How Companies Can Compete for Contracts
Print Issue: January 2004
On a new ABC television series, Threat Matrix, an opening scene featured satellite photographs that were used to track cargo ship movements while, simultaneously, analysts pulled up crew lists, ownership records, and cargo manifests. All these data were integrated to allow the analysts to quickly discern patterns and anomalies that pointed the way to terrorists. Federal agents communicated seamlessly with state and local authorities using an array of devices. For example, field agents sent and received real-time information about threats and suspects over PDAs. The program was a showcase of all that technology can do in the fight against terrorism. Unfortunately, it was also fiction.
Bridging the gap between the reality of security technology deployed in the fight against terrorism and the idealized version of how such technology can be used will involve private sector ingenuity applied to public sector problems. This means that more and more technology providers—in security and other fields such as the communications and service industries—will be contracting with the Department of Homeland Security (DHS).
The DHS estimates that it will spend more than $10 billion in procurements and more than $4 billion on grants during the current fiscal year, which began in October 2003. The department’s 2004 budget request includes $803 million to “develop new partnerships with the private sector to research, develop, and deploy homeland security technologies that will make America safer.” The projected amount is eight times more than the 2003 spending on these programs. The Transportation Security Administration (TSA) recently administered round three of its port grants program. Technology funding is also starting to find its way into the hands of state and local authorities who are ready to buy.
Challenges. Companies that desire to capitalize on these opportunities must get the right message about the company to the right person, overcome obstacles at the state and local levels, understand new government procurement rules (not elaborated on in this article), speak the right language, assess government needs, and ensure the technology that the company has made available has been successfully tested to government standards.
The message. Across the federal government, the individuals charged with spearheading technology efforts remain inundated with sound proposals as well as with wild ideas. Given the volume of paperwork, even the best technologies can find it hard to break through the cacophony. For example, Hollis-Eden Pharmaceuticals has developed a drug that has been proven in lab tests to dramatically increase survival rates in the event of exposure to nuclear-bomb-level radiation doses. Despite the obvious importance of this drug, making sure that the company receives the federal funds required to complete its testing and development has been a surprisingly difficult process, largely because the people who are charged with managing these funds are overwhelmed.
The company succeeded in securing the resources and exposure it needed, but not without significant work identifying its homeland security niche; honing its message; and educating members of Congress, federal agency leaders, and the public. Companies that have even the best of technologies can find it frustratingly difficult to get the attention of key individuals. Reaching the right people requires not only knowing with whom to talk, but also knowing what to say in the limited time available to make the case.
The obstacles. Another major hurdle for companies exists at the state and local levels, where much of the homeland security technology funding will ultimately be handed out from block grants. This means that instead of one consolidated subfederal homeland security technology market, there are 50 state and thousands of local markets.
Technology companies that want to be successful in putting their goods and services into state and local hands face a dizzying challenge. They need to develop contacts across a host of state and local agencies. Then, they need to develop an understanding of the state and local procurement systems in which they desire to participate. In doing so, they have to do more than merely sell; they have to develop trust and build partnerships with their subfederal customers, occasionally helping them determine their needs and how best to fill them.
Most major contractors who have been dealing with issues now associated with homeland defense have traditionally dealt with only the Department of Defense, not the state-level agencies that now might have some responsibility for an issue like interstate or international border security. Now homeland security has given rise to issues that are outside of the defense contracting world, requiring these contractors to know the adjunct generals for the National Guard in each state, for example.
Currently, there is no general resource for this type of information. A company can find out who leads a state’s emergency management team by searching the Web sites of individual states, but this requires a great deal of time. Even this approach is not practical if the company does not know what sort of agency to target. For example, if a company has developed a chemical protective suit, it must first identify the potential consumer, such as the National Guard or other first responders. Then it must identify who would handle procurement in each state.
However, some changes currently under way could make this part of the process easier. For example, the National Guard has just appointed a federal-level procurement officer.
Also, the DHS has announced its Security, Planning, and Integrated Resources of Information Technology (SPIRIT) program. Dedicated to IT contracting, the program allows the government to pick a few companies to work on multiple contracts. Worth $10 million, these multiaward contracts are designed to allow an agency to call on a handful of contractors to do everything they need instead of bidding each project individually. Those not involved in the original bidding process could later participate by partnering with a company that was part of the original bidding process.
