Five Tips for a Successful Selling Season

Sales FunnelSteve Headshot 65 x 85 by Steve Charles, Co-founder

Every year around this time I’m approached by technology companies looking for quick tips on how to make their September successful. I start off by saying that in a typical government fiscal year, we see the feds spending about a third of their budgets in the last quarter. However, the steps for completing the acquisition packages began six to nine months ago. 

As we wind down to the last week or two of the year, program managers pick and choose purchase requests like puzzle pieces to get to zero by midnight, September 30.  So, to make sure you’re in the mix at the 11th hour, make sure to ask your government customer one critical question: is the right amount of money in the right account?

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The Government’s Buying Season is Over…Now What?

Photo of Allan RubinAs we turned the corner on a new government fiscal year, the editors of FedPulse asked me to share some thoughts on what technology companies will face in the year ahead — and how they should prepare.

This led me to a few questions. What happens next? Will a busy September (actually, a couple of very strong months for many of us) lead to continued strength in the year ahead? Or should we expect an immediate drop-off now that the September rush has passed?

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Year-End Tip: Ask, “Is the Right Amount of Money in the Right Account?”

Steve Headshot 65 x 85by Steve Charles, Co-founder and Executive Vice President

During typical years, the feds spend about a third of the budget in the last quarter. While sales for complex deals and engagements are off, sales for easy to buy commercial items are staying strong. So, what can you do to be successful this September? Make sure to ask one of my favorite closing questions: “Is the right amount of money in the right account?”

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Voluntary Cybersecurity Framework Could Lead to Regulations in the Future

Lloyd McCoy_65x85by Lloyd McCoy Jr., Consultant

The Preliminary Cybersecurity Framework, released for industry feedback in October serves as a preview of the voluntary guidelines and best practices aimed at industry for the purpose of reducing cyber risks to our critical infrastructure (see below). The Framework also focuses on information sharing, between industry and the government. Specifically, the government and private critical infrastructure operators, as well as the technology firms who support them, would share information on cyber breaches and ways to prevent them.  The draft by the National Institute for Standards and Technology (NIST) was put together with industry feedback, but there are lingering concerns that the final version may not be all that voluntary.

Some industry watchers worry that if a technology company disregards the Framework, and there is an intrusion resulting in loss of data or impaired critical infrastructure, then that firm could be vulnerable to lawsuits. The draft Framework does include liability protection but only for those who adopt the Framework – leaving those on the outside more vulnerable particularly if the Framework becomes to the de facto standard.

The Framework also addresses privacy and civil liberty concerns, an issue on a lot of people’s minds nowadays. It calls for minimization of personally identifiable information (PII) as information on cyber breaches is shared with the government. The issue here is that all the scrubbing and anonymizing of data that will be required is costly and time consuming and could prove to be a disincentive.

The White House has gone to great lengths to make the Framework as benign and palatable as possible to industry, but while the Framework is not mandatory, there is concern it could pave the way for regulations and legislation in the future. The Executive Order from which the Framework is derived, for example, requires federal agencies to state whether they have authority to establish requirements based on the Framework…should they need to.  Also, the word “should” was dropped from certain sections featuring recommendations for industry. The change was intended to make the language less forceful but now reads as if industry is being commanded.

Any concerns or recommendations can be conveyed to the government during a 45-day comment period which ends December 13, 2013. It is open to all industry, particularly those connected in some way to critical infrastructure. I encourage you to take a look at the Framework and take advantage of this opportunity to shape the guidelines which, if you peel back the layers may become more binding than you might think.

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Security Clearance Process Undergoing Review, Be Aware Opportunities Will Be Coming

Rick Antonucci_65x85By Rick Antonucci, Analyst

Due to the tragic Navy Yard Shooting in September, as well as the leaks by former NSA contractor Edward Snowden, the DOD has been reviewing the process by which security clearances are awarded. More recently, a GAO report  revealed that thousands of government employees and contractors with delinquent tax debt hold security clearances. Over half are federal employees and owe approximately $85M in unpaid taxes. Consequently, a new program currently under development which allows for continuous checks of cleared personnel. The concept demo will run from April to December 2014 and will scan about 100,000 currently cleared personnel. IT vendors focusing on data analytics, databases, and identity and access management tools will have a play in the upcoming system.  

The GAO reported that part of the problem with the current process is inconsistent quality metrics throughout the clearance process and this has allowed people, such as Navy Yard shooter Aaron Alexis, to slip through the cracks. The GAO estimates that 87% of about 3,500 investigative reports that DOD adjudicators used to make clearance eligibility decisions were missing information. Right now there isn’t an automated, routine, way to identify anomalies in a clearance record.

Monitor closely the pilot effort that will be running next year and make sure to speak with the actual users of the clearance process, as well as those who are heading up the program, to make sure that you can raise awareness of your solution at both ends. And lastly, though it has been said before, don’t ask what the pain points are; know what they are and come prepared with a solution that will demonstrate your solution’s value. This is still a nebulous program in its beginning stages but be aware that there will be opportunities coming down the pike to support this overhaul of the security clearance process.

