What Does the Future Hold for Government Acquisition – Opportunity or Challenge?

6/13/2019 

What the market holds for acquisition is yet to be seen, but from my   perspective small businesses have numerous challenges they face over the next few years. One of the biggest challenges will be ongoing merger and acquisition which leads to consolidation and the reduction of bid opportunities for small businesses. This all depends on the political impact    and resiliency of the government services community.

In the late 1990s hardware and software manufacturers were “encouraged” to consolidate the overcrowded defense market.  Smaller companies found themselves being bought by the “Big Four” - Lockheed Martin, Raytheon, Boeing, and Northrup Grumman. Today we face a similar situation within the services community today. Companies such as Leidos, ASRC, SAIC, CACI, Parsons and Mantech are all trying to take the lead in providing services in a very intense, and fast-growing high technology market, where the contractor has developed or procured capabilities, through mergers or acquisitions.  What was once a niche company-based skill or capability has now become the next acquisition for many of these larger companies.    

Leidos jumped to the top of the market by buying Lockheed’s Information Services business. Now other companies are following the same path.  For example, GDIT buying CSRA, SAIC buying Engility and Parsons buying Polaris Alpha. Each are growing or maintaining the capabilities necessary to perform in the market as much as they are trying to keep up with the competition. 

The result could be that small businesses will become left behind, either to fend for themselves in this GSA based competitive environment or be acquired as a niche player that adds capability to get a leg up.  With the budget expected to shrink over the next two years (FY20-FY21), it is the small company who will be working harder to find opportunities to grow or make themselves attractive to these growth-based companies whichever satisfies their goals. On the other hand, they might consider ways to consolidate with other small businesses and maintain or grow their workshare, but also providing the capabilities the government is demanding.

We can only watch to see if the consolidation of the service companies will continue or eventually find the same result that the Big Four of the 1990s found themselves – in a market consolidation process that led to fewer procurements and being less competitive. The environment shifted from the use of fixed-price contracts to cost-plus contracts. Unfortunately, this is already happening.

This leads to the area for opportunity in the GovCon services community and a way to improve the services business capability. 

Today, acquisition reform is different than we have experienced since the Goldwater‐Nichols Act of 1986.  Specifically, I am referring to Section 804 of the FY16 National Defense Authorization Act (NDAA) and it’s FY17 modification which changes how programs are being developed, acquired, managed, executed and deployed.  Those programs which follow the Section 804 requirements and implement them will not be subject to the Joint Capabilities Integration Development System (JCIDS) and DOD Directive 5000.01 “Defense Acquisition Systems”.  What is being accomplished is a Mid-Tier acquisition pathway, separate from the traditional acquisition system, for rapid prototyping intended to be completed in a period of two to five years as well as rapid fielding to acquire new or improved capabilities. This was driven by the need to identify, develop, acquire and field programs in a manner which maintains or improves US superiority in weapon system delivery.

On its surface, you might ask why is this important and how can this be an opportunity for the services community?  Since Section 804 bypasses the requirements for the program to meet the JCIDS process and the 5000 series requirements for managing and reporting program within DoD, the assumption is that the need for understanding program/project progress or milestone achievement is not as important as it once was.  Under the current system, government analysts and the service contractors perform these requirements.  They evaluate the cost of companies performing these requirements and how they are meeting the expectations for delivery. This assumes the hardware and software manufacturers are measuring whether the system can meet the specification compliance which proves it can accomplish its mission.  To do this, it is necessary to achieve the desired end state performance (capability) by understanding what the system cannot do.   

How can this be accomplished without monitoring progress or implementing performance measurement techniques?  We must use modeling and simulation techniques, tech order development, and acquisition strategy to make a top down assessment of the system and what it cannot do in a multi-domain environment. We need to collect data to understand the dollars spent and available to ensure the government fields a system that meets all the capabilities necessary to perform its mission. To ensure this is done properly, the government services community can use a big data strategy and measure performance to end state desires. The services community is best able to accomplish this since they have supported the federal government for over three decades. The government is increasingly asking for contractor support as well as federal worker support to provide the necessary labor.

Even when requirements are reduced to meet rapid development and fielding requirements, the change appears to negatively impact the use of service contractors. However, the result of their efforts will provide the opportunity to stand out using innovation, solving the problems with technical expertise and how this can provide a pathway to adapt and deliver capabilities faster and better.  This will only be accomplished by addressing the analyses necessary to ensure the systems procured and deployed are competent and meet the mission environment within dollars planned and accounted for.

Author:

Neil F. Albert

President

Advanced Concepts and Technologies International, LLC (ACT I)

This article originally appeared in the 2019 PSC Federal Acquisition Conference Thought Leadership Compendium.