Federal Contractor Games Part 2: Can an IT contractor be your PARTNER ?

The last posting discussed one of the tactics used by a so-called federal agency “partner”: to confound and confuse the agency through administrative and procedural ‘hanky-panky’.  This post discusses two more of the set of tactics listed in the earlier post:

·      Using procedural and administrative steps to confound managers (discussed in previous post)

·        Obfuscating rather than clarifying task substance and schedule, and

·         Staffing and rate anomalies

•   I Inflating effort for tasks
• ·     Transferring and avoiding risk
• ·     Manipulating travel and expenses
• ·     Overwhelming the government legal and contracting staff
• ·     Violating ‘best customer’ pricing guarantees and requirements

Obfuscating rather than clarifying task substance and schedule

  One of the more clever techniques the ‘partner’ almost always used was to include a long list of assumptions and conditions in the task proposals.  This ‘fine print’ usually attached at the back of a task proposal was often 3-5 pages long, and contained items that actually rendered key parts of the task proposal improbable if not impossible.   With the shear number of the assumptions and conditions, the probability of them all being met was zero, leaving a virtual escape clause for the partner.  It turned out that many of the technical managers OVERLOOKED this (boring) detail and focused on the  technical substance of the task proposals. One really neat, seemingly innocuous assumption was having a specific named person from the agency available at a particular time, for example for full time for the first two weeks of February.  Reasonable?  Yes!  Yes if.

 In one analysis we decided to look at all of the staffing conditions ACROSS ALL TASK PROPOSALS.  As you may have suspected, the partner included similar conditions in different task proposals for the same person, same period of time such that the named government person was scheduled over 100% of his available time, sometimes 200%.  Without very close examination of the fine print, the agency would never have known BEFOREHAND that some proposals from the partner COMBINED, created what contract law calls “impossibility of performance”.  In other words, if ever challenged legally, the contract would be ruled void, due to the impossible circumstances stipulated in the language of the agreement (actually missing the essential component of contracting ‘a meeting of the minds’).  This is not the kind of behavior, or need for deep analysis that the agency was expecting from it's selected strategic partner.  I suspect that other agencies attempting to make PARTNER relationships work are experiencing similar issues.

Staffing and rate anomalies

  Another tactic that drove my costing analysis team bonkers was the issue of: who was proposed to do what at what labor rate. The agency needed to ensure that they were paying legitimate rates for legitimate skill-experience. For this we used well known industry models that used IT function complexity and other factors to estimate the level of effort (LOE) that would be required.  Actually, we used several of them for cross checking, and varied the key drivers to determine upper and lower bounds of OUR estimates. 

The partner often proposed generic people rather than named individuals with resumes on file (as was required).  We found a pattern of abuses including ‘phantom staff’ where the proposed staffing detail (names, hours, qualifications) did not match with the LOE and/or pricing and pre-negotiated staff rate tables.  It seemed that the partner planned to bill hours for which the partner would have no staff, or they were padding labor for contingency or profit. Or perhaps the staff they would eventually bill were not being identified for an undisclosed reason (offshore? unqualified? Non-existent? We-don’t-know-yet?).  Another staffing practice was to propose staff from distant locations.  People needed in the D.C. Metro area would be coming from Chicago; ones needed in Minnesota would come from Virginia.  One proposal claimed that the only COBOL (yes, I said COBOL) programmer they could locate was in Australia, and needed to be flown in and housed in the D.C. Metro area.  As the House majority leader, John Boehner recently bellowed “ARE YOU KIDDING ME !!!?”  

What was more ummm…interesting was the fact that the partner also operated a corporate housing business unit and profit center.  I’m not sure if this was ever ruled to be a conflict of interest, but it certainly created the appearance of one.  We later discovered that the partner was also charging the agency a ‘plumping fee’.  A WHAT?  It was a fee to have housekeeping come in and “plump” the pillows and generally tidy up regularly (presumably even if the unit went vacant for a period).  There were a few other practices that we detected through our examination and analysis such as: 

-- pricing offshore staff at ‘regular’ rates (offshore was not allowed, apparently they decided to use them but hide that fact by charging regular rates);
-- charging different rates for the same person;
-- using higher cost staff than otherwise required; 
-- billing of contracts and administrative personnel on technical tasks (rather than appropriately charging to corporate overhead).

