Vendors Jostle and Profess Economic Stimulus Readiness - Part II

Part I of this blog series tried to analyze not only the opportunity but also the many related strings attached stemming from the American Recovery and Reinvestment Act of 2009 (ARRA), a.k.a. the Economic Stimulus Plan. The inspiration came from my attendance of the Deltek Insight 2009 user conference last May, where Deltek decided to fill a market need by convening a separate “track” that was entitled “Stimulus & Beyond (Navigating the Brave New World).” 

The conclusion of the keynote session was that while public sector organizations stand a fair opportunity to receive unprecedented amounts of economic stimulus funds, the catch is that they need to provide unprecedented transparency and accountability into how those funds are spent while measuring the achievements of those programs. Indeed, many of the “lucky” recipients of funds from the ARRA must meet legal requirements to publish timely and accurate accounting, allocation, and results data for every dollar received.

What All This Basically Means

The stimulus act places a premium on readiness, streamlined execution, and accuracy of information, with the top officials being held responsible for the performance of infrastructure projects. A common enterprise reporting framework is necessary in order to roll up information from individual government agency entities and seamlessly publish it to required public domain sources.

Recipients of ARRA funds must provide instant visibility into spending status and real-time reconciliation for accurate reporting. They should also have the capability to define, plan, and prioritize projects to quickly respond to new funding opportunities and execute the funding process time and again. Organizations that are unable to meet expectations and report the use of funds quickly, accurately, and transparently will be left out of future funding opportunities.

The US Office of Management and Budget (OMB) cites the following ARRA compliance requirements:

  • a strong preference to competitively procured fixed-price contracts, whereas alternative contract procurements will most likely require additional reviews and oversight from federal agencies (that will be implementing risk assessment, as mentioned in Part I)

  • ARRA funds must be tracked separately from non-ARRA funds

  • contract management capabilities

  • adherence to the prevailing wage (i.e., the Davis-Bacon Act, as mentioned in Part I)

  • administrative requirements under the following circulars:

    • OMB Circular A-102 – “Grants and Cooperative Agreements with State and Local Governments”

    • OMB Circular A-110 -- “Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Learning, Hospitals and other Non-Profit Organizations”

    • OMB Circular A-133 – “Compliance Supplement for auditing compliance requirements"

Therefore, some sample reporting data that ARRA recipients will have to periodically provide are as follows:

  • evidence that the contract was procured competitively

  • type of contract executed, e.g., fixed price, guaranteed maximum price (GMP), time and material (T&M), etc.

  • ensure that the clauses required by ARRA are incorporated into the contract

  • evidence that the lowest responsible bidder was selected

  • evidence that proper approvals occurred given the contract values

  • evidence that expenditures are in compliance with ARRA (preferably prior to the payment)

  • evidence that there is segregation between ARRA and non-ARRA funds

  • evidence that the project is progressing within planned milestones and budget

  • evidence that changes and/or modifications to contracts meet the intent of the ARRA scope

  • Davis-Bacon wage reporting data with each application for payment, for compliance tests

  • the ability to provide all the project documentation to the Office of the Inspector General (OIG)the Government Accountability Office (GAO), or the OMB

  • the ability to report information to the state agency’s site and/or the site

Moreover, as the policy requirements (and required reports) will evolve, any compliance program must be flexible, scalable (to easily handle a few or many activities concurrently), transparent (with complete access to information to all data and processes), and must be implemented quickly. On the bright side, these stringent requirements provide an opportunity for public sector organizations to become more efficient, as well as increase their political and public support.

So, How Can Deltek Help ARRA Aspirants?

On the accountability front, Deltek’s back-office and front-office software powers most of the leading government contractors (the company’s market share and mindshare within the Top 100 US Federal Contractors is unmatched by any other software vendor), and the Deltek GCS Premier and Deltek Costpoint accounting solutions were built from the ground up to ensure compliance with the deepest of government regulations.