Navy Yard Tragedy May Prompt Increased Physical Security and Big Data Investments

Lloyd McCoy_65x85by Lloyd McCoy Jr., Consultant

Look out for increased investments in technologies related to physical security and background checks in the wake of the mass shooting at the Navy Yard. That is, once the government reopens for business. Law enforcement officials are confident the perpetrator, Aaron Alexis, a federal contractor, gained entry to the base via his valid contractor Common Access Card. This card is very similar to those given to military personnel and Department of Defense civilians and allows relatively unfettered access to most military bases for cleared individuals.

The fact that Alexis was allowed access, despite a history of erratic behavior, has prompted calls for more stringent security safeguards. Secretary of Defense Chuck Hagel ordered a review of the Department’s security clearance and military base access standards. Expect more scrutiny over the tools we currently use to vet security clearance applicants.  Separately, a recent Pentagon inspector general report exposed major flaws in military installation access procedures. That report specifically recommends replacement of the access control system currently used for un-cleared personnel. More recommendations are sure to follow in the wake of last week’s shooting.

As the dust settles after the release of the inspector general report and Hagel’s investigation, expect to see legislation and policies calling for more funding for data mining, data analytics, emergency response, access control, identity and access management, and biometric identity verification.

A Look at the Next Two Weeks…And Beyond

Steve Charles_headshot _7-23-2013_65x85by Steve Charles, Co-founder and Executive Vice President

With the Washington Nationals now eliminated for sure from this season’s baseball playoffs, Washington the city and the market can focus fully on handicapping the possibility of a government shutdown next week.

Just in case, the White House issued a memo this month on agency operations during a “potential lapse in appropriations,” the proper word for shutdown. It’s two pages, followed by a 12-page attachment on details of contracting, grants administration, and payment processing during a lapse. In essence, for the government to spend anything, it would have to be for “excepted” activities, mainly essential and emergency requirements, lest an agency fall out of compliance with the Antideficiency Act.

But let’s presume Congress will find some way of avoiding a shutdown. For sales planning purposes, how else can you think? A shutdown wouldn’t likely last more than a few days anyhow. Less clear is how much spending authority your federal customers will actually have in terms of both dollars and the authority itself.

If you have a scholarly bent, the Government Accountability Office has long tomes (GAO Red Book) online covering appropriation law, dating back to the Civil War era. But for more immediate practical purposes, pay attention to the term of a continuing resolution. In theory they could do it a couple of days at a time. In practice, the term will revolve around the Obamacare defunding gambit and the debt ceiling deadline around October 17.

Regardless, agencies only have spending authority at the yearly rate, prorated for the months approved. So an agency with an annual budget of $1 million in an account would have authority to spend only $250,000 during a three-month CR.

But like your Swiss wind-up watch, this year has complications. Namely, sequestration, which at this writing is still in effect. Will the CR live within the 2014 Budget Caps of the Budget Control Act (Sequestration levels) or will it ignore them and apply the sequestration holdbacks later in the year?  Expect some agencies to remain cautious, others will try and spend what they can early and worry about holdbacks later.

When approaching government customers, remember any spending under a continuing resolution, aggressive or conservative, must be mappable back to an authorized program funded by appropriated dollars in the previous year. Agencies can’t initiate new programs under a CR, but they can engage better ways to do what is already under way. That’s the smartest way to position your offerings now.

Beyond the current budget vicissitudes, here are a few of the long-term trends we’ll be staying on top of in the next year:

  • How  to sell products in a services-oriented environment. Infrastructure as a Service, utility-based computing, application sharing ⎯ these are all changing how the government looks at IT. Perhaps this by-the-month mode of buying is at some level driven by unpredictable spending authority.
  • Extreme price sensitivity, seen in the growing use of lowest-cost, technically acceptable procurements, shared services, and in the growing practice of analyzing competing contract vehicle prices. Keep an eye open for the “prices paid database” promised by OFPP.
  • Development of rules and practices to fill out the policies designed to ensure a safe electronics supply chain. Our big concern is whether the government is prepared to pay what it costs for tested, certified parts through bonafide channels.
  • Expect  more pressure to participate in strategic sourcing programs. The government wants to pay less and we need to show them how we’re lowering our costs of sales.

Shielding Yourself from Sequestration

photo_Chris Wiedemann_65X85- one postby Chris Wiedemann, Senior Analyst

If you had a chance to view immixGroup’s Market Intelligence briefing on sequestration yesterday, you hopefully have a better understanding of what the proposed cuts mean to IT companies.  Tim Larkins summarized the history of this situation – what sequestration is, when it became law, and just how those cuts (which weren’t really supposed to happen) actually arrived. He also covered some of the projected long-term impacts of sequestration on federal spending. This information is all vital – it will help you understand your customers’ pain and better equip you to discuss the cuts they’re experiencing.

Today, though, I want to take a minute to reemphasize some of the key components of Tim’s presentation: what does this mean for federal sales? The “snowquester” is actually a pretty good metaphor for the impact of these spending cuts on the federal IT market: some segments will stay pretty dry, while others may well get buried. So what should we be doing to shield ourselves from sequestration?

