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By Steve Kelman

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A sobering take on government contractors

steve kelman

I recently had a chance to hear a small informal presentation by an executive with decades of high-level industry experience in the government contracting market, and who is very respected in the community. His remarks were sobering, and I took a chance to follow up with him after his presentation to get more meat on the bones of his discussion.

He started his presentation by asserted that no traditional government contractors had established any position to speak of in the market for cloud computing, arguably the biggest tech management shift of the past decade. Instead, Amazon Web Services, with no presence in the federal market, stole the market from under their noses. Very few government contractors had even explored entering this market.

Why, I asked? "Government contractors don't think that way," the executive replied. "They are very focused on government RFPs, responding to things the government puts out. That keeps them busy. But it makes them very unlike Silicon Valley companies and venture capitalists that are constantly scanning the market for new tech trends and developments. When Amazon concluded there was a potential huge market in cloud computing, they poured huge amounts of their own money into developing an infrastructure. Government contractors don't think that way either. They don't want to risk large amounts of their own money."

By contrast, Amazon was "willing to take time and risk" painstakingly to make a business case for cloud to senior federal officials over a number of years before making sales.

The executive in question sees the cloud as just the latest illustration of the failures of government contractors to exploit opportunities opened up by the internet. The internet, he pointed out, was incubated by the government, with much of the work sponsored by DARPA. The first federal funding of what became the internet started in 1962. Over the next 30 years, before it was commercialized, the growing network was well-known within the defense and academic communities. It was everywhere around the world of government contractors, but they did not really see its commercial potential.

Silicon Valley, he noted, initially knew much less about the internet than government contractors did, but once they saw things developing, they jumped. "What always struck me as strange was that 90 percent of the companies that clustered around the internet were Silicon Valley, yet they had not been involved in developing it for all those years," the executive told me. "Government contractors sat here with the internet growing over time, this was their backyard." (He made the same observation about GPS systems, developed by government and government contractors, but exploited by Silicon Valley.)

This executive said he attended National Science Foundation meetings on the internet "for years" as the technology was developing; "there would be some government contractors there listening but I never saw any major contractors do anything about it." Indeed, he "never heard much of any discussion in the government contracting community of this." (The one exception was SAIC's 1995 acquisition of Network Solutions, which held a contractual agreement with the U.S. government to be the exclusive seller of all internet domain names globally.)

He said that senior federal agency leaders with whom he has been speaking feel that, because of these contractor shortcomings, they aren't "getting what they need" from contractors. They desperately want to tap into the commercial tech world – hence the new Defense Department offices in the Silicon Valley, Boston, and Austin, Texas – but there is wide skepticism in the commercial tech world about the government's slowness and the large marketing resources that go into landing government business. So, the executive felt, whether DOD's efforts will be successful is very much an open question.

Finally, he reported that he had never seen senior agency leaders feeling so "besieged" as they do now. There is a "general anxiety about the speed of change," he observed. With tight budgets, there is "intense internal pressure about how to work with less," but that means changing an "agency's longstanding IT environment to something that would be totally different," which is hard. Organizational and technological change are coming so rapidly that "people are having a more difficult time figuring out what to do to be on the advanced end of technology." And agency leaders, he asserted, don't believe they have the talent inside government to select the right technologies.

In sum, a frank and fairly grim picture from a very wise man. I would like to hear reactions from readers!

Posted by Steve Kelman on Sep 06, 2016 at 5:16 AM

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Reader comments

Mon, Sep 26, 2016

Government contractors are told repeatedly that they must answer what is asked for in an RFP. When Government COs honor a debrief request from a contractor, they often hear that the Government didn't ask for anything innovative so the tech approach was scored low. taking an educated risk on new technologies, approaches, and new vendors can greatly advance an Agency's mission achievement. Also, if Government Program Managers were not "off-limits" to industry, and if COs had a stronger understanding of the products/services they are procuring, both contractors and Government could learn a lot from each other. Lack of contractors' access to Government reps that are willing to discuss/brainstorm future technology applications is a huge hurdle to contractors feeling that early investment will result in future Government contract awards to offset that investment and not force contractors to layoff staff or close down.

Fri, Sep 23, 2016 Robert Polster

You are right. Government contractors mainly have an RFP mindset. They wait for the government to tell them what to do. But that can be changed. The reason it can be changed is that large rewards will go to contractors who realize that they have the power to shape RFPs by bringing insights to government executives . The mission of my business is to enable government contractors to really understand the challenges faced by government executives, and design solutions that address their needs. Companies that take this approach can expect accelerated growth. Currently government contractors and government executives speak a different language completely. The contractors talk about their technical skills, certifications, and experience. But government executives are concerned with something completely different: the risks that threaten their missions. They need visibility into complex operations, insights about the causes of problems, and better control of their organizations. And government contractors know how to provide these things, but they do not realize it. The company running a great IT service desk thinks that their great value is their knowledge of ITIL. But what their customer appreciates is the advance warnings the contractor provides that enable him to head off stakeholder complaints. Polster Consulting, LLC helps contractors understand the high value they are already delivering to their customers, and then tell the story of that value in a way that enables them to shape RFPs. More information at

Thu, Sep 22, 2016 Watcher67 Charleston, SC

"Government contractors don't think that way," the executive replied. "They are very focused on government RFPs, responding to things the government puts out." That is the key. We (gov contractors) are REQUIRED to respond to RFPs. The RFP already defines the requirement. Unless you are an industry giant, it is nearly impossible to get a new tool or technique into a decision maker's hands, and then into an RFP, or other acquisition process. Even BAA, SBIR, and STIR activities are limited to topics named by the government. If your tool or technique doesn't fit you can't propose. Expo's and conferences don't work either. It is extremely difficult to get the attention, or fight through the crowds to share your product or service with the people it would benefit. Whole business entities rise and fail based on the eclectic, and dated tech requirements solicited in standard gov't RFP's.

Tue, Sep 20, 2016

Change is the Key Word you have to get rid of the stinkin thinkin, the old way of doing business, the problem with Govt is that it can't commit to one company for an answer to cloud computing, if you look at what we have as far as enterprise systems, they are slim to none other than MilSuite, Enterprise Email is clumsy and SharePoint Enterprise services is a joke from DISA...they cant support the majority of the DOD and it always has issues. then you have to put up or shut up (Funding) is always and issue again when it comes to large scale ops you can not give one company the pickins which is why we will always have issues with software, cloud technology, etc....

Fri, Sep 16, 2016

1) you can have safe systems that are deterministic and pass IV&V, or you can let your customer be your beta tester. The former does not lead to innovation, but to reliability and substantially higher costs. Decide. Note that humans as a species have already embraced nondeterminism and evolution. Why do we reject intelligent design for humans but embrace it for government programs? Let's get more bio-inspired - you never get perfection, you just get a process that lets you approach it eventually - if you let it work.
2) The folks in charge of government contractors are ex-DoD types. There's the right way, the wrong way, and the NAVY way. Put's the NO in innovation.
3) If the government wants innovative solutions, stop regulating the market. Buy what you need when it's a product, and turn off the BAA spigot. The market will adapt if you let it. No, you won't get aircraft carriers (but given cruise missiles, do we need them?). You just need to convince everyone they need their own cruise missiles. Soon cruise missiles will be as cheap as quadcopters.
4) Speaking of which, we've got quadcopters. Stick some TNT on it, you've got a weapon. What else do you need? Instead of figuring out how to spend another billion, try making do with what you can get cheap. Bricolage. Goes for other government programs too, that spend far more than they are worth (and most cause more harm than good in the first place).

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