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Federal Government Meets Small Business Contracting Goal for First Time in Nine Years

Early this month, the SBA announced that the federal government met its 23% small business contracting goal, obligating over $83 billion in prime contracts to small businesses in FY 2013.

This is the first time since 2005 agencies have obligated such a high percentage of contracting dollars to small businesses, despite financial challenges such as sequestration and constrained budgets.  Agencies also met prime small business contracting goals in the areas of small disadvantaged business and service disabled veteran-owned small business, but fell short for women-owned small business and HUBZone goals.   For small business subcontracting goals, agencies fell short by 2%, awarding 34% of subcontract work to small businesses versus the goal of 36%. 

Overall, SBA gave the combined 24 cabinet-level agencies a grade of “A” for FY 2013 small business contracting.  This is up from a B in FY 2013.  Twenty agencies received the grade of “A” or “A+” for meeting or exceeding a series of small business contracting goals.  Three agencies received “B”s, while only one agency, Energy, received an “F.”   Energy struggles to meet small business goals , because so much of its spending goes to its national labs, which are not suitable for small business contracting.  The departments of Interior and Transportation performed well on the other end of the reporting scale, receiving “A+”s for their small business contracting achievements.

John Shoraka, SBA’s Associate Administrator of Government Contracting and Business Development, credits a large part of the success to the administration’s commitment to achieving small business contracting goals.  “There’s been a laser-like focus with respect to small business procurement from the White House.”  Additionally, the Small Business Procurement Council held regular meetings on the goals to hold agencies accountable.

Congress is considering increasing the small business contracting goal even higher, to 25% and hiking the subcontracting goal to 40%, meaning nearly another $10 billion that would need to be awarded annually to small businesses.

 

CAD system, content management software top list of Chicago IT procurement opportunities

The city of Chicago, Illinois, released its most recent buying plan for the Q2 2014 – Q2 2015 period, which provides vendors an idea of what goods and services the city plans to procure over the next 15 months. The plan includes 242 possible procurement opportunities in areas such as work services, commodities, professional services, and small orders. This number is only a slight decrease from the 246 opportunities listed in the previous buying plan for Q4 2013 – Q1 2015.
 
Not surprisingly, construction opportunities dominated, accounting for 32.6 percent of projects listed, as shown in the figure below. The plan includes projects varying in value, from less than $10,000 to more than $20 million, allowing for companies of all sizes to become vendors for the city.

Source: Deltek
 
Of the 14 departments that have solicitations expected between now and Q2 2015, more than 55 percent of projects listed in the buying plan fall under the Water Management, Transportation, or Fleet & Facility Management departments. A majority of these projects are construction requirements valued at $1 million to $5 million. However, public library projects also have a strong presence, including an integrated library system valued at $1 million to $5 million, and a new website development opportunity.
 
While there are only nine Emergency Management and Communications projects included in the buying plan, three of them are in the $10 million to $20 million range, including a computer-aided dispatch (CAD) system. This project, which is expected to be solicited in Q1 2015, will replace the department’s current Northrop Grumman CAD system.
 
The Innovation and Technology Department has five solicitations planned through Q2 2015, though a number of projects in other departments have IT aspects included as part of their requirements. The largest project coming out of the Innovation and Technology Department is a content management and process modernization program (CMPM). While the specific details of the CMPM solicitation are not yet known, the CMPM division of Innovation and Technology oversees the city's content management systems and has a goal of reducing paper operations by 2017 while streamlining overlapping business processes for the city.
 
Nearly 48 percent of the opportunities listed in the buying plan are valued at $1 million to $10 million, while the majority of big-ticket projects are construction requirements. However, there are eight projects that the city anticipates will cost more than $20 million, including a water utility billing project that will require IT professional services.

Source: Deltek
 
The city has also included 14 projects with small business set-asides of two types: Small Business Initiative (SBI) and Target Market. The SBI is a construction program the city established in order to augment the projects awarded to local small businesses. The city reports that 30 contracts valued at nearly $50 million have been awarded under the SBI program. Target Market opportunities are directed to minority businesses, including women-owned businesses. The plan includes five Target Market opportunities, including an Innovation and Technology master consulting agreement for IT professional services.
 