 As Federal agencies look to the private sector for a close working and workable relationships, they must not forget the nature of profit-seeking entities, and must continue to be guided by hundreds of years of history of government contracting and case law.  They must reject the notion that government can be run as businesses are.  There isn't inherent profit in everything that the government does.  Barkeeps and hoteliers for George Washington’s army overbilled and cheated. The courts continue to be filled with cases of contractor illegal behavior and misdeeds. Nothing has changed other than the sophistication and complexity of the methods that profit-seeking entities can employ to maximize profit.

It may be that some of these are accepted business practices between private companies (where the cost can be passed on to customers) but in the federal environment the customers are the taxpayers.


P.S.  If you are thinking that these are exaggerations you should visit http://www.contractormisconduct.org and look at some of the cases concerning contractor misdeeds. You can also track current cases and hot topics on The Project on Government Oversight's blog at www.pogo.org.  POGO.org has worked long and hard to keep an eye on alleged as well as proven cases of fraud, waste and abuse in Federal Programs. You'll find a long list of well known, otherwise respected firms that have been caught raiding the taxpayers' cookie jar.

Next post: Federal Contractor Games Part 3:  More contractor tricks

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Federal Contractor Games Part 1: Can an IT contractor be the government's PARTNER ?

There is a school of thought that supports the notion that close “partnering” relationships between Federal IT shops and large experienced IT integrators would yield better, cheaper IT systems quicker.  The proponents point to any number of Federal IT failures and the image and reputations of IT integration companies in support of these notions.  These notions took hold during Clinton-Gore "reinventing government" initiatives.  The idea was to 'downsize' the bureaucracy (smaller government), lessen procurement and contracting 'barriers', and encourage and leverage relationships with the presumably more efficient and effective private sector "big boys' of systems building.

For Federal IT shops and CIOs, it was and is an alluring prospect.  Get these high flying top-tier systems development titans imbedded in the government’s IT shops so that they can ply their corporate resources, management experience, methodologies and current skill base to modernize the agencies’ lagging IT systems. Sounds great huh?

A few years ago, my team and I assisted a Federal organization in evaluating proposals from a group of well recognized, top flight systems engineering-integrator partners who were given access to the executives, managers strategic plans and other internal information.  The idea was to create an open relationship among executives and managers in exchange for decreased contracting burden, fair pricing, expert management, top-of-the-line tools, and expert, experienced IT strategists, engineers, and developers. 

Our job was to evaluate each task proposal for technical, business and cost realism.  In the next few posts, I will report on my observations after evaluating and reporting on almost 300 task proposals over a 2 year period.  Of course there were tasks that were ‘clean’ and carried out successfully, although their costs or schedules often exceeded those proposed, and the functions envisioned not always delivered in full.

There were a half dozen or so categories of partner’s practices that worked against the agency and for the partner.  The one covered in this post is:

Using procedural and administrative steps to confound managers

Procedural and administrative tactics that the partner used included tactics such as omitting required proposal information (e.g staffing plans including qualifications, cost detail breakdown, schedules with dates, or other administrative or contractual components).  This tactic put the burden on the agency to detect the missing components, and to spend the time and effort getting the partner to correct the deficiencies.  This stalling tactic bought the partner both more time to respond to schedules, and caused the agency much more effort to discover and launch correction procedure cycles into effect.  This in turn triggered an all-new submission-examine-accept/reject cycle. This often created schedule problems for the government’s technical and program managers as well as budget-spending problems due to fiscal year spending boundaries and limitations.

This happened too often to be error. After much to-and-fro with the partner, contracts shop, legal team, program managers and the partner, I concluded that it was part of the partner's strategy.

