Schmooze Or Lose
Contractors rely on personal connections and insider information to win contracts.
Earlier this year, Dennis Groh, a vice president of government contracts for STG Inc., found himself up against what he calls "the big boys." His small information technology company in Reston, Va., was competing against giants, including AT&T, Qwest and Sprint for Networx, one of the largest government procurements in history. Networx, which is administered by the General Services Administration and valued at around $20 billion over 10 years, will provide federal agencies with telecommunication services.
Faced with this enormous challenge, Groh did what he thought would work: He leveraged old friendships. The assistant commissioner in GSA's Federal Technology Service from 1999 to 2003 started calling friends still at the agency to ask what they were looking for in Networx vendors and to offer his advice on the best solution for the government. His hope, of course, was that his company would end up as one of the solution providers.
One-on-one meetings with senior officials are essential, Groh says, because they can help shape the final solicitation and increase the chances of his company being one of the awardees. "The big boys can easily go to the Hill and lobby, so we have to go to the executive branch. We have to get the message out to the decision-makers. We can't out-lobby the big boys.You want to create as much bias as you can. . . . We have to be evangelists out there."
In theory, government contracts are awarded based only on the merits of proposals-agencies select the vendor that offers the best value at the lowest price. In reality, the winners often are the companies that schmoozed agency executives during the early stages of the procurement process and helped shape the final solicitation, in the process gaining the trust and confi-dence of those with the power to award contracts. Introductions to those decision-makers and inside information about upcoming procurements are considered so valuable that contractors are willing to pay thousands of dollars to secure them. Consultants who offer those benefits, often packaged under the term "acquisition services," say they are merely lubricating exchanges in a free market.
"We're taking information that's completely publicly available, putting it in one place, and we're selling to whoever wants to use it," says Marcus Fedeli, manager of federal opportunity products at INPUT, a Reston-based firm. INPUT's services include contacting agencies on behalf of clients, introducing clients to agency decision-makers at networking events, and sharing information about solicitations prior to their official announcement based on interviews with agency officials, budget data and Freedom of Information Act requests. Fedeli adds that his firm, which counts 90 percent of large government contractors as its clients and has experienced a more than 500 percent revenue growth over the past five years, also helps agencies by spreading information about goods and services they're looking for.
Critics, however, say the importance of inside knowledge and relationships are evidence of a corrupt system. "Those relationships have become infinitely more important than a contractor being able to show that they are the best person for the job. . . . It's how the system is designed to work right now," says Danielle Brian, executive director of the Project on Government Oversight, a Washington-based nonprofit that analyzes government contracting.
Christopher Yukins, associate professor of government contracting at The George Washington University Law School, says another problem is that no one really knows what's going on behind the scenes. "I think it's gone too far. We have a system that's very heavily based on relationships without the transparency to make sure relationships are kept in check," Yukins says.
The number of consultancies offering acquisition services to contractors has blossomed in the wake of Iraq reconstruction, when it became apparent that inside knowledge, especially on contracts awarded without competition, is essential to doing business with the government. Many consultants agree that there's a line that shouldn't be crossed; for example, writing a solicitation that subtly favors one company's product when it is deemed to better suit the agency's needs is OK, but giving information about an upcoming solicitation to one contractor and not others goes too far.
The exact location of that line is fuzzy. Acquisition regulations provide guidance, but even procurement professionals offer varied interpretations of the rules. Almost everyone agrees that personal connections and inside information about how decisions are made can mean the difference between winning and losing a contract. Whether or not you think that's fair tends to depend on which side of the table you're on.
A Fine Line
Actions to influence acquisitions fall along a spectrum of appropriateness. Some interactions between bidding companies and agencies are considered so valuable to the government that the Federal Acquisition Regulation and agency policies explicitly encourage them. According to the FAR, open discussions, including one-on-one meetings and site visits, help contractors prepare their requests for proposals and help the government make better decisions.
"The ability of the government to meet one-on-one with industry before the RFP comes out is in the interest of the government. Any person in government knows that you want to get as much information as you can before you come out with the RFP so you don't make mistakes," says Steven Kelman, professor at Harvard's John F. Kennedy School of Government and lobbyist for the government contractors Accenture and Ariba Inc.
