By Karthik Srinivasan
The start of 2019 has been tumultuous, filled with uncertainty and changing expectations. In this article, Karthik Srinivasan, currently the Chief Operating Officer at IndraSoft and a 25-year industry veteran with experience supporting Defense, Homeland Security and Health IT markets, shares his insights on what may be ahead for 2019, lessons learned from 2013 and moving forward.
What do You Expect is Ahead for 2019?
2019 is off to a rocky and unpredictable start, both at the global economy level, as well as for the GovCon industry. Five weeks of a Government shutdown has cost $6B already and the cost is rising. For each hour of Government shutdown, we lose $12.5 million in productivity for 800,000 furloughed workers, and that does not include the Government Contractors who are the most impacted.
2019 could very well be split into four distinct quarters, with the first calendar year quarter revealing a significant slowdown in new contract awards. The second quarter may see weak economic data as a result, that in turn will create market fear for IT and major spending in the commercial sector, which will trickle into the GovCon sector as well. Remember that the entire Capital Planning and Investment Cycle (CPIC) process at various agencies have been significantly impacted due to the shutdown. This means most of the agencies are behind in defining their budget formulation and execution activities, an important component in the amount of money that will be available for major IT spending contracts that are expected to be put up, usually in the Summer 2019 timeframe.
It is also likely that major contracts currently up for recompete could see extensions, pushing new solicitations further into late 2019 with a 2020 award timeframe. This is significant for companies that may miss 2019 sales booking numbers. While the third quarter of the year is historically busy with major contracting shops pushing solicitations before the Government Fiscal Year end, when the same set of Government Acquisition resources are engaged in processing extensions and bridge contracts, they will have less time to release new solicitations. A shift of at least three months is expected in 2019 for all contract actions.
Recession Factors In
We must also consider that a recession is here, like it or not. It’s a matter of time. Any new GWAC or agency-specific IDIQ solicitation response must factor in this aspect. The ongoing fight over border wall funding and a divided control of the House and Senate will have a significant impact on budgets and continuing resolutions. We must brace ourselves for a scenario wherein ‘best value’ solicitations are put out, but the evaluation might as well provide significant priority to the ‘price’ component. This is primarily due to the ‘time lag’ between when the solicitation is released, when it is evaluated and when it is awarded. We are talking several months to even years for this process to occur for larger GWACs and IDIQs.
A recession will force agencies to shy away from releasing new IDIQs, and instead, will force them to comply with GSA’s preference for their consolidated vehicles. Look at how many years it took NITAAC to award each of the categories for CIO SP3 on-ramp, and it is still not done. Look at the direction DHS is taking with DHS EAGLE III, wherein they will utilize a culmination of CIO SP3, Alliant 2, OASIS and other existing vehicles instead of releasing another new IDIQ. If this is the situation even without a recession or a current economic slowdown, it will only get worse during a recession. If the GovCon community escapes 2019 without a major hit from recession, it is sure to face the heat in 2020. Any major bid by a contractor must factor in this ‘timing’ aspect of price in the award decision.
Being competitive in price is commonly misconceived as reducing labor rates just to win the contract. Price competitiveness can be accomplished in many other ways.
It is important to conduct a thorough Price-To-Win (PTW) analysis that will help define options. If you are providing an effective and innovative solution that benefits the customer, it must provide cost savings, in addition to the latest technologies and operational efficiencies for customer programs. Vendors must focus on achieving maximum cost savings to customers, which in turn will result in being price competitive.
Look at business processes to see what can be automated, what bottlenecks can be reduced. For systems development, look at how you can effectively implement Agile processes. If you are implementing an infrastructure program, look at Cloud models and leveraging existing infrastructure to expand, rather than incurring additional capital expenditures.
Bidding low does not necessarily mean bidding reduced resources in an FFP contract, or reducing labor rates in a T&M contract. You can bid low through process automation and process elimination. You can also bid low by ensuring you are implementing a ‘right person at the right time’ model if you have the flexibility to support such efforts. Look at creative ways on how your solutions can be repurposed for other customers and spread the cost savings back to those customers. It is important to provide a price volume and a narrative wherever applicable that justifies your price reduction (or cost savings to customer).
Comparing the 2013 Shutdown
In 2013, we encountered 16 days of shutdown in October. This was a very bad time for a Government shutdown to occur, with the fiscal year for several Federal agencies ending on September 30th and the first two weeks of October typically setting up the new fiscal year.
I distinctly remember this fourth calendar quarter in 2013 wherein industry experienced several solicitations released Christmas Eve that had been anticipated towards the end of summer. Due to significant uncertainties and delays, the holiday season was the catch-up time. The fear instilled by the shutdown resulted in several vendors bidding in an LPTA mode.
If we can learn and apply a lesson from the 2013 shutdown recovery, we can assume the Federal workers returning to duty have a lot to catch up on, both in their personal lives and at their office desks. It is going to take a while before they even start looking at new initiatives. For 2019, Federal pay raises have been frozen and over 800,000 Federal employees have missed a paycheck. Mortgages and other bills to pay will take precedence, then comes current contract extensions before they even look at new solicitation releases.
Reboot – Moving Forward
If you have existing work within your agencies, ensure you go above and beyond with service levels. This is going to be especially important for contract support that resumes after shutdown. Government officials are still going to be held to timelines by oversight requirements and will get little if any relief in meeting deadlines. That pressure will fall to contractors to keep up deliverables.
Senior leaders in Government consulting firms should consider using some of their 2019 budget towards employee morale and team building. The morale of many employees is at an all time low if they have been impacted by not being paid, using vacation time, or forced furloughs. Focusing on the employee morale to retain them is especially critical if you have little time before a contract comes up for recompete.
In Part 2 of this article, Karthik will look at how to build resiliency into your company and positioning for 2019 and beyond.
About the Author
Karthik Srinivasan is the Chief Operating Officer (COO) for IndraSoft, providing overall leadership to Operations and Sales. He is a proven leader with a demonstrated track record of leading several Federal consulting firms through successful growth and transformation. Karthik has 25 years of experience leading Sales and Operations support for Defense, Homeland Security and Health IT markets. Prior to Indrasoft, he served as Senior Vice President of Federal IT Services for IBA, and Director for Homeland Security market at ManTech. Most recently, he was the recipient of 2019 FedHealhtIT100 honors for driving change and advancement in Federal Health IT & Consulting market.