First and foremost, when you’re finalizing a deal with your customer, make sure the money is there. That means asking your customers two questions: what activity account is funding the purchase, and is the right amount of money in that account? Remember, while program people are creating demand, they have to request that money be transferred from Treasury into the right activity account before they can actually buy anything. This is the step where the sequestration cuts are actually taking place – think of them as a leak in the cash pipe. That leak could mean that money intended to purchase your products is actually getting lost before it ever lands in the right activity account. Don’t forget: unless you and your customer both know 1) which account is funding a purchase, and 2) whether that account contains the right amount of money, you’re subjecting yourself to potential delays and hang-ups down the road. You might even not get paid.

A few more points that I want to emphasize:

  • Although the long-term impacts of these deficit cuts will probably be minimal, we are going to feel the pinch in the short term. Federal IT spending will decrease overall this year, particularly in DOD, where they have been spending as though the sequester would not be implemented.
  • Most of the cuts to IT spending will probably be felt by systems integrators and services contractors, both large and small. All the language coming out of OMB and other government sources indicates that there are many duplicative or otherwise unnecessary IT services contracts that will probably be descoped (or cancelled outright). This is bad news for small business subs on large contracts, but is actually good news for the COTS community, since government will need to buy more tools to perform the tasks that they used to outsource.
  • Keep your audience in mind. At the executive level, demonstrating cost savings and value is going to be more critical than ever – if you can’t demonstrate real ROI within two years of purchase, your customer likely won’t be interested.
  • At the end of the day, there is still a mission that has to be met, and government customers won’t be able to use sequestration as an excuse not to do their jobs. If you or your clients can help them meet that mission, you will still find a willing audience.

As always, if you have more specific questions, I urge you to reach out to the Market Intelligence team. Good luck and happy hunting.

Sequestration. It’s Here, So Now What?

photo_Steve-Charles_65x85by Steve Charles, Co-founder and Executive Vice President

Like so many of our clients and partners, I’m scanning the news almost hourly to see what will happen with sequestration. As I’ve advised earlier, it’s important to filter out the politics ⎯ admittedly that are getting more heated and unreal-sounding ⎯ from the underlying reality.

That reality centers on two points worth repeating.

First, the math. For the civilian side of the government, cuts of $42.5 billion represent 6 percent or so of overall spending, but the effect is magnified by the fact that the fiscal year is nearly half over. The cuts aren’t horrible, but they are real. On the Defense side, it’s more like 9 percent, and this on top of budget limitations worth hundreds of billions over 10 years agreed to last year.

Remember, Sequestration is a “hold-back” of a specified percentage on all accounts of a similar type. For instance, the hold-back percentage on Discretionary accounts is higher than Mandatory accounts, and some accounts are exempt. But all “sequesterable” accounts of the same type have the same hold-back percentage applied, so an agency can’t completely cut a program, rather, all programs, theoretically, are subject to equal pain and suffering. The Sequester Order expected March 1 should include all these details.

This requires a careful, tactical approach by your sales teams to focus on the real opportunities, analyzing each by understanding which budget line item is potentially funding each individual opportunity. February 27 guidance to agencies from Comptroller’s office (M-13-05) emphasizes use of furloughs, hiring freezes, travel bans and so on to meet the hold-back percentages on sequesterable accounts without damaging mission performance. The memo does not mention freezing planned expenditures on technology purchases.

So opportunities to continually improve government performance and cybersecurity are still out there. Understandably, program managers are being very careful about allocating funds until there is more certainty that the fund-certifying official can sign off on the disbursement–all of which must happen before Contracts can work on the procurement.

Second, go back and review those areas most likely to keep going during the sequester. These are spelled out in guidance from the Congressional Research Service issued in January. It’s called Budget Sequestration and Selected Exemptions and Special Rules. Note that word: exemptions.

Among the areas the White House has the discretion to exempt:

  • Military payroll accounts for uniformed members, which of course pulls along all of the support products and services related to troops.
  • Veterans medical benefits, which also pull through supplies and services.

These two have already been “rescued” by the administration. Other possible exemptions that relate to the sales of products and services:

  • Unobligated balances carried over from prior years from nondefense programs.
  • A dozen direct benefits programs. Normally the administrative expenses related to these programs would be subject to sequester. But here’s a crucial point. CRS reports that OMB has decided that discretionary administrative expenses for exempt programs would not be sequestered. The reasoning is convoluted, but that exemption from the sequester could be your ticket to continued sales.

Bottom line? It’s no longer enough to ask whether the customer has money. Now we need to get into the details at the budget line item level and find out how sequestration applies to that account. This is a big job. There are many thousands of accounts.

And don’t forget, there’s a continuing resolution behind the sequester. It expires March 27. So far no plan has emerged from Congress on how to avoid a government shutdown. In their caution, your customers are thinking about how to avoid stumbling into an Antideficiency Act violation. Will the CR simply be extended, or will Congress us it kill some programs and plus-up others? Anything could happen as Congress and the President wrangle over finalizing the way the amounts cut by the sequester actually happen over the longer term.

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