Sometimes, that interaction slides into unethical and even illegal realms, such as when former Air Force official Darleen Druyun agreed to pay Boeing Co. a higher than appropriate price for its tanker aircraft and gave the company proprietary information about one of its competitors. (Druyun served nine months in jail after she admitted giving Boeing preferential treatment in exchange for a top job at the company.) Similar, less high-profile examples are common. For example, former Army Col. Richard J. Moran is serving a prison sentence in Taft, Calif., for reversing the decision of an Army evaluation board and making an award for a global command and control system to a company that treated him to fancy dinners and offered him a $125,000-a-year job.
The bulk of contractor-agency interactions are more mundane: Contractors attempt to glean more information about a future procurement than do their competitors. They try to convince agency officials that their services or products will improve efficiency or productivity, in the hope that officials will write a solicitation that targets them. In some cases, they act like clever advertisers, convincing agencies that they need goods and services they weren't planning to buy. And contractors also try to create positive reputations to increase their chances of winning competitions.
"If you don't have a relationship with folks who are the decision-makers, you don't have a very good chance of being on the shortlist," says Gloria Berthold, founder of TargetGov, an Elkridge, Md.-based consultancy that caters to small businesses. She tells her clients to join professional associations that count federal acquisition professionals among their members and to call procurement officials to arrange meetings. The only people who would suggest there is something wrong with relying on personal connections to win contracts, she says, "would be folks who have a problem with building relationships. . . . I don't think that's bias factor. It's a trust factor."
Attempting to shape an agency's request for proposal is a standard business strategy, according to consultants and contractors. "I would hope we're able to guide or influence how the agency is thinking about the RFP," says Peter Kant, vice president of government affairs for Rapiscan Systems, a Hawthorne, Calif.-based security inspection systems company that provides screening equipment to the Transportation Security Administration and other agencies. His team closely reviews the appropriations bills and operational plans of agencies in order to anticipate and shape RFPs before they are officially released, especially to encourage them to include performance-based metrics, which fits with Rapiscan's business approach.
"If we go after a deal, there's a 100 percent chance we've been in before. The key is to get in early and influence the direction of the RFP. All credible businesses do that," says Gary Labovich, a vice president at the McLean, Va.-based consultancy Booz Allen Hamilton. In addition to tracking trends and talking to senior officials, Labovich says his firm frequently submits white papers, or an analysis with recommendations on a particular issue, in the hope that some of those ideas will make their way into the request for proposal or formal bid solicitation. "Sometimes it looks like what we suggested," he says of RFPs.
"Our subscription service identifies opportunities at early stages when they can be shaped," says Ray Bjorklund, chief knowledge officer at Federal Sources Inc., a consultancy in McLean, Va. "We flesh them out and ask a lot of questions . . . to add more depth to what is publicly known," which includes analysis of public statements of senior agency officials and strategic plans released by the agency. From there, he says, it's up to the client: "You can develop white papers that can inspire . . . then when you do pay a visit to an official who hopefully is a key decision-maker, you can walk in and lay out your wares." All that, he says, happens well before the solicitation is written.
Consultants say they are careful not to let that influence, or the appearance of influence, go too far. If a proposal is tailored too specifically to only one company, then other vendors won't bid and it won't be competitive, which could force the agency to redo the entire process. "We have fine-tuned the art of positioning our clients favorably while retaining fair competition," says Kathy Conrad, senior vice president at Jefferson Consulting Group, a Washington-based professional services company.
Agency officials, on the other hand, tend to say those one-on-one meetings have no impact on the final selection process. "I would never make a subjective determination as to whether a company is competent or not . . . I wouldn't even know how to go about doing that, given the regimented nature of the process," says John C. Johnson, assistant commissioner of GSA's Federal Technology Service. He says he met often with contractors prior to the release of the Networx proposals to listen to ideas and concerns. "I don't think it should be viewed as a means by which companies can come in and impress the government and lead to a decision down the road. The system is designed for it not to work that way," he says. To ward off those hoping to influence the process, he declined to reveal his role in the source selection.
Johnson says GSA incorporated many of the hundreds of comments and questions the agency received about Networx into the final request for proposals. "If we thought there was a good idea that threaded into an actual goal, then we accepted it without placing judgment as to whether it was self-serving or not," he says. Awards are expected by next fall.
Al Sligh, director of strategic sourcing and acquisition systems at the Homeland Security Department, says he frequently meets with companies, in large part to help his agency form better solicitations. "Sometimes our strategies are not on the money," he says. The meetings, he adds, "help the procurements go faster" and help avoid costly cancellations. He says companies that he personally has met with do not have a better chance of winning contracts.
