For the first time in a long time, more federal contractors reported decreases in their government contracting revenue last fiscal year than those who saw increases, according to a Grant Thornton survey of about 100 contractors.
Thirty-eight percent of contractors suffered reductions in revenue over the past year, compared with 36 percent that saw revenue increases and 26 percent that experienced no significant change, according to the annual Government Contractor Survey released last week. Professional Services Council sponsored the survey.
“This year’s survey shows more revenue shrinkage than growth and a plunge in net profit, with the majority of contractors seeing a tiny profit or none at all,” the survey said. “This despite reducing headcount and overhead, holding wages at generally the same level as in the last two years, cutting [general and administrative expenses] and benefits, and doing just about all a company can do to sustain profits. Contractors are up against costs that can’t be slashed and must be absorbed: indirect, health care, overtime and, for many, out-of-scope work.”
Companies said that 84 percent of their revenue came from federal business, which is the lowest reported over the past six years. Last year, federal business made up 93 percent of companies’ revenue.
Defense Department contractors were the hardest hit. Revenue from DoD contracts dropped 16 percentage points to 47 percent. However, revenue from civilian agencies rose 7 percentage points to 37 percent. State and local revenue accounted for 7 percent and commercial revenue made up 9 percent of companies’ revenue.
The survey assumes that reduced defense spending, changing priorities for the administration and insourcing are to blame for contractors’ revenue decline.
Overall, the median turnover rate for companies was 8.5 percent. Most of the companies surveyed sell professional services to the government, which may explain the high turnover rates. It’s common for employees to accept jobs with the winning vendor if their company loses a follow-on contract, the survey said.
When asked how often their companies won non-sole-sourced contracts, the median rate was 30 percent. When the company was the incumbent, that number rose to 50 percent.
In some cases, however, bid protests are triggered when incumbent vendors receive far lower scores than their competitors, despite having a stellar performance record, the survey said. “It should be noted that with the increased use of lowest price, technically acceptable contracts, the incumbent’s advantage is virtually erased.”
Nine companies have been awarded spots on an intelligence training contract worth $750 million over five years, the Defense Department announced today.
Out of 24 proposals submitted, nine awards were made on Oct. 26 to:
BAE of McLean,Va.
Battelle Memorial Institute of Columbus,Ohio
Booz Allen Hamilton of McLean,Va.
Cyberspace Solutions LLC of Reston,Va.
Intrepid Solutions Services Inc. of Falls Church,Va.
Prescient Edge Corp. of Falls Church,Va.
SAIC of McLean,Va.
Six 3 Intelligence Solutions of McLean,Va.
SRA of Fairfax,Va.
The indefinite-delivery, indefinite-quantity contract will expire Nov. 30, 2017, according to the announcement. Work will be performed in Washington DC; Quantico, Va.; Norfolk, Va.; Ft. Huachuca, Ariz.; Ft. Jackson, SC; Willow Grove, Pa.; Oak Ridge, Tenn.; West Davis Monthan AFB, Ariz.; and elsewhere as required. The Defense Intelligence Agency’s Virginia Contracting Activity is managing the contract.
Security measures intended to prevent the placement of roadside bombs on a major highway in Afghanistan were improperly installed, the Special Inspector General for Afghanistan Reconstruction said in a safety alert last week.
The “culvert denial systems” were designed to prevent insurgents from placing improvised explosive devices (IEDs) in roadway culverts, according to the alert, which was sent to the commanders of the U.S. Central Command and U.S. Forces-Afghanistan.
“Through our preliminary investigative work, we estimate that a large number of culvert denial systems might have been falsely reported by Afghan contractors as complete when, in fact, the denial systems were not installed or were installed in a defective manner, rendering them ineffective and susceptible to compromise by insurgents seeking to emplace IEDs,” the SIGAR said in the Oct. 10 alert.
Officials identified an undisclosed location of particular concern for potential threats, “however, we are concerned that this problem may be more widely spread throughout Afghanistan,” the alert said.
