Affordability is other side of SBP - one of our pillars.
Sec. Stackley talked about affordability (another part of our strategic business plan) and performance. We cannot continue to replace existing warfighter capabilities with systems that are exponentially more expensive. It is catching up to us in the shipbuilding industry. It’s going to require innovation and a different way of thinking.
We are looking at affordability through commonality. We have driven a tremendous amount of variation into the plate in the different system causing tremendous burden to our platforms. On the procurement end, with so many variations, probably not getting the best deal. Hugely dependent on you to bring the innovation to the table in cyber and affordability areas. We need to get on the huge barrier in the cyber area. It will be detrimental to our ability to take on the cyber domain.
There will be a lot of resources in the Cyber domain over next decade, and cannot exclude 80% of the Small Business participation. We would be shooting ourselves in the foot.
Along with Mr. Tatigan, I'm thrilled we're doing this at HQ. Our field activities do a great job at the local areas, and this is something that has been long overdue at HQ.
From a contracts directive perspective, it is our job that to make sure that each procurement is reviewed for small business opportunities. At the end of day I sign the contracts, but I don't own the requirement or checkbook. Even though I sign on the bottom line, it is the PEOs and PMs, so getting Small Business engagement at an early level with the customers that I serve is [of] key [importance]. My job is to ensure we are doing everything we can to make sure procurement comes to fruition when it is identified as Small Business or procurements are identified as Small Business set aside. It starts with communications.
Greenometer is about metrics, but this is so much more than about the metrics. And honestly, metrics is a rear view mirror look, and what we need is the forward look. It needs to be deliberate communications and planning that feed into what are the new procurements that will be set aside for Small Business.
We're predominantly a production command, so where does a small business fit into that picture - everywhere.
Set asides. [We are] looking at increasing goals for primes.
We've been extremely successful in SBIR.
Disruption and competition are great. We're seeing good examples of this with subs, and software.
Contractually, this a good deal for taxpayer.
Looking beyond services sector as well where there are opportunities across all portfolios.
Seaport is the big question on everyone's mind. We are going to be coming out with a survey. We do want to talk to small business. We do want to understand experiences that can inform what the program does going forward for the Navy with regard to Seaport and support services.
On behalf of all the PEOs, our greenometers are all green (laughter)
When you look at metrics you have to understand where the bar is set. SBIR is one area with quite a bit of cost across the board. And we think we’re doing pretty good. The key metric for me is the SBIRS phase II to III transition. But what is the correct number? Is 100% transition the goal? Is it 50%? We can always do better to make those transitions. That’s what I challenge my PEO and the other PEOs. There are a lot of things we all could do to make those transitions better for SB.
We looked across the board at a lot of different areas. In IWS, SUBS and others [we] looked at service contracts and Omnibus and how do we set aside certain pieces. [We looked at] competitive actions within the Small Business community, and we have been successful.
In IWS we looked at one for Business Financial Management that has been positively received across the PEO, and we will continue to look across the PEOs and Directorates.
On the technology side, [and this] ties a little bit to SBIR, but [it is] broader than that. The open system architecture we’ve done in the past with various program -- the modularity, the componentization and the software -- have enabled us to do a lot more for big systems. The one example I like to use is CEC. This has been a journey for the last 10 years in IWS. They’ve taken a very large complex system, and they’ve reduced the weight, the size and increased its capability. They’ve built in modularity to the point where we can take a big piece of that and put it out there for Small Business award.
We look across the PEOs to see where we can get affordability and technological advancements to warfighter soon – in performance of the various systems, the way we do business in the shipyards, cabling, connectors, lighting, and cyber. It’s these areas where a Small Business can be very innovative.
But how do we insert that into program office? How do we get it in there and out to the warfighter as soon as possible?
Q1: Secretary Stackley hit on a very sensitive issue. Small Businesses are helping large businesses win contracts and meet their Small Business goals but at the end of day, the work is not flowing down to the Small Businesses. So we can’t perform and we can’t contribute. What are you doing with regard to execution accountability?