Vendors can expect to see the greatest amount of these opportunities procured during 2014. However, Chicago does tend to roll over its projects from one buying plan to the next, so don’t be surprised if a project listed in the current plan is delayed until the next one, or even further. Since 2011, the city has only issued between 140 and 175 solicitations in any 15-month period, meaning that 65 to 100 projects listed in the buying plan will not be procured during this cycle.
 
In addition, not all of the opportunities listed in the plan are guaranteed to be solicited. As is the case with many projects, sometimes the owning agency reprioritizes projects or decides a requirement can be met using internal resources. In other situations, funding can’t be secured and a project is canceled. Deltek has seen opportunities included in buying plans continue to be pushed out for up to two years, and in several occasions they have been canceled.
 
While it can be used as a guide to develop strategies for doing business with the city, it’s also important to keep in mind that not all solicitations that are released by the city come from the buying plan. For example, in 2013, of the 11 solicitations that Deltek considers IT the primary requirement, only four were listed in any of the procurement forecasts released by the city. So, if you don’t see any projects of interest in the plan, be assured there are other opportunities available. 
 
You can learn more about current procurement opportunities in Chicago in the GovWin IQ State and Local Opportunities database. Not a Deltek subscriber? Click here to learn more about Deltek's GovWin IQ service and gain access to a free trial

 

 

 

2014 NDAA Allows Prime Contractors to Count Lower Tier Small Businesses

The 2014 National Defense Authorization Act (NDAA), signed into law in December, offers advantages to small business contractors as well as prime contractors, by allowing primes to count all dollars funneled to small businesses.  To date, primes could only tally first tier small business subcontractors for their small business subcontracting goals.

 

The Making Every Small Business Count Act of 2013, first introduced by Rep. Sam Graves (R-MO) in June, became an amendment to the NDAA.   Unlike prime contractors, federal agencies are currently able to count all spending with small businesses toward their small business utilization goals regardless of the tier the company holds on a contract.   The new rule is meant to incentivize prime contractors to further expand their use of small business contractors.   Once the new rule takes effect, primes will be allowed to count 2nd tier subcontractors (subcontractors’ subs) toward their small business subcontracting goals.  “The change will encourage prime contractors to fully consider the merits of small business bids,” stated Graves in June when he first introduced the legislation.

 

Provisions of the amendment include the following:

  • The amendment increases availability of lower tier subcontracts to small businesses by counting every subcontracted dollar toward the negotiated small business contracting goal.  
  • Agencies negotiate small business subcontracting goals with prime contractors, and prime contractors pass down the requirements to use small businesses to their own large subcontractors.  The dollars reported are then applied to the government’s goal for subcontracted dollars to small businesses.   
  • By basing the goal on all tiers, the amendment allows for higher small business utilization goals in contracts.

Surprisingly, the American Small Business Coalition (ASBC) does not stand behind this legislation.  On the surface, the legislation appears to provide added advantages to small businesses in the federal contracting arena.  However, Guy Timberlake ASBC CEO, asserts in his blog post, “Don't we have enough challenges with entities that are not legit small businesses being awarded work directly (or indirectly) by federal agencies? Now we create an unmonitored means for organizations to boost their numbers.”   Timberlake’s belief is that large business affiliates and subsidiaries stand to gain the greatest benefit from this change, rather than true independently-owned small businesses. 

It will be some time before the true impact of this legislation will be felt.  The rules and regulations will be developed and then enacted within 12-18 months.  The new criteria will only apply to contracts entered into in the following fiscal year after the rules are enacted. 

Although primes will not be able to count 2nd tier subcontractors toward small business goals in the near future, the new criteria should be on their radar as well as that of small business contractors.  Small companies wishing to enter the federal contracting space may be afforded easier access in years to come.  

 

NASA Releases SEWP V Draft RFP

Originally published for Federal Industry Analysis: Analysts Perspectives Blog. Stay ahead of the competition by discovering more about GovWin IQ. Follow on twitter @FIAGovWin.

Every government agency has made at least one purchase through National Aeronautics and Space Administration‘s (NASA) Solutions for Enterprise-Wide Procurement (SEWP). The current version of SEWP runs through April 2014, and the program office is preparing to release the draft solicitation for SEWP V.

The Government-Wide Enterprise Acquisition Contract (GWAC) draft request for proposals (RFP) for SEWP V is expected to be released before March 2013. Industry comments and inquiries will be due by April 12, 2013. Then, this summer, final solicitation is expected to be issued.
Update: The SEWP V Draft RFP was released March 4, 2013. NASA will host an industry event on March 11, 2013, scheduled from 9:00 AM to 12:00 PM EST. Registration is on a first come first serve basis and may be accessed here.