One benefit those companies likely gain is a better understanding of what agencies are looking for. "A relationship is just about you understanding them. It absolutely increases your chances, not because they know you-because you know them. You have taken the time to understand them," says Robert Guerra, president of Guerra, Kiviat, Flyzik & Associates, a strategic business development firm based in Ashburn, Va. A relationship, he adds, should not necessarily be viewed as something bad.
In some cases, relationships are formalized when agencies contract with vendors for acquisition advice. With some exceptions, the Federal Acquisition Regulation prohibits contractors that helped an agency prepare a solicitation from bidding on the contract. "This should be done in order to avoid a situation in which the contractor could draft specifications favoring its own products or capabilities," the FAR states.
Some companies have their own policies preventing them from advising and bidding on the same solicitation. Conrad of Jefferson Consulting says, "In the instances when we're asked to provide assistance on a particular procurement, we draw a very bright line and do not represent commercial clients in the specific procurement."
Kathy Sadler, contracts and negotiations executive at IBM, says her company mitigates potential conflicts of interest by setting up internal firewalls between the employees advising on the proposal and the team bidding on it. In the commercial environment, she says, such conflicts are less of a problem because a company is allowed award contracts based on more subjective criteria. Federal sector consultants often are quick to point out that in the private sector, close relationships between clients and sellers are not only allowed, but encouraged. Only in the government, they say, does fairness matter so much.
In addition to doing what they can to influence awards by meeting with senior officials, contractors also reach out to another power-Congress. That companies lobby lawmakers to increase funding for goods and services they already provide-such as a certain type of aircraft carriers to the Navy-is well-known. Lawmakers also openly advocate on behalf of certain groups of contractors, such as small businesses or women-owned companies. What is less clear is the way lawmakers get involved in specific procurement awards.
"Particularly with Networx being a large program, you have a lot of different communities of interest. . . . All of them make known their concerns, particularly to Congressman [Tom] Davis' [R-Va.] committee, in hopes that they could bid or potentially be able to win some business," says Anthony D'Agata, manager of Sprint's government systems division. He says his company occasionally lobbies Congress with regard to upcoming procurements, but he doesn't recall if he has done so for Networx, on which Sprint is bidding. Davis is chairman of the House Committee on Government Reform.
"It can be helpful. GSA certainly listens to the Hill," D'Agata says.
Many contractors who say they meet with lawmakers in the hope it will help them win a competition appear to disagree with lawmakers and agencies on exactly how much influence Congress has. When asked whether legislators exert influence on procurement decisions, GSA's Johnson says, "I've never had a member of Congress do that, and no, it wouldn't have any effect. The process is very well-defined in terms of how we make selections. . . . It would be extremely difficult for anybody to influence something unilaterally."
Contractors and congressional staff members say lawmakers often write generic letters of recommendation on behalf of contractors, but they generally avoid getting involved in individual competitions.
It's difficult to track the potential influence of meetings between contractors and lawmakers. "Often the lobbying occurs without the kind of open record that would support complaints," says Charles Tiefer, professor of government contracting at the University of Baltimore School of Law. Unlike lobbyists, who are required to file disclosure forms with the government, consultants and acquisition services providers do not have to register, making their relations with federal agencies harder to track.
The Project on Government Oversight released a report last year showing that the top 20 government contractors have spent more than $390 million lobbying since 1997. The watchdog group says that money was spent to influence the awarding of government contracts. Those numbers show only that contractors that win awards also lobby; they don't show that the lobbying actually caused the companies to emerge as winners.
Drew Crockett, a spokes- man for Davis, who held hearings on how Networx should be structured, says, "Sure, we sometimes hear from companies that are confused about what assistance members of Congress can or should provide in the contracting process. Davis simply explains to them that lawmakers do not and should not have that kind of influence. . . . We do not attempt to prejudice the process by advocating for one contractor over another."
Some contractors, however, still believe in the power of lawmakers and senior agency officials to give them an edge, if only because they can influence how the competition is structured and whether it mandates small business awards. STG's Groh says he hopes to be one of the winners in the Networx procurement, which he says will be determined by program and contracting officials at GSA-"and hopefully extra interest and leverage from Mr. Davis or Mr. [former GSA administrator Stephen] Perry."