One must not forget that profit-seeking contractors are in the business of making profit.  Secondarily they’re in the business of solving the agency’s problem…. No matter what creative names executives and politicians want to call them. For me, there is no partnership where one party always pays and the other party always gets paid.  The contractor is rarely at risk for anything other than not getting paid as much as the contract's maximums; and the government is always at risk of not getting the things for which it paid. The general public (and politicians) seem to believe that a contractor doesn't get paid until the product is delivered.  That is rarely… if ever… how IT is paid for.

In the next few posts, I’ll expand on these other practices:

Obfuscating rather than clarifying task substance and schedule

Staffing and rate anomalies

Inflating effort for tasks

Transferring and avoiding risk

Manipulating travel and expenses

Overwhelming the government legal and contracting staff

Violating ‘best customer’ pricing guarantees and requirements

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Uncle Sam Still Using Floppy Disks: An unfunny joke? A silly government IT embarrassment? or A deeper problem for Federal IT?

 A few days ago the New York Times reported on the continued use of floppy disks and CD-ROM in Federal government operations.  http://www.nytimes.com/2013/12/07/us/politics/slowly-they-modernize-a-federal-agency-that-still-uses-floppy-disks.html?nl=todaysheadlines&emc=edit_th_20131207&_r=0

 Yup, it’s not a joke.  The National Archives continues to receive floppies and CD-ROMS from agencies for publishing items in the Federal Register (FR).  On the one hand the FR has been online to the public in text and PDF formats since 1994, long before most Federal agencies put anything ‘out there’. So it’s not the National Archives that is behind the times, but it is mostly because they are trapped in a ‘lowest-common-denominator’ dilemma of those that provide content for the FR.  It seems that inadequate funding combined with congressional and executive inattention have allowed these small federal fish swim in the backwaters of the Federal IT infrastructure.  It can’t be cheap to maintain capability to create and read outmoded media, nor do the bicycling messenger services or Fedex overnight packages come free.

 This is due, in part to the legislation requiring the Fed Register to continue to accept these now-outdated media.  One might ask “who even has the capability to produce or read floppies”?  The truth lies in the budgets, and perhaps the vision of some of the very small commissions, rulemaking boards, regulatory bodies and others that promulgate the guts of what makes government run and makes the notices and proposed rules of engagement visible to all. 

 When I hear stories about the inadequacy of Federal IT professionals, or contracting problems, or lazy Federal employees…. I try to look deeper for the root causes.  Even as some in Congress rail against bureaucrats, and cheer or bristle at Federal IT problems and failures, the Congressional contribution to the underlying problems cannot be exaggerated.  Are IRS’s problems with modernizing the coded logic in its systems due to its IT weaknesses or is it  the annual changes to the 73,900+ pages of the Tax Code? 

 The hidden hand in many of the most intractable IT issues are buried in the actions and inaction of the Congress more than the lack of vision or ability of any Administration. …. Healthcare.gov notwithstanding.

Outsourcing Federal IT = Silver Bullet: Don’t Let The Truth Interfere With A Good Story

 

Sparked by the Healthcare.gov rollout “disaster”, pundits and politicians have pointed to “outsourcing” to the private sector as a solution to developing and operating Federal IT systems.  To paraphrase Ronald Reagan: There they go again! 

 I worked on a study for an agency looking into outsourcing software development and operations.  The CIO wanted examples of where outsourcing was being done and whether it was achieving the organizations technical and cost goals.  We enlisted the help of Professor Mary Lacity:  http://www.umsl.edu/~lacitym/vita.htm of the University of Missouri-St. Louis who is widely known for her teaching, data collection and 18 books and countless journal articles on outsourcing.  She has been collecting global data on outsourcing for many years, and has tracked deals through their life cycles.

 At the time of our study the idea of outsourcing had taken hold in the IT industry.  Australia’s Inland Revenue Service (their IRS), Dow Chemical, Kodak, and other large organizations were attempting to focus their own staff on direct mission functions and jettison the IT work to (presumably) more productive and cost effective contractors. 