Based on the previous version of the contract and material that has been released, we can expect that SEWP V will award multiple commercial firm-fixed price, indefinite delivery, indefinite quantity (IDIQ) contracts. Competition in SEWP IV aligned to four groups across two different categories, as shown below:

Each of the groups has specific requirements and functional tasks that must be met by the products (and product-based services). According to the Joanne Woytek, the SEWP Program Manager, of the thirty-eight SEWP IV contract holders, seventeen were small businesses. The 70 federal agencies, boards and organizations using the SEWP GWAC result in around 25,000 orders annually. At around of $90,000 per order, the contract vehicle averages $2 billion in reported spending each year for the past three years. The estimated total, maximum ordering value of SEWP IV was originally valued at $5,600,000 for each contract. Due to the SEWP IV spending trends, the follow-on contract is expected to have a similar or higher value.

Update: According to the released draft, the performance period for SEWP V contracts has been extended and the ceiling value has increased. Interested vendors are encouraged to comment on all aspects of the Draft Solicitation. For more information visit GovWin IQ Opportunity ID: 82396.

As vendors look for opportunities amidst spending cuts and budget pressure, aligning offerings for vehicles like SEWP may be one strategy for maintaining market share. 

M&A Activity Dips In 3Q: Deals In Cloud Computing And Cyber Lead Transactions

Mergers and acquisitions activity in the defense and government services sector continued to move along in the latest third quarter, and is expected to remain robust for the remainder of the year as larger contractors continue to seek out smaller firms operating in hot sectors like cloud computing and cybersecurity to help offset expected federal budget cuts.
Among the contractors we track, there were 40 deals announced during the latest third quarter, off slightly from 43 deals announced in the second quarter, and 47 deals in last year’s third quarter.
M&A activity in the third quarter was driven by five transactions which had valuations of over $1 billion, including Dell’s acquisition of IT management software maker Quest Software for $2.4 billion, and Chicago Bridge & Iron Co.’s purchase of AEC firm Shaw Group Inc. for roughly $3 billion.
Other significant purchases in the third quarter included VMWare’s buyout of software-defined networking firm Nicira for $1.26 billion, and IBM’s purchase of HR management software provider Kenexa Inc. for $1.3 billion. Also in the latest quarter, private equity firm Thoma Bravo acquired enterprise software firm Deltek Inc. for $1.1 billion.
FIA Perspective:
Smaller deals in federal growth markets drive M&A activity. During the latest third quarter, there were several M&A transactions announced in the cloud computing and cybersecurity markets, and we expect these trends to continue going forward. M&A activity in the cloud sector was very strong in the latest third quarter, continuing its momentum from earlier in the year. 
In one of the larger deals announced in the cloud market (besides IBM/Kenexa above), VMWare agreed to acquire DynamicOps, a Burlington, Mass.-based cloud computing startup that was spun out of banking giant Credit Suisse’s IT department, for between $100 and $150 million. DynamicOps is a leader in the emerging market for cloud automation solutions.
Cisco also continued its foray into the cloud in the latest third quarter, acquiring Virtuata to help secure virtual machine data in multi-tenant data centers. Virtuata helps to isolate each virtual machine from others in the same virtualized data center or cloud environment, and will allow Cisco to address security concerns among enterprises and service providers.
Other notable deals in the cloud sector included Rackspace’s purchase of e-mail application integrator Mailgun, and Citrix’s acquisition of Beetil, which provides cloud-based service desk technology. In addition, Lenovo agreed to buyout Stoneware, which makes cloud products used in the education and government sectors, for an undisclosed amount.
Overall, top-tier IT companies enhancing their presence in the cloud computing space should come as no surprise; the cloud market is slated to be one of the most attractive growth markets for IT firms over the next several years. According to Deltek’s Federal Cloud Computing Services Outlook, 2012-2017 report, the demand for vendor-furnished cloud computing services by the U.S. government will increase from $734 million in FY2012 to $3.2 billion in FY2017, representing at a CAGR of 34%.
For the remainder of the year, we expect top-tier IT firms to continue their expansion into the cloud market, targeting smaller firms providing unique or distinctive solutions to enhance their overall market share, while allowing them to compete for future opportunities.
On the cybersecurity front, there were five deals announced in the latest third quarter which involved firms providing cyber solutions or products, up significantly from the number of cyber-related deals announced in the second quarter. 
Notable deals included Apple’s acquisition of AuthenTec for $356 million, and General Dynamics’ purchase of Fidelis Security Systems for an undisclosed sum. AuthenTec designs security products for mobile devices such as fingerprint sensors, while Fidelis provides cyber tools that provide real-time network visibility, analysis and control.
Earlier this month, KEYW Holdings Corp. also made two significant cyber purchases, acquiring Poole & Associates for $126 million and Sensage for $34.5 million. Poole will expand KEYW’s software engineering presence in the Intelligence Community (IC), while Sensage will allow KEYW to expand its addressable market into securing critical infrastructure. Both of these acquisitions should significantly enhance KEYW’s top-line growth moving forward.
We believe that M&A activity in the cyber arena will continue to be robust for the remainder of the year, as larger IT firms look to extend their addressable markets while recognizing the vast number of smaller firms with unique cyber-related capabilities. 
Elsewhere, there were several notable acquisitions in other markets which were previously hot sectors (health IT, geospatial and wireless). In July, SAIC acquired health IT consulting firm maxIT Healthcare for $493 million, while DigitalGlobe acquired rival satellite imagery firm GeoEye for $900 million. AT&T also made a significant purchase in the latest third quarter, snapping up mobile service provider Nextwave Wireless for $600 million.
Our Take:
Looking ahead, we expect M&A activity in the defense and government services sector to continue to be strong for the remainder of the year, as federal contractors look to acquisitions in new and adjacent markets to make up for lost revenues resulting from expected future budget cuts. 