A1: Ms. Shaver: One of the things we have started to do is providing an incentive structure around subcontracting and Small Business. Therefore, if in your proposal you say you’re going to subcontract a certain percent out we are going to reward you if you meet or exceed that. You have to provide demonstrative performance. It is somewhat of a challenge in the system because there are no automated systems that show from an execution perspective if you are meeting your goal. Therefore we are trying to put incentive structures in the contract. There is after action reporting, but it becomes a rear view mirror exercise. We are looking for methods to actually demonstrate during execution that the money is actually going to Small Business. Because that is part of the terms and conditions that you agreed to. We are not where we need to be yet. But I think we recognize it is a problem.
Funding stream is a challenge too. For example, we expected to obligate $1M by the end of the year, but only obligate $700K. The Prime makes decisions as to where those $700K have to go and often says I’m going to hold that money inside. I’m going to put my own people to work instead of giving it to subcontractors.
We want to know if they have to make those decisions and tradeoffs, are they doing them with the businesses in mind? So it isn’t always the Small Business that are suffering. It is a legitimate concern and we have a ways to go. We're putting an optic to and voice to this, and with the incentive structure we hope we can help a little bit.
VADM Hilarides: In the last few years, how many feel you've been on short end of stick of a big business bid and you didn’t get what you helped them achieve?
(Many hands went up)
Mr. Deligne: I don’t think we have visibility into what is going on there, and we need to figure out how to get data on this. We need [more] visibility so the program offices and PEOs can have those conversations on why that is not happening.
Mr. Bray: Data is harder to get when it’s second and third tier supplier.
On missile side, with missile systems, [we have] semiannual reviews [in which] we look at subcontractor suppliers. We're looking at all levels and how money's flowing. Trying to understand if the competition is happening at all levels and how the supplier activity is happening.
We work with a consortium of Program Offices. It is an area we are looking at, and the money flow is the area that concerns me the most. If money is not reaching the sub-primes, they don’t have the flow to keep going. We are working on this. The data is not as evident to get there. Working with DCAA too with audits.
Ms. Shaver: Another area we’re looking at is making sure that when we are making the payments, the payments are flowing down. [We receive phone calls], and we hear [some Small Businesses] are not being paid. I open up the contract and see it is fully funded and work is being executed, why are vendors not being paid? I can tell you we have written letters to large companies/ primes, and have had large primes in our offices explain to me why. Because this is a term of performance. If you are not paying your subcontractors, performance will suffer, and you have an obligation to do that. And we are going to start evaluating you on it and start looking at it from a CPARS perspective.
Q2: Follow on question--Last several years small business set aside was 20-30% instead of having a AB goal inside the larger contract. Are we going to continue doing that, because it shuts out Small Business who do not fit into that niche?
A2: Ms. Shaver: We've been pushing for more AB breakouts and Small Businesses set aside, especially in the support services sector. And one of the things we do is look back at the services provided historically, and which pieces of the work are being done at the subcontractor level by SB and being done successfully. That type of work is what driving us to pull work out and set it aside and to write a set aside as much as possible. Doesn't mean we don't have just as large goals for unrestricted large business small business set aside goals. It is becoming a challenge for some of the large primes because the SB they have used as subs for previous procurements are now off working as primes. And the good news is they now have to find new SB to rejuvenate their industry. We are working on more set asides, but we are still holding those large businesses accountable to have as high or higher subcontractors.
VADM Hilarides: Caveat on the services area there is tremendous downward pressure across the entire government for us to reduce contractor support services. I hear it everywhere I go. We need to control that expenditure. And there’s a sense that we are not managing as well. It is an area that is difficult to audit.
Q3: (Person asking question said he had experience with MDA, NAVSEA, NAVAIR, Hughes, and Raytheon.)