Rules. Since 9-11, Congress has enacted a host of homeland security laws that touch everything from first responders to food service companies to travel agencies. As a result, the market will increasingly be driven by federal regulation. For example, the technology requirements the government will impose on maritime facilities will drive the technology choices of ports, vessel owners, and refineries. The responsibilities federal statutes will delegate to states and localities for responding to a biological, chemical, or other attack will drive what technologies these states and localities will use their grant monies to obtain.
Companies need to stay abreast of the changing legal and regulatory environment because it will directly influence their sales and bottom lines. Moreover, some companies will find that the best way to build their market share will be to participate in the development of the mandates that are setting the parameters of that market, through congressional and government relations efforts.
Companies should have an employee dedicated to tracking this information, or they should hire someone to do it (more on hiring consultants later). As part of the effort, the company must do more than passively monitor what government is doing. To really get in the door, the company must establish and maintain good government relations with key officials. The objective would be to make the relevant officials aware of the company’s reputation, expertise, and ability to deliver on any proposal made.
Language/issues. Not only are the laws and rules new, the players are also speaking a language that may be unfamiliar to companies that have not previously been involved in government contracting. They also respond to different concerns from those of the typical technology customer. The issues here are not return on investment and efficiency. Instead, companies need to be able to address how their products make people safer, reduce vulnerabilities, minimize potential liabilities, and comply with new regulations. The companies that emerge as the leaders in this space will be those who know how to speak the language and who understand the dynamics of homeland security.
Companies need to talk about total solutions, deployment, and safety. Other key areas are connecting law enforcement with intelligence, disseminating unclassified intelligence information, and integrating first responders into regional threat models.
For example, the pharmaceutical company referred to earlier had never contracted with the government when it began the process. It had a new drug in development, a spinoff of a cancer treatment drug, that it thought would have homeland security applications, but company executives didn’t know which officials to approach.
The challenge was to get this potential breakthrough in front of the right people in a manner that showed just how important the drug could be. With the help of a consulting firm, company executives looked at exactly how the product addressed the homeland security needs of the nation and honed the message to show just how the drug could save lives and make Americans more secure.
The company then showcased the drug’s assets in the appropriate language, stressing that the drug was not a mere idea, but a real product already tested for safety. The company further showed that the drug was relatively low cost. The presentation also noted that the drug could be stockpiled because it is stable and that it could be taken before a biological event to prevent harm. The company was careful to put all of this information, not in marketing terms, but in the language of national security.
Next, the company worked with the consultants to identify the key decision-makers across the full range of the federal government—from the National Guard, to DHS, to Congress. At the same time, the company launched a media strategy to make the public aware that there was a drug out there that could significantly increase survival rates after a nuclear attack or event, thereby creating public interest in and support for the product.
The reason for all of this effort was that the company needed developmental dollars to move its drug through the clinical trial process. Management successfully made its case within the congressional and executive branches, procuring several million dollars, and the drug is now in the testing phase.
The need. For other companies wondering whether they should enter into the process, the first question is whether the product or service they have to offer fills a priority need of homeland security. To be successful, companies must identify the five or six priority items facing the DHS. The best way to obtain this information is to study the agency’s budget.
To succeed, companies must keep an eye on how the government’s priorities are evolving. An issue may not be at the top of the list when the company first approaches the government, but may later become a greater concern. If the company approaches officials when the issue has gained a high level of attention, it will likely get a more favorable hearing.
For example, as the DHS has evolved, it has become increasingly desirous of total solutions that help it meet the need to integrate a large number of diverse databases. The challenge of protecting the nation’s extensive borders and widely dispersed infrastructure has emerged as another primary focal point in the homeland security area.
One company intent on breaking into the homeland security market initiated its efforts with a product that facilitated “trusted communications” among a group. The company gained little traction despite the value of its standalone product until it joined that product with another technology that helps incompatible databases communicate with each other. Though still facing some hurdles, the company is now close to achieving success after it added certain video and other monitoring capabilities to create what is an effective security monitoring and communications system capable of broad geographic placement.