 

Government 2.0: Government Trends - IT procurement transformation (Part 2)

Continuing from my previous blog on Government  2.0’s effect on the traditional IT procurement process, I wanted to take a look at trends in government’s approach to acquiring Gov 2.0 technology. Part 1 of this blog series highlighted how small Gov 2.0 IT firms have begun to use non-traditional purchasing options to circumvent the traditional procurement process. Gov 2.0 firms are trying to avoid the procurement process because it has historically been more difficult for small IT firms to compete in the government IT market. However, today’s trends in IT procurement hint that times are changing. Since governments continue to face shrinking IT budgets against expanding IT costs and needs, they are now looking for alternative ways to do business as well. For many IT bureaucrats and contracting officers interested in Gov 2.0 technology, that means looking outside of the conventional procurement process, and toward smaller IT firms.

 

Code for America (CFA), an example of Gov 2.0 realized, is an organization that describes itself as “Peace Corps for geeks.” Established in 2009, CFA assigns programmers on year-long fellowships to work with local governments on in-house IT projects, to provide faster and more affordable alternatives to procuring vendor services and solutions. CFA noticed that new IT products, which it calls “civic startups,” were often created once the fellows had completed their assignments – essentially spawning new businesses. However, these civic startups that had created products for governments were having trouble selling their products. Finding the government procurement process difficult to navigate, many fizzled.

 

In response to this issue, CFA is setting up its first civic incubator, where a handful of IT entrepreneurs will participate in a five to six-month-long program that will provide funding and mentoring, while bringing their applications and solutions directly to local governments and school districts. This incubator is something CFA’s leadership hopes will turn the traditional procurement process on its head.

 

Another noticeable trend on the rise is localities across the country sponsoring crowdsourcing events and hackathon competitions as an alternative approach to the traditional solicitation processes for Web development solutions and services. In 2010, after working with CFA, the city of Boston took a one-day hackathon event to the next level by creating a permanent office within local government. The New Urban Mechanics Office was created to hire full-time programmers for in-house IT development projects as well as to conduct outreach to encourage, field, and partner with small IT entrepreneurs.

 

In another CFA spinoff, White House Chief Technology Officer Todd Park created the Presidential Innovation Fellows (PIF) program to  pair “top innovators from the private sector, non-profits, and academia with top innovators in government to collaborate on solutions” using technology. On August 23, 18 innovators from outside of government were selected to work on one of five projects over the course of six months. The PIF program’s goal is to synthesize open data, expand e-government services, and simplify the RFP process by “building a platform that makes it easier for small high-growth businesses to navigate the federal government, and enable agencies to quickly source low-cost, high-impact information technology solutions.” 