The SIGAR has been working with the anti-corruption Task Force 2010 and U.S. Central Command Joint Theater Support Contracting Command on the investigation.
The Government Accountability Office on Monday denied a protest against Lockheed Martin’s $4.6 billion contract award to support the Pentagon’s global data network.
In its June protest to GAO, Science Applications International Corp. claimed that the Defense Information Systems Agency unreasonably evaluated Lockheed’s technical risk and costs, according to GAO. SAIC also said that DISA failed to meaningfully investigate whether Lockheed had unequal access to information pertaining to the contract, which would have been an organizational conflict of interest (OCI).
GAO determined that DISA’s evaluation of Lockheed’s proposal was “reasonable and consistent with [the] solicitation’s evaluation criteria,” Ralph White, GAO’s managing associate general counsel for procurement law, said in a statement. “GAO also concluded that the agency reasonably investigated Lockheed’s alleged OCI.”
Lawyers from both sides are working to release a public version of the decision.
“Lockheed Martin submitted an affordable and innovative solution, and we regard this as an opportunity to coordinate with DISA to improve the speed and efficiency of information exchange between our joint warfighters around the world as well as their commanders and allies,” Gerry Fasano, president of Lockheed Martin Information Systems & Global Solutions- Defense, said in a statement. “We have remained transition-ready throughout the protest period and look forward to beginning work on this critical mission.”
Lockheed Martin Corp. beat out incumbent SAIC to provide daily operations and sustainment of the Defense Department’s global data network. The contract has a ceiling of $4.6 billion over seven years — three base years and two two-year option years.
The Navy has awarded a $1.9 billion order for more aerial reconnaissance and sub-hunting aircraft to Boeing, the agency announced Friday.
The low-rate initial production award for 11 P-8A Poseidon aircraft is a modification to a previously awarded fixed-price-incentive-firm contract and follows two orders last year for 13 aircraft. The fleet will ” bolster the service’s anti-submarine, anti-surface warfare and intelligence, surveillance and reconnaissance capabilities,” Boeing said in a news release today.
Boeing has delivered three of the P-8As, which are based on the company’s 737-800 commercial airplane, the company said. The Navy plans to purchase 117 to replace its P-3 fleet.
Most of the work will be performed at Boeing’s facility in Seattle, Wash.
Defense contractor Paragon Dynamics Inc. has agreed to pay $1.15 million to settle allegations that it improperly obtained bid and proposal information for National Reconnaissance Office contracts, federal prosecutors announced Tuesday.
Paragon Dynamics, a software research and development firm based in Aurora, Colo., allegedly obtained bid and proposal information from competitor Raytheon Corp. in fiscal 2009, while Raytheon was competing on National Reconnaissance Office contracts, the U.S. Attorney for the District of Colorado said in the news release. The NRO is in charge of designing, launching and maintaining America’s intelligence satellites.
A Paragon Dynamics employee with access to a Raytheon facility in Aurora allegedly used his access to obtain entire drafts of Raytheon’s proposals for two separate contracts, according to information from the Colorado U.S. Attorney’s office. The employee allegedly faxed part of a proposal to the president of Paragon Dynamics, who sent the information to another corporation that Paragon Dynamics was teaming with in a competition to win the NRO contract, according to the government’s claims.
“When companies cheat in the bidding process for government contracts by stealing the work of their competitors, they face strict penalties,” said John Walsh, U.S. Attorney for the District of Colorado. “Corporate espionage erodes the trust we have in our public procurement system, and the Department of Justice will hold cheaters accountable for their actions.”
As part of the agreement, NRO’s inspector general reached a corporate integrity agreement with Paragon Dynamics, according to the news release. Paragon Dynamics was awarded $3 million in defense contracts in 2012, according to data from the Federal Procurement Data System.
The average compensation package of the chief executive officer for one of the top five Pentagon contractors is roughly $21.5 million, according to an analysis by the Project on Government Oversight.
