National security has and always will continue to be one of the nation’s greatest priorities. As worldwide tensions rise, uncertainty may begin to take hold, and decisions become more challenging to make.
Luckily for national security agencies, they needn’t face these challenges alone. The ACG editorial team recently had the opportunity to speak with Tamara Jack, Associate General Counsel at LMI.
Tamara is an experienced strategic consultant who has worked closely with government agencies. In our discussion, she highlights how recent federal budget cuts have affected government contractors, as well as the trends that are driving government spending today.
Here is what she had to say:
CGCS: Can you give our readers some background on LMI, as well as your role within the organization?
Tamara Jack: LMI is a strategic consulting company committed to helping the federal government reach decisions that have an impact on how the government is run. The company was founded in 1961, initially to provide logistic expertise to the Department of Defense. Today, it works with virtually every federal department and agency.
The majority of our work is in support of the national security agencies, such as the Department of Defense, the Department of Homeland Security, and intelligence agencies. We also support the civilian agencies, such as the GSA, NASA, the FAA, HHS, and others.
LMI is a mission-driven company. I believe in and support LMI’s mission to help our government solve some of its most difficult problems, and to keep our country safe. As Associate General Counsel, I help our business find ways to succeed, for example by helping them navigate government contracts law, as well as international trade compliance, labor and employment, and intellectual property law issues. I also support our Chief Legal Officer with mergers and acquisitions and real estate transactions.
CGCS: How have recent federal budget cuts impacted the business of LMI and other government contractors? What kinds of challenges has it created?
Tamara Jack:LMI just finished its FY2014. LMI had a record year, exceeding its FY2013 results. We grew last year and we continue to maintain a solid financial position. That said, FY2014 was a tough year for federal contractors. Our industry had to deal with both sequestration and a government shutdown. This affected most federal agencies and influenced their procurement activities in 2014, which in turn led to lower revenue and profits for many in our industry. There has also been a fundamental change in the way the government procures, including – for example – a shift to lowest priced providers and to aggregating opportunities under large omnibus contracts.
The federal government is off to a slow start for FY15. Federal agencies started the New Year under a stopgap spending bill, and unless Congress passes an omnibus spending package, we are looking at federal agencies operating under a potential continuing resolution through December. This, coupled with a shrinking budget, will affect acquisition activities in the first quarter of the fiscal year.
That said, this environment could create new opportunities for companies to grow. While the government continues to deal with these challenges, contractors should put an increased focus on managing costs. Contractors that are managing costs by cutting indirect expenses and are more creative and flexible with cost structures are more competitive, thus attractive to government clients, and in a better position to respond effectively to the current environment.
CGCS: What trends are driving government investment right now? What mandates, initiatives or priorities are they investing towards? How does this compare between the different markets within the federal government (defense, intelligence, civilian)?
Tamara Jack:The current fiscal environment, as well as ongoing threats, will continue to impact federal spending throughout 2015. The government will continue to invest in cyber security, business intelligence and data mining, health information technology, and intelligence, information and security areas. This is true across all segments of the federal government.
Despite being hit with the largest cuts, some of the top contracting opportunities in FY 2015 will come from the Department of Defense. In fact, the Army is gearing up to award two large contracts in 2015. The Responsive Strategic Sourcing for Services (RS3) program is anticipated to be the largest contracting opportunity with an estimated potential value of $30 billion over ten years. This program will cover command, control, communications, computers, intelligence, surveillance and reconnaissance services. The second large opportunity will be the Army’s Information Technology Enterprise Solutions (ITES-3S) program with an estimated value of $25 billion over nine years.
As for our industry, we will continue to see revenue declines, but we will also see companies taking aggressive steps to manage such declines to be better positioned for growth. For example, merger and acquisition activity has been on the rise in 2014, partly because of a significant valuation rebound. And it will probably continue in 2015, as companies use acquisitions to gain access to specific contracting vehicles, to expand capabilities, to diversify, and to establish presence in new geographic locations in a declining aggregate market.
To learn more about LMI and their solutions, click HERE.