 

One of the five projects, RFP-EZ, was born after Sean Green, head of the Small Business Administration’s Investment and Innovation Program, remembered an instance with the Department of Health and Human Services (HHS). The department had a need for an IT project, but the project’s estimated cost was $5 million to implement by a traditional IT vendor. After some research and outreach, HHS partnered with smaller IT companies that were able to complete the project for just more than $400,000.

 

During the PIF announcement, Green gave an open call to developers, contracting officers, and small Web development firms to join the effort and participate through Github.com, which is an open platform where RFP-EZ will be demoed. If successful, many state and local level governments will likely partner with or imitate the RFP-EZ project. Park took to Twitter after the announcement to confirm that the PIF will also be working with both state and local governments, in addition to the federal government, to create these IT solutions.

  

Analyst's Take

 

At all levels of government, innovation and affordability have been contradictory terms. The Code for America debunked the idea that quality Gov 2.0 solutions and services had to come at a premium. CFA seems to have been the catalyst for the future direction of Gov 2.0. Governments willing to take the early leap by circumventing their IT procurement process and engaging with innovators directly can expect some growing pains, but they will likely be dulled by ultimate cost savings.

 

The traditional format of government procurement has been grounded in the 1950’s-style door-to-door salesman. Governments release a solicitation and wait for the salesman to ring their door bell to peddle goods. Now, government agencies with strict budgets have the option to shop around without going through a lengthy and expensive procurement process. Governments want convenience and efficiency without having to sacrifice quality and they are willing to go outside the traditional procurement process to get it. 

 
Subscribers have access to the full article here, including expanded analysis and recommendations for contractors.
Also, be sure to follow Deltek's General Government Team on Twitter @GovWin_GenGov.

VA's IT Service-Disabled Veteran-Owned Small Businesses Strategy

Of their total FY2013 IT budget of $3.2 billion, the Department of Veterans Affairs plans to spend over $2.5 billion with federal contractors and a large percentage of that will go to Service-Disabled Veteran-Owned Small Businesses, according to VA CIO, Roger Baker, at Deltek’s VA Industry Forum on August 15.
A large percentage of that $2.5 billion will be procured through the VA’s Technology Acquisition Center (TAC) run by Associate Executive Director Wendy McCutcheon. Last week, Baker and McCuthcheon also announced that 50% of all acquisitions through the TAC in FY2013 will be awarded to Service-Disabled Veteran-Owned Small Businesses (SDVOSB).  While that sounds like a huge percentage, in FY2012, the TAC’s awards to SDVOSB stands at about 45%.
Baker made it clear that the SDVOSB goal would not come at the expense of the discounts and the quality of service the VA expects and the VA is interested in strategic partnerships that go both ways, where both parties are fully invested and share risks.
The VA’s overall goal is to contract 10% of their total spending (not just IT) with Service-Disabled Veteran-Owned Small Businesses (SDVOSB).  Given that, it appears that an inordinate share of the SDVOSB goal will be borne in the area of IT procurement.
When questioned about the potential impact of the 50% SDVOSB goal on large businesses, McCutchen implied that there would be no major impact beyond what vendors are already experiencing and there would be no work stoppages with large business. However, at least one vendor from the audience challenged McCutchen based on with their own experience.  
The Technology Acquisition Center successfully awarded $2 billion in contracts in FY2011, plus the $12 billion multivendor Transformation Twenty-One Total Technology contract that seeks to modernize IT systems across the department. Half of the 14 vendors chosen for that program are small, veteran-owned businesses. It stands to reason that VA will strive to funnel a good deal of spending through that vehicle to those small, veteran-owned businesses. 
Given the strong reiteration of these goals by VA last week, partnering for business at VA will continue to be a key strategy for large businesses well into the future.