As such, Deltek is on the frontlines of ensuring government contractors have the tools they need to stay accountable to the government in this age of increased transparency whether the dollars are coming from the ARRA or not. Likewise, Deltek’s long history and customer base of over 8,000 architecture, engineering, and construction (AEC) customers make the vendor the market leader in this segment of the professional services market as well.

As stimulus money finally starts to flow, guess what parts of the economy stand to benefit from the stimulus money? Well, government contractors of course, but also many AEC firms that will be called upon to help modernize the infrastructure within the US. Therefore, Deltek finds itself on the frontlines of helping companies grab opportunities from the stimulus plan, since both of its major vertical markets are “stimulus-friendly.”

Show Me the Money!

Now, for Deltek to reap the benefits from its advantageous position of being at the center of the stimulus plan, the obvious question would be just how much money is flowing so far? While it is tough to navigate the website to get a complete answer, it appears that the current answer is: not much. Consider these stats from October 2009:

  • Of the entire US$787.2 billion plan, only $173.2 billion, or 22 percent, has been paid out so far (although much a higher percentage has been promised or committed to projects).

  • Of the $275B to be spent on contracts, grants, and loans (the part of the bill that should most affect AEC firms and government contractors) only $47B has been paid out, or 17 percent.

  • On the ARRA-funded Awards Progress front, 70 percent of Awards contracts are either not complete or are less than 50 percent complete.

What does this mean? Well, for much of the Stimulus Plan that is devoted to infrastructure investment (some reports put it at $152B of the total amount of the ARRA, for more details see Part I), it appears as if most of the money has yet to flow, largely due to the myriad complexities around warding and then accounting for the money. 

While I am sure that Deltek (as do we all, for that matter) wishes more of the money would have flowed to date, the vendor remains in a very enviable position. As the clear market leader selling software to both AEC firms and government contractors, Deltek is positioned to prosper in the near and long term, especially if the backloaded stimulus money reaches its originally intended recipients. 

So, given that Deltek recognizes its advantageous market position, what has the vendor done to position itself to help power the ARRA opportunity, accountability, and transparency? The answer is, quite a lot.

Namely, what do companies need to win new business and stay compliant? The answer is strong business development solutions and business intelligence (BI)/business performance management (BPM) capabilities to monitor and measure their businesses.

As peek-previewed in my blog series in early 2009, at Deltek Insight 2009 the vendor had major product releases across these exact areas. Here is the rundown:

  • GovWin 6.0, to help government contractors win new business

  • Premier Analytics, a BI solution for GCS Premier so that small to midsize government contractors can better monitor and manage their businesses 

  • Cobra 5.0, with expanded usability so that companies can more easily manage project costs and measure earned value in this new era of compliance

  • Deltek Vision 6.0, the latest release of Deltek’s solution for professional services firms of all types and sizes.  Along with the landmark Vision release, Deltek also released:

  1. Vision Performance Management – a set of BI tools to help service companies turn critical business data into understanding and knowledge

  2. Project Connect – bi-directional integration between Deltek Vision and Microsoft Project

As you can tell from the above, Deltek has been hard at work on the product front in 2009. In fact, somewhat in contrast to the perception that it is a conservatively run company, this year Deltek released the most new products in the history of the company.  That is an encouraging and healthy sign that proves that the vendor is willing to invest in its business and drive innovation even in a tough economy. This foresight might serve the company well in the future, especially as the stimulus money begins to flow faster.

One last bit of news on the solution front: Deltek recently purchased mySBX, an online community comprised of thousands of government contractors that leverage the power of the network to solve business problems inherent in the GovCon world. Large and small government contractors use the community for many purposes, such as finding teaming partners to collaborate on and win government contracts, staying compliant with diversity and competition goals, and minimizing lost revenue opportunities by finding outlets within the network for billable consultants currently on the bench.

While mySBX offers a compelling value proposition today, Deltek is putting its heavyweight status behind the network and will begin to accelerate the value of the online exchange in many ways. This was a strategic move with positive ramifications for Deltek on a number of fronts, not the least of which is finding new outlets for its solutions.  Stay tuned for more information as Deltek adds capabilities to the network in the coming months.