Ben Freeman, an investigator for the government watchdog group, looked at the compensation packages of CEOs at Lockheed Martin, Boeing, General Dynamics, Northrup Grumman, and Raytheon reported in the firms’ Securities and Exchange Commission filings.
The Defense Department — and therefore, taxpayers — pay for part of contractors’ executive compensation, which is billed as part of the indirect overhead rates on contracts. Some lawmakers are pushing measures to reduce how much contractors can receive for executive compensation.
(To be clear, the highest paid defense contractor wasn’t among the five in POGO’s analysis, Freeman said. David Cote, the CEO of Honeywell, received a $35.7 million compensation package last year, according to an Associated Press study.)
But the $21. 5 million in average executive compensation among the top defense contractor is still enough to pay for:
– the salaries of 475 American workers. “The average worker in the U.S. earned $45,230 last year,” Freeman said in his blog post. “These CEO’s were paid more in an average day than the average American worker was paid all of last year.”
– the salaries of 335 soldiers. “According to a 2011 Congressional Budget Office analysis, the median compensation (including basic pay, allowances for food and housing, and tax advantages) for enlisted U.S. military personnel with ten years of experience was about $64,000. ”
– the salaries of 268 defense and aerospace industry workers. “According to a Deloitte study, the average wage (just salary, not benefits) for the entire aerospace and defense industry in 2010 was $80,175.”
To date, the Army has migrated 500,000 email accounts to the cloud, according to a news release.
The Army expects to move a total of 1.6 million email users from disparate local servers to centralized servers operated by the Defense Information Systems Agency by March 2013. The Army projects the move, which began January 2011, will save $380 million through fiscal year 2017.
The migration hasn’t come without challenges, delays and much scrutiny. The Army was forced to suspend the migration in December after concerned lawmakers temporarily withheld funding for the program, pending a detailed review.
About 520,000 people across the Defense Department, including the Joint Staff, U.S. European Command and DISA, have migrated to the enterprise email service, according to DISA.
After pushing the Air Force last year to recoup $4.3 million spent on repairs caused by poor contractor work, Sen. Jeanne Shaheen is now proposing that all agencies explain why they decide not to take action against poorly performing contractors in Afghanistan.
The bill, S. 3505, would require agencies to explain to Congress why they do not act on recommendations by the Special Inspector General for Afghanistan Reconstruction (SIGAR) to recoup money from poorly performing contractors, when the SIGAR’s recommendations would result in at least $500,000 in savings.
The bill would cover instances when the agency fails to respond, disagrees with the SIGAR or only accepts part of the SIGAR’s recommendations to seek reimbursement for a contractor or subcontractor’s failure to complete a construction contract due to poor contractor performance, cost-overruns or other reasons.
Shaheen, D-N.H., who sits on the Senate Armed Services and Foreign Relations committees, pushed the Air Force last year to follow the SIGAR’s October 2011 recommendations to seek reimbursement from London-based AMEC Earth and Environmental, Inc. The SIGAR found that sub-standard construction by AMEC was to blame for electrical failures that cost $4.3 million to repair.
The Air Force initially rejected the inspector general’s recommendation to seek a refund from the contractor, but the Air Force agreed to open a new investigation after Shaheen intervened.
“The United States government has an obligation to the American people to ensure that our resources are used in a cost-effective manner,” Shaheen said in a press release, after the Air Force decided in July that AMEC should reimburse the government for the repairs. “Government contractors must be held accountable when they cut corners.”
The Navy and Marine Corps are soliciting ideas on how to reduce costs through better management of information technology, efficient business processes and improving cyber-related procurements.
Under orders last year to cut information technology budgets by 25 percent over the next five years, the Department of the Navy is consolidating data centers, increasing the use of departmentwide software licenses and reducing cellphone costs.
Navy and Marine Corps employees, industry, academia and the public are welcome to make recommendations. Submissions must include a brief discussion of the problem, a proposed scope, key assumptions, constraints and risks, costs, savings and other benefits and operational impacts. Email completed submission forms to firstname.lastname@example.org.