 

STG Inc.: A Mid-Tier Technology Firm On the Rise In Government Sector

As part of the FIA team, I am always keeping tabs on what’s happening in the federal IT market, and am always on the lookout for smaller, high-growth companies that operate in the federal government sector.
I recently took a look at STG Inc., which provides performance-oriented solutions in the following six key areas: enterprise network operations, cybersecurity, financial services, systems engineering and integration, software engineering, and linguistics and intelligence solutions.
Based in Reston, Va., STG is a mid-tier government contractor which partners with more than 50 federal agencies, as well as Fortune 100 companies and overseas organizations. Established in 1986, STG has grown its core competencies over the years, and is now on target to reach $1 billion in revenue by 2016. STG’s primary federal customers include the Army, Department of Homeland Security (DHS), Department of Transportation, Veterans Affairs and Health and Human Services.
FIA Perspective:
STG having success in securing large federal prime contracts. As an IT solutions provider in the federal sector, STG holds prime positions on several key GWAC, DWAC and IDIQ contract vehicles. As part of the contracting process, STG says it often assists its customers in creating their contract vehicle strategy, helping them find the best service at the best price to maximize return on investment, while easing the burden on the government.
For a smaller contractor, STG holds several prime positions on major contract vehicles, including the GSA’s $65 billion Alliant program, the Army’s $20 billion ITES-2S CHESS and $2.3 billion TEIS 2 programs, the DHS’s $45 billion EAGLE program, and NIH’s $19.5 billion CIO-SP2 program, among others.
In late June, STG was also named as an awardee on the National Institutes of Health’s (NIH) $20 billion CIO-SP3 contract vehicle, a follow-on to the CIO-SP2 contract. This 10-year, multiple-award IDIQ contract supports the Federal Enterprise Architecture, the Department of Defense Enterprise Architecture, and the Federal Health Architecture.
Elsewhere, STG also recently won a $10.9 million federal contract from the U.S. Army Contracting Command (Adelphi, Md.) for information technology services in support of the Army Research Laboratory. In addition, STG recently won a Blanket Purchase Agreement (BPA) with the Department of State to provide development, modernization, and enhancement support. The value of this 5-year BPA, which includes 1 base year and 4 option years, wasn’t disclosed.
STG names new President to further growth. Earlier this week, STG announced that Chief Operating Officer Paul Fernandes has been named the new President of the company. Simon Lee, who previously held the title of President and Chief Executive, will assume the role of Chairman and CEO and focus on global growth strategies and philanthropic endeavors for the firm.
“Paul is the right person to build our next generation leadership team and evolve STG into a billion dollar company,” said Mr. Lee. “Over the past 8 years, Paul has been intimately involved in every facet of STG’s business growth, and has an unparalleled understanding of STG’s capabilities and business philosophy.”
When Fernandes joined STG in January of 2004, he brought with him 20 years of senior management experience in growth-oriented IT organizations focused on defense and Federal agencies.
Other Company Details:
For the fourth consecutive year, STG has experienced record growth in profit and revenue. The company has also been able to continue to diversify its customer base, while opening new operating locations.
Looking ahead, STG’s strategy is to continue its steady growth, while focusing on delivering excellence to its customers and strengthening its core competencies. As part of its strategy, STG is also aiming to diversify its business base, expand its facilities, and provide training and advancement opportunities to its current employees.
With its steady growth, STG has continued to rise (for the 5th consecutive year) on Washington Technology’s list of the Top 100 Federal Prime Contractors. For 2012, STG jumped 12 spots to find itself at number 76 on the list.
“STG had the biggest spike in its history,” said STG Chairman Lee. “Last year we rose 8 places. This year, 12. We continue to outpace our competitors and have sent a clear message to industry that the Government truly is turning to STG.”
In a press release, STG noted that it again set records in terms of total revenue and revenue from prime contracts - its fifth consecutive year of double-digit growth, and the 11th time in the past 10 years that revenue has increased.  Washington Technology listed STG’s revenues at $215.6 million in compiling the 2012 list, compared with $193.9 million in revenues the previous year. These figures only take into account money collected under prime contracts, and don’t factor in revenues from subcontracting opportunities.
Our Take:
Overall, with its strong track record in winning large prime contract vehicles and proven experience as a reliable and dependable government contractor, we feel that STG has a bright future in the federal marketplace, and that it will continue to make waves as a mid-tier provider of technology-related solutions over the next several years.

 

California not slowed down by Supreme Court Ruling

California is one state that refuses to let the Supreme Court ruling slow it down from implementing a health benefit exchange. The state recently contracted with Accenture to build the California Healthcare Eligibility, Enrollment and Retention System (CalHEERS). Initial development and implementation of the system is expected to be approximately $183 million. Moreover, a total of $176 million has been allotted for the continued development and initial operating costs over approximately three-and-a-half years.
 