At NRO we had same discussion last year. All the little companies sat in a little room and said “how come I am not getting any business from the primes?” We (as Small Businesses) need to wake up. Because if you’re a big prime, and you’re buying hardware in bits and pieces, they will beat your door down because they are manufacturing and that is their bread and butter. But when there is downsizing, rightsizing, sequestration…whatever you want to call it [that’s a different situation]. Big businesses are run by the unions, not program development guys. If [an] engineer [is] working at a company, when the rubber meets the road, [he or she will think] I've got to hire Union first before you (by law).
[So] get the right arrangement and go bid the work.
A3 :VADM Hilarides: That's not a question but sounds like very good advice. (Laughter)
Q4: Has there been an update on transferring responsibility for SeaPort services procurement from NAVSEA 02 to the NSWC?
A4: Ms. Shaver: We have discussed where we should conduct the HQ SeaPort E. We've looked at this but [there’s] no decision yet, and my focus is the future of SeaPort E as a whole and the Analysis of Alternatives.
VADM Hilarides: 90 percent of our contracting is from field.
Q5: Regarding the SeaPort SB set aside, are you aware you are awarding contracts to companies that exceeded that Small Business criteria by more than 5 years? Companies whose gross revenue exceed $300M. Employees who exceed 500.
A5: Ms. Shaver: We go by the rules from the FAR. At the time that you submit your proposal is when your small business status is determined. And we go to the SBA to ensure the SB status is accurate at the time of proposal submission.
Q6: What SeaPort does, is it recertifies SB every 5 years. It takes the average of the last 3 years of certification. So when you solicit proposals with a 1-2 week turnaround, the larger revenue firms have bigger proposal teams and large pool of resumes to pull from to undercut a SB. It is an unfair process for the Small Businesses. Ironically, a Small Business as subprime to large business has to certify annually.
A6: Ms. Shaver will take action to look at this and look at the timelines and requirements for certification.
Q7: With regard to incentive fee on payment terms… is there anything you can do to flow that to the master contract level? In terms of net 30, net 60, at the MAC level vice just Omnibus?
A7: Ms. Shaver will take a look at it. Will look if there is anything to preclude us from doing that at the MAC level. But some of those payments are what we do to encourage that subcontracting flow is working.
Q8: Sec Stackley hit on a couple of key topics that are ongoing issues: delay in contract awards, and the appropriate use of LPTA vs best value in the evaluation process. Taking those two issues and looking at the head of contracts office, it sounds like there’s going to be an emphasis on the turnaround time. Will there also be discussion with regards to best value evaluation process?
A8: Ms. Shaver: I’ve sat in on the Feb and Apr meeting with Sec Stackley, and there have been lots of discussions with regard to timelines. We are working on this from two perspectives. One is the planning and predictability, which we heard feedback from Small Businesses. It is very important to Small Businesses to know timelines and evaluate other opportunities. Will I have the workforce to cover X, Y, and Z, while I’m waiting on award for X, or do I want to bid on Y? For Small Businesses it is much more serious constraint. Predictability and timelines are important to business opportunities.
There has to be a realization that there are certain bureaucratic processes in place we are not going to be able to move. We need to look at the touch times and re-work to figure out how much we can lean.
And then the focus can be on predictability. I would love it to take 6 months, but know it will take a year. But if I say it’s going to take a year then I stick to a year. And a year doesn’t become 18-24 months. [This has been and is] part of what we’re suffering from... We need to make it faster, but we really need to make it more predictable.
The other piece that you asked about was LPTA… we have had extensive discussions regarding LPTA and data mining. We have found that we're not advertising that much but when you peel back the onion on source selection it looked like they defaulted to LPTA. Best value in not LPTA. Sometimes the high technical is also the lowest priced, and that can look on the surface like LPTA. My job is to ensure there is good order and discipline in the best value trade analysis, [and that it] shows that tradeoff is actually occurring. That is the discussion with Sec. Stackley and the message we continue within our organization. Need to ensure everyone understands the difference.