When it Comes to Tech, Taxpayers Get What Corruption Pays For

It’s one of the most iconic scenes in cinema history. Rick, the jaded nightclub owner played by Humphry Bogart, confronts Captain Renault, played by the inimitable Claude Rains. “How can you close me? On what grounds?” Rick asks. The Captain of the Casablanca cops responds, “I’m shocked! Shocked! To find that gambling is going on in here!” — right after which he thanks the unctuous Ugarte, played by Peter Lorre, for providing him with his winnings. (Casablanca, 1942)

Play It Again, Sam

The US Centers for Disease Control and Prevention (CDC) recently contracted to have a website built to host its newly conceived Vaccine Administration Management System. VAMS was supposed to serve as a one-stop-shop to coordinate COVID-19 vaccines between State officials, clinics, and the millions of desperate Americans who are waiting for the chance to save their lives.

The $44 million contract for building and hosting VAMS was awarded to management consulting company Deloitte on a no-bid basis. The justification? Federal Acquisition Regulation (FAR) 6.302–1: “Only one responsible source and no other supplies or services will satisfy agency requirements.”

Apparently, according to the contracting officer at the CDC, only one company in the entire country can design and host a website. The result?

You’ll doubtless be shocked — shocked — to hear that VAMS has proven to be an unqualified disaster.

“VAMS has become a cuss word,” Marshall Taylor, the acting director of South Carolina’s Department of Health and Environmental Control told state lawmakers in January, explaining how the system has badly hurt their immunization efforts. Taylor, and officials from Connecticut, Virginia, and the few other states that had bought into VAMS confirm that the system routinely randomly cancels appointments, fails to capture registrations, and locks staff out of the dashboard they are supposed to use to log records. States that bought into VAMS are now spending more time fielding calls from concerned and complaining citizens than they are administering vaccines.

The result? Several states have already abandoned VAMS and are either cobbling together their own solutions or paying local companies to develop new systems that can actually meet their needs.

At the risk of mixing movie metaphors, this scene seems reminiscent of Groundhog Day. We have seen this plot play out, again and again, and again, as every government agency continues to contract for their technology needs with one of a handful of companies; companies that charge taxpayers extraordinary premiums — and fail. Again, and again, and again. And the small, disadvantaged companies that the law requires to be given preference for government contracts? They continue to be ignored by contracting officers. Again, and again, and again.

Why is this happening? Why does it keep happening? What can be done?

Beginning in the 1970s a phrase became embedded among purchasing agents that, thankfully, has largely become expunged from the private sector — but which seems to be alive and well in government agencies: “No one ever got fired for hiring IBM.”

This tactic of preying upon buyers’ “Fear, uncertainty, and doubt (FUD) is a propaganda tactic commonly used in sales, marketing, public relations, politics, polling, and cults. While the phrase dates back to at least the early 20th century, the present common usage of disinformation related to software, hardware, and technology industries generally appeared in the 1970s to describe disinformation in the computer hardware industry…” (Wikipedia)

The only change we seem to have seen in the public sector is that Big Blue can now be safely substituted with the names of a dozen of their peer companies among the Beltway Bandits; a challenge that is greatly exacerbated by the lure of these same companies for post-public employment by the very government executives who are making IT contracting decisions. And that FUD has now been egregiously augmented by the opportunism, corruption, and downright laziness of the government officials who award these “wired” opportunities to their friends and future employers.

Case in point: Just four years after Edward Snowden perpetrated the most damaging data theft in US history, his employer — Booz Allen Hamilton — failed to improve their cybersecurity sufficiently to stop Harold Martin III from stealing an additional 50TB of data from the NSA. And just eight months after that theft, another massive trove of data from the US National Geospatial-Intelligence Agency (NGA) was stolen from an AWS environment that BAH developed. What penalty did the partners of Booz Allen Hamilton incur? From the time of the Snowden theft in 2013 to the end of 2019 annual government contracts awarded to BAH increased by an astounding 61% — from $3.2 billion to $5.1 billion.

From the time of the Snowden theft through the end of 2019, Booz Allen Hamilton continued to receive government contracts that summed to a total of $27.6 billion dollars. Lesson learned?