Clarity 2009 and the GovCon Industry Highlights Report

In addition to Deltek’s still unmatched software capabilities for the government contractors (GovCon) market, Deltek marketers and consultants offer deep and differentiated domain expertise about the complexities and nuances of working as a government contractor.  With this wealth of knowledge comes a strong reputation and a large “Rolodex” (or perhaps LinkedIn connections nowadays).

Thus, Deltek has recently leveraged its deep connections within the GovCon market to produce a very detailed report about the related marketplace. The survey included responses from 249 unique contractors, and offers data and insights into multiple process areas within government contractors including the following: business development, project management, financial operations, business operations, and compliance. 

While I won’t go into all of the details in the exhaustive 40-page report, I want to put the spotlight here on five key questions that came out of the report, and the associated answers to those questions.  These Q&As were as follows:
Question 1:  Is the GovCon market still growing even in the midst of these tough economic times?

Answer 1:  Yes, the sector is still growing.  In particular, larger firms are experiencing better growth rates than expected, on the order of 10 percent. 

Question 2:  Are mergers and acquisitions (M&As) still top of mind with GovCon executives?

Answer 2:  Surprisingly, not so much.  Over 85 percent of large firms surveyed (those that do the most number of acquisitions) did not indicate any definite M&A plans in 2010.

Question 3:  How mature is the project management discipline inside most government contractors even with the US Government mandates to keep projects on time and on budget?

Answer 3:  The discipline is less mature than one would think. Only 11 percent of large firms thought that their project management was very mature, and the larger the firm, the more likely they were to report a lower level of confidence in their project status confidence.

Question 4: While it may seem obvious, do the larger, more technologically advanced contractors really have faster, more efficient business processes than smaller companies?

Answer 4: Actually, the answer from the survey was no! It turns out that large firms’ invoicing cycle is 12.6 days and the industry average is 9.8. Better yet, smaller firms’ invoicing cycle is four times shorter.

Question 5: In this new age of transparency, has the Defense Contract Auditing Agency (DCAA) adopted a more confrontational stance with contractors?

Answer 5: While it may seem that way–especially with plans to hire more auditors throughout the Government–surprisingly the answer is no! More than 83 percent of contractors that were recently audited said that the relationship was “good” or “excellent.” This last myth caused significant debate within the industry, and it will be interesting to see if relationships remain strong when the new auditors are hired. 

Juxtaposing Deltek and non-Deltek GovCon Customers

  • Deltek customers report on average a 9 -day monthly invoice cycle, versus the industry average of 15 days.

  • A majority of Deltek customers report “High” project status visibility while organizations that are not using Deltek solutions consistently report they have “Poor” project status visibility.

  • Deltek customers report that 75 percent of all of their projects are on track or under budget, while organizations that do not use Deltek solutions report project budget overruns on at least half of their projects.

  • Organizations that do not run a Deltek solution require the support of 50 percent more compliance related full time employees (FTEs) than organizations leveraging Deltek solutions.

  • In addition, while not a comparison stat per se, users of Deltek’s business development solutions (i.e., Deltek GovWin) report win-rate increases on the order of 17 to 52 percent.

For the details behind the answers and the survey findings, you can contact Deltek to get access to the landmark GovCon Industry Highlights Report. All companies that currently do business with the US government or are planning to do business with the largest customer in the world should make reading the report mandatory.

Part III of this blog series will focus on the construction industry’s current challenges, the outlook, and the trends that still bode well for the sector in the long term. The blog post will then talk about some software vendors that cater to the entire construction project’s lifecycle, i.e., the Plan, Build, and Operate (PBO) cycle, and these vendors’ efforts with regard to ARRA.

Your views, comments and opinions, etc., are customarily welcome in the meantime. If you are a recipient of ARRA funds, I would appreciate you sharing your experiences about dealing with federal or local agencies.
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