Boeing's Aerospace Support Center in San Antonio.
The allegations were made initially by four present and former Boeing employees acting as whistleblowers. They will divide $3.9 million as their share of the settlement under terms of the False Claims Act.
In a brief statement, Boeing called the discrepancies "a matter of inadequate charging discipline" not deliberate wrongdoing. The company said it's improved charging practices.

Comparing Federal IT Systems against Commercial Systems: JUST STOP IT!

Every week or so some pundit, politician, or professional writes an article about how the Federal government ought to acquire IT products or services like private industry does.  I believe that idea to be niaeve and irrational. It betrays these folks’ ignorance at best, or political and business motives at worst. There are too many differences between the private versus public purposes, environments and challenges to enumerate, but I’ll discuss some of them below.   

But first, these folks make the false assumption that private industry is more successful at IT projects than are the Feds.  One needs only to read the Standish Group’s annual Chaos Report http://www.csus.edu/indiv/v/veli...
It reports on IT project failure rates and problems in both the private and public sector.  But even this excellent source is dependent on the private sector to volunteer information about their failures.  The press, public and Congress don’t know how many private sector IT projects get strangled quietly in the crib, or buried without a eulogy.  No one knows how many private projects are late, over budget, under functioning or otherwise not meeting the original plan.  So these pundit types need to just stop blindly believing the propaganda and puffery from those who seek to profit from selling IT system development services to Federal agencies. The media pundits need to look for evidence supporting the claims of the ‘private-is-better’ notion.

But let’s explore that ‘private-is-better’ wonderland a bit.  Let’s assume that private industry develops their IT systems better, faster, cheaper than the Feds develop theirs.  What are these systems doing? I hear politicians mention what they apparently believe are comparable systems…. Google; Amazon; Facebook; iTunes; or … which ever.   ‘If Amazon can get your stuff to you in a few days, why can’t Obamacare let you ……blah..blah..’ 

Compared to the functions most Federal IT systems need to perform, these commercial transactions are trivial.  Not that they don’t perform their functions extraordinarily well, but they’re just trivial.  Most of their public-facing transactions are no more than some combination of: 
1.   sign in or sign up 
2.   browse or search
3.   choose from what’s listed
4.   type in a sentence or two (maybe)
5.   give credit card & address (maybe);
6.   Click DONE!  

They don’t really care who or where you REALLY are …… only that the credit card is good and a password/email pair is valid.  

If the ‘private-is-better’ crowd intends to compare private company internal IT systems (finance, HR, accounting, sales or other business functions) these systems are also trivial in comparison to the realities of (Federal) government systems.  Their systems can be built or rebuilt according to the company’s current needs and carry over whatever legacy functions they need to.  In other words, the company can redefine what it needs, jettison what it doesn’t and buy or build what they need. They can follow whatever ‘standards’ they desire (or none).  They can be as careful in handling data and security or as loose as they dare.  They can also roll out these functions at whatever pace is appropriate.  Of course they do, or don’t do these things at their own risk and peril.

In the (Federal) government sphere, agencies and program managers (PMs) have no such ‘freedoms’.  They operate under a totally different set of business rules, mostly driven by Congressionally developed and Presidentially signed legislation and the subsequent translation of the legislation into regulations and procedures… only after the public and commercial entities and lobbiests have provided their input and commentary.  

The agency PMs also operate under procurement rules wherein they can’t just PICK a contractor that the agency likes and trusts. There is a formal public process that governs advertising, specifying the need and giving the marketplace an opportunity to compete to fulfill the requirements.

Even though there are government regulations that constrain some private activities (e.g. various disclosure documents for publicly traded companies). Most private companies building systems do not have congressional actions that impinge on their technical direction and approach, nor do they typically have an unstable set of new/changing executive appointees to contend with.  Nor do they have complex rules and regulations created out of the legislative, rulemaking, legal and public input processes.

In most non-trivial transactions with the Federal government, there are many issues that private sector systems do not address, except in a limited way.  Using Social Security or Medicare or some other claims processing or tax system as a point of illustrating the unique complexities of government systems it becomes obvious that these systems are much more logic and data-centric, pulling from many different sources across organizational boundaries.  A sampling of the issues that the Fed IT world worries about that the private sector typically don’t ---are issues such as:
·      Are you who you say you are? - and how does the agency establish and verify that electronic identity with extremely high accuracy.  Or even when doing a transaction in person, depending on the size and nature of the transaction, great lengths are taken to ensure accuracy of government-known information compared to the in-person representations
·      If you are conducting a transaction for someone else, what is your relationship and legal authority to do so?
·      If you are applying for some kind of disability benefit, you need to provide medical, financial, educational, work history, and other evidence to enable the government to determine your eligibility for a benefit.  And …the government needs to be able to receive, track, validate and associate all of this information with a specific “case”/individual.
·      If you are applying for some kind of educational benefit, you need to supply statements and data about yours and your parents’ financial condition, history and income.