The system is expected to start enrolling Californians in the fall of 2013 for coverage that will begin in January 2014. There will be two releases: One, for CalHEERS to go live on July 1, 2013, as a Web portal to provide initial ability for consumers and small employers to shop and compare plans; and two, for enrollment that will take place on October 1, 2013. At this time, CalHEERS should be able to add functions that allow people to assess their eligibility for Medi-Cal, Health Families or subsidized coverage of the exchange.

The impact of Ariz. immigration law ruling on state and local E-Verify

The Supreme Court ruled against three of the four provisions of the controversial Arizona immigration law on Monday. In a 5-3 vote, the majority of the justices concluded that the Arizona law unconstitutionally invaded the federal government's exclusive prerogative to set immigration policy. Many states looking to get a better handle on the presence of unauthorized immigrants in their state were watching closely, especially Alabama, Georgia, Indiana, South Carolina, and Utah, which all currently have pending Arizona-style legislation. With this Supreme Court decision, states and localities may begin looking at the E-Verify program more seriously.

For those not familiar, E-Verify was created in 1997 as a free and voluntary Web-based program targeting federal agencies and contractors. The program evaluates an employee’s Employment Eligibility Verification Form, known as the I-9 Form, against U.S. government records to determine if they are legally eligible to work in the U.S.

If a disparity is found, the employer is alerted and the employee is given eight federal government work days to resolve the issue while retaining employment. The program, operated by the U.S. Department of Homeland Security (DHS) and the Social Security Administration (SSA), was mandated for all federal agencies and contractors in 2007. Soon after, a handful of state governments began requiring their state agencies to participate in the E-Verify program as well.

There are currently 17 states that require public and/or private employers to participate in the E-Verify program: Alabama, Arizona, Colorado, Florida, Georgia, Idaho, Indiana, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Utah and Virginia. While E-Verify mandates vary from state to state, all of the previously mentioned states require government contractors and subcontractors providing direct services to the state to enroll in the E-Verify program.

The E-Verify program is not without its flaws. In 2010, DHS released an outside study on the accuracy of E-Verify’s ability to identify unauthorized workers. The study found that 54% of unauthorized workers were able to slip past the system and gain authorization to work. The study attributed this high number to identity fraud. An unauthorized worker could cheat the system, by submitting documents from a person who was authorized to work. Since that time, DHS has worked diligently to increase E-Verify’s reliability and accuracy.

In most cases government contractors who knowingly employ unauthorized workers risk having their contract terminated. Penalties range in severity from one government entity to the next. For example government contractors that are found to be some of the most egregious E-Verify violators can face heavy fines, upwards of $2,500 per worker (Louisiana) or even five years in jail (Mississippi). However, in most instances, employers using E-Verify are presumed by the government entity to be in good faith and not subject to penalties should an unauthorized worker mistakenly or fraudulently be given authorization. So, it is in the best interest of the contractor to enroll.

So, how might the Supreme Court decision affect government contractors? Likely, state and local government mandates for E-Verify will pick-up steam. For most large government contractors who do federal and multistate government business, E-Verify is something of an old issue. Smaller and more regional government contractors may have recently ran into E-Verify hurdles, especially as the program becomes more popular among states and localities.

The main obstacles government contractors are experiencing are mostly logistical. Navigating though E-Verify’s enrollment and compliance process can be daunting and confusing to smaller firms with limited resources. Also, arranging to have all new and most existing employees verified within 30 days of a contract award can be a nightmare to medium-sized firms with decentralized staff. If a government contractor does not know where to start and wants to avoid potential fines, they can seek out third-party assistance from E-Verify employer agents who use E-Verify to confirm the employment eligibility of another company's employees. The agents audit all I-9 forms and identify errors to be corrected before submitting them to the government entity.

In light of the Supreme Court decision, and as illegal immigration becomes a bigger issue on the agenda for states, E-Verify will no doubt be a hot topic. Government contractors who are not currently enrolled in E-Verify and do most of their business with states and local government should start investigating the enrollment process now. In the future, E-Verify will become a standard tool and more prominent fixture in the state and local government contracting market.

If you are interested in guest blogging for Deltek’s general government services team, reach out to Jason Sajko at jasonsajko@deltek.com for more information! Meanwhile, be sure to follow us on @GovWin_GenGov! 

 

 

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