Tuesday, February 21, 2017

Risks without Reward

Although this piece strays far from the realm of politics, it does at least provide a touching reminder that the world of Federal contracting, the one that occupies my working hours, has its "competitive humor", at least when you look from the perspective of time and a little distance.

The genesis of this piece was from a previous one about the amusing reaction during the S*per Bowl by Google voice-responsive devices around the country, to a commercial featuring those devices.  A bit hard, it apparently is, to demonstrate a voice-response system in a TV commercial without having thousands of such devices within earshot all go off and respond.

Well, I laughed.  At any rate, I compared the issue to the 1999 "Y2K" situation that we all remember, and for which I had managed a group that worked to fix programming code that was subject to the "bug" of Y2K.  A reader brought it up, and it all reminded me of the most memorable story of those years in the late '90s.

I was working for Litton Industries at the time, Litton having acquired the fairly large firm called "PRC", an information technology contractor for whom I had been working a number of years at the time.  Such acquisitions were as common then as they are now; Litton had in fact purchased PRC from Black and Decker in 1996, which had acquired it as a component of a company called Emhart in 1990, who in turn had bought PRC in the mid '80s.
Companies buying companies buying companies

 One of PRC's larger contracts was with the U.S. Patent and Trademark Office as an IT support contractor, covering a few hundred people.  A big element of that was COBOL programming.  Even then, COBOL was a "very old" programming language, meaning that the people who used it were pretty much, well, old.  I programmed in COBOL for years, if that tells you anything.

With the Y2K bug having started to be the subject of alerts in 1996, PRC decided the next year to form a group to "remediate" older programs, meaning to overhaul them to make all the date fields four-digit, and to test that they did what they were supposed to do thereafter.  Much of that was COBOL code, meaning that there was a big need for COBOL programmers capable of doing the work, and that meant, politely, older software engineers.

PRC's five-year contract with the Patent and Trademark Office was coming to an end in 1997.  Although PRC was confident of winning the recompetition of the work, having done a really good job and gotten high review scores, government contracts are almost invariably price sensitive, and a solid-performing contractor can lose to one who slashes their prices, even if the latter is at risk of not being even able to hire people at the salaries they bid.

Now that brings up a peculiar aspect of contracting.  When you have a hundred people working full-time on a project, they have almost all of what is called "institutional knowledge."  In other words, after five years of managing, developing and fixing code, those 100 people know everything about the code and no one else knows anything.

So if a different company is competing for that work, they would normally expect, if they win, to try to hire all, or most, of the people working for the current employer, the "incumbent."  That's often difficult, since the challenger has to get their price down below the incumbent while still planning to hire the same employees already there. 

To do that with the already-thin profit margins in such work, you have to plan to pay the people less, or give them poorer benefits.  Essentially, you "hope" to keep them and learn everything you can from them before they quit for a higher-paying job.  I believe the past eight years showed how good "hope" is as a strategy.

Obviously the employees, even old COBOL programmers, are not stupid.  They know what's going on, but there has to be an alternative for them.  Typically there isn't, so they just stay on the project for the new contractor, at lower pay or weaker benefits or both.

That was the tack taken by CSC, yet another three-letter contractor.  In their bid, they cut the price of the proposed workforce, while declaring that they would hire the incumbent team.  USPTO assumedly never asked how CSC could be so sure that they could retain much of the work force while paying them less, looked at their proposed price and awarded them the contract in 1997.

But a funny thing happened on the way to that award, though.  Y2K happened.

Now from the perspective of the programming staff PRC had on the USPTO contract, well, they were not excited about changing companies, and even less excited on learning what would happen to their salaries and benefits.  And at just about the same time that award was being worked out, PRC's brand-new Y2K organization was looking for a mess of COBOL programmers for a new task with some of its other customers, to fix old COBOL code.

That meant that, at just the time CSC was looking and ready to hire all those PRC programmers about to come off the USPTO task as it expired, PRC had alternative work for them, allowing them to stay with their company, and keep their salaries and benefits.  Needless to say, a large percentage of them decided to stay and not go over to CSC.

I would have felt sorry for CSC had they not been PRC's competition, and had they not won away an important PRC contract by bidding a price so low that they were going to have a tough time living up to it.  Plus, I was running the services part of the Y2K group at PRC, and I needed those programmers just as much.  So each one we kept was good for me -- and we kept about 50 of them.

Our competitor was not so lucky; they quickly found themselves obligated to deliver on a contract for which they had fewer than half the staff members they expected to have, and all that institutional knowledge they expected to get from them, well, they didn't get it.  USPTO was not particularly happy, although they might have wanted to have looked in a mirror and evaluated how they determined contract awards and to what extent price should have been a factor.

My Y2K team did excellent work, and for a couple years, until just after January 1, 2000, most all of them were busy and productive.  I accepted a good offer and left PRC a month or so before that, and the rest is history.  CSC had a rough time at USPTO and lost the recompetition in 2003.  In fact, if memory serves, USPTO had to execute a sole-source contract to PRC just to get some of that institutional memory available to them.

For the record, the above is certainly not a slight against CSC, as much as a historical reckoning; they did nothing out of the ordinary for the time (or since).  If anything, the blame falls squarely on the contracts people at PTO for accepting a bid so fraught with risk if the contractor failed to hire enough incumbent staff.

A lesson in there somewhere?  I don't know, except for the suggestion that Federal contracting officers look a bit harder at bids for services that charge a lot less than what the agency had been paying.  Hopefully they will, but don't hold your breath.

Just a nice, non-political tale for the day.

Copyright 2017 by Robert Sutton
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