What makes this matter all the worse is the inordinate rate of failure of projects by the same companies that have acquired “most-favored” status. Consider:

• The $1 billion debacle known as the Secure Border Initiative Network (SBInet) delivered by Boeing that died on the vine.
• The Social Security Administration’s seeming Sisyphean efforts to integrate 54 different IT systems it uses to process claims in each territory and state. A project that has, thus far, cost taxpayers over $1 billion — and has been ongoing for over 11 years, as have the perennially repeated projections by the cabal of companies that hold the contracts that the initial systems will be completed in just another 24–32 months.
• In August 2014, the Office of Inspector General released a report finding that the cost of the HealthCare.gov website — which proved to be an infamously epic failure and has still not been fully rehabilitated — reached $1.7 billion. A sum that was divided between 34 contractors, the majority of which are the usual suspects.

A report from the Standish Group shows these challenges to not be exclusive to the US, finding that government tech projects over $6M only succeed 13% of the time.

The true irony in this bias toward the biggest Beltway Bandits? The known secret that it is all a bait-and-switch. Edwin Booz, James Allen, and Carl Hamilton died in 1951, 1992, and 1946, respectively. When the government hires Booz Allen Hamilton none of the three founders actually do the work. And neither do the named partners or principals. In their place, the government gets the junior-most people the firm can get away with assigning; associates who are typically underpaid, overworked, and rarely over-qualified. Partners and the subject matter experts that are dangled to win these awards are nearly always subsequently relegated to “supervision”, “oversight” — and sales. Contrast that with the alternative of hiring a small business, for which a single government contract can make a world of difference.

And Yet, It Persists

Regulations from both the Small Business Administration (SBA) and the Federal Acquisition Regulation (FAR) require the government to consider small companies that belong to one of four socio-economic categories first for set-aside and sole-source contracts worth $150,000 or more:

• 8(a) Business Development program
• HUBZone program
• Women-Owned Small Business program
• Service-Disabled Veteran-Owned Small Businesses (SDVOSB)

Additionally, Executive Order 13360 requires all Federal agencies to award at least 3 percent of all federal contracting dollars to Service-Disabled Veteran-Owned Small Businesses (SDVOSB). Since that EO went into effect on October 26, 2004, however, few agencies have fulfilled their mandated annual commitments.

Ignominiously, those that have failed most egregiously to heed President Lincoln’s injunction that “A nation that does not honor its heroes will not long endure” include the US Department of Defense and the US Department of Veterans Affairs.

Eternal Shame

In 2006, when Congress passed the Veterans Benefits, Health Care, and Information Technology Act of 2006, it included a provision requiring the VA to restrict competition to veteran-owned firms so long as the “Rule of Two” is satisfied. The VA Act states, in relevant part, at 38 U.S.C. 8127(d):

(d) …a contracting officer of the Department shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers the best value to the United States.

It came as little surprise, but grave disappointment, to the owners of SDVOSBs that the VA wholly ignored this provision.

After enduring five years of the VA’s recalcitrance the matter was finally brought to a head when several SDVOSBs, including Kingdomware Technologies, Inc. protested to the U.S. Government Accountability Office (GAO) in 2011 that the VA had violated the law.

GAO agreed with Kingdomware — but the VA refused to abide by the GAO’s decision and continued to circumvent the Rule of Two, notwithstanding the GAO’s decisions. Kingdomware was forced to pursue the matter in federal court, with the VA continuing to fight against giving preference to SDVOSBs all the way to the United States Supreme Court.

On June 16, 2016, the Supreme Court handed down an 8–0 unanimous decision in favor of Kingdomware and all SDVOSBs.

The most disturbing aspect of this incident is not that the Department of Veterans Affairs — an agency that claims its mission to be “to care for those ‘who shall have borne the battle’ and for their families and survivors” — fought so arduously to keep from having to comply with its own regulations to provide an advantage to Service-Disabled Veteran-Owned companies. It is the fact that the VA continues to engage in its reprehensible obstinance.

Victory for Veterans? Not Quite.