 While there is a vast body of work which I do not want to misrepresent, it’s fair to say that contractor vs inhouse skills isn’t as much of an issue as is the ability of the organization to craft and execute contracts that meet their REAL and evolving needs at predictable, perhaps lower costs.  It turns out that many organization’s employees actually do things as a part of what they perceive as their JOB that the official organization charts and job descriptions do not document.  So, it is problematic for an organization to specify “exactly” the duties, functions, procedures, and tasks to be performed under contract, at a price, with performance criteria.  It is also difficult to specify future needs and to specify, measure and enforce cost and productivity characteristics.

 Unless perfectly specified, the work performed by a contracted source will either: a) not meet the organization’s ACTUAL requirements, or b) will (and should) cost more than originally priced.  On the other hand, to achieve an “exact” specification and contracting documents acceptable to both parties take a very, very long calendar time (multiple years) and thousands of hours for both parties in lawyers, accountants, business and IT managers to arrive at an acceptable set of contractually binding documents.

 The real world experience has yielded very mixed results.  Lacity’s books and papers chronicle these results and are mandatory reading for those contemplating outsourcing.  The myth that outsourcing is a silver bullet is partially due to the fact that most who have attempted it, and failed, do not discuss or publicize those failures, leaving the positive impressions that were left from the big media deal announcements (even Time Magazine covers).  Lacity has published data and analyses showing the true story.

 In the Federal IT environment, requirements are continually evolving (including new legislation); contracting process is proscribed; deals must be done in public; and there are more antagonists than protagonists. Outsourcing federal IT functions is probably a fool’s errand if the goal is to save dollars and achieve higher overall productivity. 

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Federal I.T. Lesson Learned and the Hero of Katrina: National Finance Center’s Gil Hawk

It’s been 8 years since Katrina, but a good story about the Federal Government working well can’t be repeated too often and serves as a lesson to CMS and others operating Federal systems.  The agency that worked extremely well during and in the immediate aftermath of Katrina was the U.S. Coast Guard.  The USGG didn’t need anyone is Washington D.C. to direct them.  Their rescue mission is well defined and executed 24/7/356 without hesitation or confusion.  

But there is another Federal organization that actually worked extremely well before, during and after Katrina. The National Finance Center (NFC) is a part of the Department of Agriculture and processes the personnel and payroll for many other agencies and organizations.  NFC’s massive data center is located in New Orleans on a spit of land between Lake Pontchartrain and Lake Borgne. Before Katrina it had over 1,100 employees, processed payroll/personnel for 600,000 federal employees as well as processing health benefits for ~2M participants.  Other organizations at the data center had about 350 employees and made over 2.5M payments back then and ran several financial and administrative systems.

Sounds like a disaster in the making huh?  Somehow Gil Hawk and his teams managed to keep ALL MAJOR FEDERAL FUNCTIONS running in spite of the affects of the storm on the NFC employees lives, families and homes. How’d they do that?  Through contingency planning, practice drills of those plans, continuity of operations (COOP) preparations, establishing alternate operational sites, off-site data storage and backup infrastructure, and a host of other well-known and recognized techniques for ensuring continuity of services under the most adverse conditions.

If the Healthcare.gov team at CMS hasn’t reached out to Gil Hawk yet, they should.  After the current “glitches” of the Exchange portal are fixed, and the back-end systems for subsidy calculation and payment to insurance companies are rolled out. They need to quickly focus on Preparedness Planning.   The Healthcare.gov data centers aren’t surrounded by lakes…. but they’re probably on the same electrical grid, nor’easter area, communications cable trunk, ‘’snowmageddon’ zone, or eastern-earthquake area. Since planning doesn't seem to be CMS's strong suit, it needs to ensure that they redouble efforts to prepare for these or other conceivable natural or man-caused major disruptions. They couldn't go wrong by seeking advice from Mr. Hawk.

Give kudos to Gil Hawk and the dedicated employees at NFC.

The media ‘talking heads’ who suggest “outsourcing” to contractors as a solution to developing and operating federal systems are wrong. 

Follow this blog and read about the Myth of Successful Outsourcing in the next post.