The proof. With few exceptions, companies must present the government with proven technology. (In other areas of the federal government, there are processes where items are tested by the government before being deployed, but this is not happening at DHS.) Companies must, therefore, have some proof of concept or some tangible proof that the product actually does what it is intended to do.
The question is, at the end of the day, how does it make the country safer? In the case of the drug mentioned in the earlier example, the company was able to prove that it could increase survival rates after a nuclear attack by 90 percent. This type of solid proof helped the company market its product to DHS.
Liability. A critical component of government contracting for homeland security is protecting the company from liability. One of the most significant issues facing companies in this arena has been securing insurance to protect the company from the potentially ruinous claims that might be asserted against them following a terrorist act. As a result, companies have been reluctant to enter into the homeland security market.
The government has attempted to address this issue through the Support Anti-terrorism by Fostering Effective Technologies (SAFETY) Act of 2002. Interim regulations that govern implementation of the law allow providers of antiterrorism products and services to apply for designation as suppliers of “a qualified anti-terrorism technology” (QUATT) and certification as providers of an “approved product for Homeland Security.” QUATT designation will provide significant limitations regarding claims that can be asserted against a company’s covered technology in the event of a terrorist attack.
Certification and placement of the technology on an approved product list for Homeland Security will afford added benefits in defending against a lawsuit. The technology must be reevaluated every five to eight years or when it is significantly changed or modified. Once approved, the deployed technology is protected even if it is transferred to another entity.
From a company’s perspective, the primary challenges under the act will be whether its product or service meets the definition of antiterrorism technology and whether it can satisfy the criteria for designation and, if desired, certification. Moreover, even if approved, the protection of the act will apply only in the event of an actual attack and not to situations such as testing or activation as the result of a false alarm. In this regard, one issue that needs to be resolved through practical experience is the interplay between the SAFETY Act’s benefits and other forms of government indemnity that are sometimes available to those providing inherently hazardous products.
Another outstanding issue of concern for all companies is the protection afforded to sensitive company information that must be revealed to the government as part of the application process. Although such materials are exempt from Freedom of Information Act requests and, in theory, protected from general distribution within the government, issues remain as to who might be afforded access to such materials and, if so, under what circumstances. For example, it is undecided whether a contracting officer conducting due diligence in advance of a contract award will be afforded access to such data. Similarly, it is unknown whether a competitor’s outside counsel will be allowed access to information as part of a bid protest.
Consultants. Many companies will choose to consult experts rather than dedicate employees to the task of tracking government contracting trends. This route can offer unique benefits. For example, some small companies are correctly placed to benefit from government rules, such as preference for minority-owned businesses. Good consultants can offer this type of information as well as problem-solving techniques. However, in the world of homeland security, companies should be wary of experts who purport to have vast experience. The landscape is brand new, and anyone claiming to have specific knowledge is probably exaggerating.
Instead of searching for homeland security experts, companies should look for more specific expertise. For example, those companies that manufacture cargo tracking devices should look for a consultant with a track record in border patrol issues. Because working with the government involves multiple levels of expertise—and political contacts—companies may want to look for a consulting business that includes a diverse team—a former congressman, a policy expert, and several government specialists, for example.
If a consultant claims to have success stories, ask for specifics. There aren’t many success stories at this point because the process is so new, but there are some consultants who have sold products to DHS. Also, companies should be sure that the consultants are offering solid counsel and advice, not selling an escort service—where the consultant’s only job is to arrange meetings between players and companies—even though getting in the door is a critical first step.
While the technologically advanced world portrayed in Threat Matrix may not be here quite yet, it is on the horizon. For companies with technology solutions, this represents an exciting opportunity to assist in a vital cause, create new markets, and push envelopes. However, to be a player here, companies need more than a good product or service. They need to understand how to navigate in this new business matrix.
Rob Housman is counsel to Bracewell & Patterson’s Homeland Security Practice Group in Washington, D.C., and is a former White House official. Tony Anikeeff is a partner and co-leader of Bracewell & Patterson’s government contracts section, and a member of the firm’s Homeland Security Practice Group. He is a former U.S. Department of Justice assistant branch director.