Blog: Are you taking your eye off the ball?

posted Washington Business Journal, 24 Oct 2013

By Ray Bjorklund, President, BirchGrove Consulting

Seems like it's happening several times each year. Our community of federal contractors gets distracted by fiscal wranglings between the White House and Capitol Hill. And then they suffer for it.

A daily count of new opportunities introduced in FedBizOpps postings for the period of July through August illustrates one of those differences.

Granted, there's plenty to distract us all. Seeking news to report, media channels hype every halting step toward resolving the fiscal impasse. As advocates for their members, trade associations report on the dire impacts. Company executives wring their hands about next steps. These distractions bring on hyperventilation that inhibits rational action.

There have been a slightly higher number of distractions this year. We started off with the tail end of the 2013 appropriations process that had dragged on five months into the new fiscal year. The-sequester-that-couldn't-be-stopped then hit us. As we entered fiscal year 2014, the absence of any new appropriations led to the partial government shutdown. On top of all these interruptions and delays in government spending, we faced a breach of the debt ceiling that could have caused markets to meltdown.

The hyperventilation is a waste of energy reserves that could be better used in improving business performance. When you hyperventilate, you take your eye off the ball.

What's the risk? A desolate pipeline that inhibits organic growth. Poor contract execution that results in cancelled work. Inferior past performance that compromises your competitive position.

And then there's cancelled contracts, which can indirectly weaken both your pipeline and your competitive position.

The federal procurement system doesn't take contract terminations lightly. Larger dollar value terminations often require a contracting officer with specialized experience to adjudicate the liabilities of both sides of the table. It's often the last step in a systematic process of escalating actions. If the situation doesn't warrant a full termination, we sometimes see tacit contract terminations cast as supplemental agreements or funding-only actions. More typically, we see terminations for convenience.

The most serious cancellation is a termination for default. At least 21 contractors based in D.C., Maryland and Virginia had contracts or orders terminated for default in 2013, with a third of those terminations happening in the fourth quarter of the federal fiscal year. There are already three contract terminations for default in the first 10 days of fiscal 2014. Even though these contractors are headquartered locally, the place of performance was sometimes in a stressful overseas environment. These two dozen terminations together resulted in almost $36 million in losses to those contractors.

Some contractors lost even more: credibility with their customers, present and future, was compromised as well. At least one of these cancellations was related to a declaration of ineligibility for future contracts (although final adjudication is pending). Not a good way to win new business.

Many managers in a company have a fiduciary responsibility to do the right thing for their company's future in this uncertain environment. During this latest round of distractions, it's been a particularly intense challenge for smaller companies. Kudos to those company executives stepping out to soften the impact of the shutdown on their employees.

Hyperventilating is not the right thing to do. Keeping an eye on contract execution and customer satisfaction is. It may mean the future for your business.

Have you lost any incumbent contracts to a competitor? Is it harder to get meetings with key government people? Has your win rate declined? Yes, these circumstances may be attributable to a tougher market. Even if we didn't have the distractions of fiscal wranglings, finding and competing for new work is harder. But it might also have something to do with the government's perceived or real impressions of your past performance.

Do what's prudent for the company and adapt, but don't get distracted about a future you can't control. Take your eye off the ball and you might compromise future revenue.

©2013 Washington Business Journal. Used by permission.