A point of ignominy for the Federal government — and for the VA in particular — is the plague of Veteran suicides. Official numbers hold that 22 US Veterans take their own lives every day. My own research shows this number to be far higher: more than 35 of my brother and sister warriors who wore the uniform take their own lives every single day.

Depending on whose numbers you ascribe to, that amounts to 8,000 to 13,000 Veterans who find themselves in such excruciating and unremitting psychological pain that the only way they can find relief is to take their own lives. And it continues to happen year, after year, after year.

On July 11, 2019, I was invited to address a conference sponsored by the VA in Washington, DC. The topic of my talk was focused on ways in which leading-edge technology can be used to save would-be suicides, as well as examples of where tech is already being used to save lives in several countries.

Following my talk, I was approached by a number of attendees, including my hosts from the VA and the Substance Abuse and Mental Health Services Administration (SAMSHA), who strongly encouraged me to submit a proposal to put the sorts of capabilities I had discussed to work to save our Nation’s Heroes.

My team developed a proposal and we presented it to Pam Powers, Acting United States Deputy Secretary of Veterans Affairs. Ms. Powers, in turn, introduced us to Dr. Matthew Miller, National Director of Suicide Prevention for the VA. After nearly a year of back-and-forth, we were able to meet with Dr. Miller and his colleagues — who unequivocally agreed the solution we shared with them would doubtless save thousands of Veterans' lives.

Then… Nothing. Despite my company’s status as an SDVOSB — and our continued efforts and appeals to the VA, Congress, and the White House… Nothing.

And yet, in the interim, the VA has awarded billions of dollars in contracts to the handful of Beltway Bandits it continues to funnel funds to; contracts that are funded from VA coffers that control the second largest government budget after the Department of Defense.

What adds insult to grievous injury, in this case, is the fact that despite continued commitments to prioritize suicide prevention, a 2018 report from the Government Accountability Office (GAO) disclosed the VA failed to spend millions of dollars that had been made available for outreach programs. Specifically, the GAO found that of the $6.2 million set aside for suicide prevention media outreach in fiscal 2018, only $57,000 — less than 1 percent — was actually allocated.

Veterans advocate groups called the report “shocking and disappointing”; a sentiment shared by then VA Secretary Robert Wilkie, who subsequently reaffirmed the Department’s commitment to suicide prevention. Former President Donald Trump likewise authorized a substantial increase to the budget for Veteran Suicide Prevention, with $9.4 billion ($426 million above 2019) allocated for mental health services, which is inclusive of $222 million for suicide-prevention outreach (a $15.6 million increase over 2019).

And yet, not a dime could be found to fund our SDVOSB company in our efforts to save thousands of Veterans' lives.

Were this an anomalous case, we could chalk it up to bureaucracy, belligerence, or a simple SNAFU. But in my 20+ years working with the Federal Government, I have found this sort of situation to be the rule, not the exception.

Simultaneous with our wrangling with the VA, my firm also submitted for a proposal in response to a solicitation from the Defense Innovation Unit (DIU), a relatively new entity established to “partner with organizations across the Department of Defense (DoD)… to rapidly prototype and field advanced commercial solutions that address national security challenges”. DIU’s sole mission is to “strengthen our national security by accelerating the adoption of commercial technology throughout the military and growing the national security innovation base.”

Rather than invest unlimited funds in government research and development, DIU was established “With offices in Silicon Valley, Boston, Austin, and the Pentagon, [to] connects its DoD partners with leading technology companies across the country” and to capitalize on the innovative entrepreneurialism of the private sector.

In response to their solicitation for a solution to detect people at risk of self-injurious or other violent or criminal behaviors, my company submitted a proposal to DIU that employed cutting-edge capabilities the members of our team developed in service to organizations from Samsung to the CIA, and from the US Secret Service to Silicon Valley startups. The solution we proposed was singularly suited to the challenges they posed — and wholly consonant with our company’s unique capabilities at the intersection of technology and psychology.