I’m not saying that private sector companies do not have sophisticated, complex systems.  What I’m saying is that those that do, are able to do their business OUT of the public eye (so we don’t know how successful they are), and those that don’t have sophisticated systems… even the ‘trivial’ retail systems have ties to inventory, accounting, buying and delivery systems…. But they are not typically operating across organizational boundaries.  Verizon has still not consolidated their various billing and account systems across ex-NyNEX and all of their acquisitions and business unit consolidations – and they are a ~$24 Billion enterprise  ($21B-wireless $3B-wireline revenue).

So the pundits, pols, prevaracators, just need to examine the reality of Federal IT systems…. And just STOP THE SILLY, ILL-INFORMED, HEADLINE-GRABBING RHETORIC.

Federal IT Contracting 2.0: Solving The Problem With Contractors

The founding principal of federal contracting is competition.  The notion is that through a formal process using both objective and subjective criteria, that the proposal evaluation teams are positioned to pick the best of the competitors.  There is no shortage of detractors of the process.  It’s cumbersome, it’s rigid, it’s bureaucratic, it’s slow, the Federal Acquisition Regulation (FAR) is too big and complex, etc.  Reformers argue that shortcuts of various types need to be taken.  All of that may be true, but I don’t think that those are the things that prevent IT contracts from being much more successful than they currently are.

A typical IT contract awards work to ONE contractor.  I think that this is the basic flaw.  At the time of contract award perhaps the best contractor is the one chosen.  But that contractor doesn’t necessarily STAY the best contractor.  It is no secret that contractors use their “A” business team for writing proposals, and propose their “A” team developers and engineers.  Their actual USE the “A” team on the project is no guarantee except for a few who are officially designated as “key personnel”.  But even that is no guarantee, and there is a process for replacing key personnel.  Even in the rare instance where a contractor delivers the staff exactly as proposed, this ‘best’ team’s performance has a tendency to erode after the ‘honeymoon’ period common to all projects.  This is due to totally normal human behavior.

There is no shortage of material on organizational development, group behavior, management and behavioral sciences, group and individual motivation.  And there is no shortage of methods, consultants, and interventionists to help teams perform to their highest potential. There is not enough of these sources and methods being employed on federal IT contracts.  Of course, for a contractor to employ these tools on a continuing basis, it would add to the costs which would be passed through to the customer via the contractor’s overhead costs.  It’s a thorny problem. 

Here is a solution: All mid to large size IT contracts should award tasks orders of... say... 80% to the ‘best’ contractor and 20% to the ‘next best’ contractor.  Let’s call these the A team and B team contractors.  Simply, the B team is there to keep the A team on their best game.  If the performance of the A team begins to slip, the Program Manager (PM) and the Contracting Officer’s Technical Representative (COTR) and Contracting Officer (KO) have the power and mechanism in place to easily move current or new work tasks from A and award it to B, and vice versa when necessary. Another way would be to have B act as a validation and verification (V&V) team, which allows them visibility into the guts of the project (and ready to take over) This scheme would provide for constant competition among the contractors, and would surely keep their executives and managers engaged in the quality of service on contracts they’ve won – perhaps as much as they worry about the quality of the proposals for the NEXT contract they’ve yet to win.

In the current federal IT contracting environment, competition works well enough…. until there is one winner.  At that point, the game is over.  The Federal IT community needs to figure out how to take advantage of normal human and organizational behavior, along with their survival instincts and revenue goals by incorporating this or other constant competition schemes into their IT contracting playbook. 

EPILOG:  Ironically, amid all of CMS’s failures on the Healtcare.gov system rollout, I think they actually had a similar mechanism in place that saved a chunk of their bacon…or maybe just a few slices. The main contractor’s (A) role was taken over by another contractor (B) who was working on a key part of the system: the ‘data hub’ that routes data between systems and organizations. So contractor B was responsible for getting the system working during the crash effort that was successful at getting – now – millions of folks signed up.  But now CMS has decided to give most of the work to yet another contractor (C).  The next thing to watch on this project is how C behaves, now that they are establishing control and probably recruiting all of the “A” team staff from the original A contractor and B as well.