And yet our proposal was rejected. The reason? According to DIU Project Manager Lieutenant Colonel Casey Grider, and affirmed by DIU Director Michael Brown, our Service-Disabled Veteran-Owned Small Business is… Small. Our company is not big enough, they said, and we do not have a sufficient track record to be considered an economically viable entity.

Ignoring the irony, for the moment, that DIU was established specifically to court the innovation that has become the near-exclusive provenance of small companies (most of the tech giants, including Apple, IBM, Samsung, and Google now spend far more on patent litigation than on R&D), through their unilateral decision to exclude small companies from consideration, DIU perversely disregards the experience of the principals who would actually be working on their initiatives. And they do so in favor of paying a premium for the legacy of a reified collection of former employees who happened to have carried the same company name on their business card. To add further insult to insult, this decision also tacitly infers that the decades and collective centuries of experience a small firm might bring to a project are inherently less valuable — and those individuals are less likely to fulfill their commitments — because they are not employed by a billion-dollar a year Beltway Bandit.

Changing the Rules to Keep the Game Rigged

Compounding the extent to which the game is rigged, to maintain their “preferential” status as an SDVOSB, companies asserting this designation are required to remain small or be reclassified. Depending on the industry in which services are offered, small businesses are no longer considered “small” if they exceed annual revenues of $1 million to $41.5 million per year.

With an industry average net margin in agriculture of 3.81% and the imposed cap of $1,000,000, that would mean a small farmer who clears an annual income of $38,101 would no longer be able to qualify as a small company. And of course, since small businesses are unable to realize near the same economies of scale that accrue to the far larger companies in their industry, the net margins small companies realize are, as a rule, considerably smaller. In plain English, that means the majority of farmers will likely bring home far less than $38,000 before they are no longer eligible to compete for government contracts.

Even for companies in the largest categories, those that are allowed to earn up to (but no more than) a total of $41.5 million per year while retaining their designation, the playing field is horribly skewed. If a company like mine were to have been awarded the $44 million VAMS contract — an amount that amounts to little more than crumbs for any of our competitors — we would be forced to then compete on an even footing with the largest companies on the planet, both domestic and foreign, for any other government opportunities.

And, once again, to add injury to injury, the game has recently been rigged even further.

The Department of Defense is increasingly utilizing a new type of procurement instrument known as an OTA (Other Transaction Authorities). In theory, these contract vehicles were intended to allow agencies to develop and scale prototype technologies without going through the usual full acquisition process. The problem? OTAs have been perverted into a fast-track to sole-source opportunities to the usual suspects. And because of their “special status,” OTAs bypass the legal recourse that would otherwise be available to protest these awards.

It should come as little surprise that OTAs have become increasingly popular with the DOD, growing 712% in spending from fiscal 2015 to fiscal 2019, when OTA obligations totaled $7.4 billion. And it should come as even less of a surprise that as the coronavirus pandemic continues to devastate small companies, the DOD has increasingly turned to OTAs to solicit business from giant companies including Northrop Grumman, Science Applications International, and Perspecta.

DIU used an OTA for the contract our company had been competing for. It was an OTA that gave DIU the ability to effectively say: If you don’t like our decision, that’s just too bad.

Unlike the normal decision process, by using an OTA an agency takes away a company’s right to any recourse or appeal (not that most small companies can afford the legal bills that come from fighting the Federal Government in the first place; a fact that agencies also seem to implicitly count on).

The Prescience of a Prior President

In his final address from the Oval Office, President Eisenhower warned “we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.” “Akin to, and largely responsible for the sweeping changes in our industrial-military posture,” Ike offered, “has been the technological revolution during recent decades.”

“Partly because of the huge costs involved,” the Soldier Statesman cautioned, “a government contract becomes virtually a substitute for intellectual curiosity. For every old blackboard, there are now hundreds of new electronic computers. The prospect of domination of… project allocations and the power of money is ever-present and is gravely to be regarded.”

Will President Biden be the first since Ike to take the warnings of his disturbingly prescient presidential successor seriously? Will the Biden Administration put the military-industrial forces in check and oversee a more equitable distribution of the governmental largesse? Will Congress use this opportunity to help the small companies that are the backbone of our economy?

Only time will tell.