Empty federal offices are bad for the economy

Thanks to that extensive survey by the Government Accountability Office, we know just how empty federal offices really are. None of them is more than half full. That fact has depressed the market for certain commodities a lot of vendors counted on each year as a kind of annuity. To take a fuller look at the empty offices,  Federal Drive with Tom Temin spoke with sales and marketing consultant Larry Allen.

Interview Transcript: 

Tom Temin And we’re talking furniture, desks, that kind of stuff, which was always a good living for those that figured out how to sell it to the government.

Larry Allen Tom, these are things that are good livings for the people that sell them, whether it’s office furniture, whether it’s things like office supplies, multifunction devices, what we used to call printers, things of that nature. It’s a significant part of the federal market when you think about the fact that the federal furniture market’s a little over a billion dollars a year. It doesn’t always make headlines. But the old saying is that all adds up, right? And then when you particularly look into the office supply part of it that’s shrinking, know that’s got a socioeconomic part to it as well, because we’re talking about a lot of small businesses that do significant business with the government. But we’re also talking about the AbilityOne program, places like the National Industries for the Blind that traditionally are heavily invested in providing those commodity type office supplies and other things that make an office function. But if you’re not in that office or if you’re not in that office very much, then the market for those things is certainly going to be depressed.

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Tom Temin Yes, I can remember when agencies like a lot of businesses went through a big process to consolidate everyone. So every manager didn’t have a printer in his or her office and they went to network printers. So it’s unlikely that the government is buying printers for everyone that is working from their house. They’ll say, Well, print the PDF if you want to print it, and otherwise you’re on your own for physical output. So it’s fair to say fewer printers are going in.

Larry Allen Well, that’s certainly right. And that’s the evidence that I’m hearing from some of the companies that I work with as that the demand for that type of product and the demand for print management services is on the decline. And when you look at the numbers, not just the vacancy numbers, which, as GAO pointed out, are pretty substantial, even if people are going back into the office, it’s probably only for two, maybe three days a week in many cases. So even when you’re there, you’re not printing out as much as you were. You can further consolidate that office space, which is kind of what GAO was saying, which means that you can do things like share desks, share workstations, so you don’t need to buy as many of them. You might need to buy some one-off stuff to keep everything current. But these large scale buys and again, they have ramifications outside of industry. Another mandatory source status for federal agencies that is in this areas, federal prison industries that for decades has made a significant part of its business selling office furniture to federal agencies. So there are a lot of things here that go beyond the mere vacancy issue.

Tom Temin Yes. The  AbilityOne, the federal prison industries, these have social value as well. And those people are simply not. I mean, the pens and all those supplies that came from the AbilityOne program that’s got to be way off.

Larry Allen You know, I think it is off. And there is a trend in that part of the  AbilityOne program, Tom, to get more into professional services. I think the statistics such as these are only going to hasten that transition into the provision of services. It’s definitely a different model for some of these organizations that are used to selling physical products. But the times are changing and people are going to need to keep pace.

Tom Temin Yeah, probably Amazon is the big beneficiary. If somebody wants that box of big sticks, it’s just easier to get it on Amazon for $3.99 than to figure out how to get it from your agency.

Larry Allen Right? Right. Well, I think we’re going to start to see some of the figures roll in here towards year end on GSA commercial platform initiative that Amazon, Overstock Government and Fisher Scientific are all part of. And I’m expecting that we’re going to have some pretty sizable increases in those sales numbers, Tom. And that could be this could be one reason why.

Tom Temin We’re speaking with Larry Allen, president of Allen Federal Business Partners. And there’s a lot going on on the scene. We are in the final quarter of the fiscal year. And so there’s a big buying to the extent that this year can produce a buying bonanza at all. And it’s all pretty much and we’re looking at Bloomberg numbers here, the big GWACs, the IDIQ contracts that are governmentwide.

Larry Allen Yeah, I thought this was really interesting, Tom. A few weeks ago, Bloomberg Government came out with initial projections showing that maybe 60% of all fourth quarter buys would go through a standing indefinite delivery, indefinite quantity contracts, things like NIH’s CIO-SP program, the GSA schedules, NASA’s SEWP, what have you. And then they revise those numbers. Bloomberg came out just last week and said not 60, but maybe as much as 66%, two thirds of all Q4 spending going through these IDIQ vehicles. That’s pretty significant. I think some of the reasons for that are obvious. One, they’re fast and easy to use. Second, they’ve got easy competition features built into them. Third, there’s a substantial amount of small business presence on most of these IDIQs. And for agencies that are trying to meet their end of year small business use numbers and do it in a fast and cost effective way. IDIQ contracts just make sense.

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Tom Temin And so that gives a clue to what vendors should be concentrating on, which is whatever vehicles you have existing. And forget about the new open competition starting fresh from scratch type of activity. If you want to have a chance of making your numbers this year, work your vehicles.

Larry Allen I think there’s a lot to that, Tom, and certainly there are always going to be open market procurements that the government does. That’s kind of the backbone of the system. But at fourth quarter, there simply isn’t enough time to start every new acquisition from scratch. You need to get yourself halfway through the process at least. And that’s another reason why IDIQ contracts are popular. So if you’re a contractor, you definitely want to have some of these contracts in your portfolio or at least work with companies that are partners that do so you can sell through them. Not every contract has that feature, but many of them do. You want to make sure that you know you’ve got your IDIQ channel tuned up and ready to go, because that’s clearly where the business is. That’s this year. And it was last year. Ironically, Tom, you and I have spent a fair amount of the time last several months talking about delays in getting new IDIQ contracts put in place. Most recently, that’s been on the GSA Polaris program and also NIH’s CIO-SP4. IDIQ contracts are popular. We know they drive business. This is proof positive of that. And yet because they’re so popular, companies are looking at this as a do or die. And the result is that the time it takes to put these new programs in place keeps expanding. So we’ll have to see if there’s some sort of a tipping point in the future that says these are great vehicles, but we can’t get new ones in place or we’re going to have to figure out something new. But for now, IDIQ contracts are certainly a very significant part of any company’s government business.

Tom Temin And briefly, I wanted to ask you about something else you’re commenting on this week. And that is what you call the two pronged compliance battlefront for contractors, including dealing with the Justice Department’s procurement collusion strike force, which sounds like, wow, they’re coming for me one way or another.

Larry Allen It kind of sounds like Darth Vader’s leading the procurement collusion strikeforce Tom. You can almost hear the Empire music playing in the background, but that’s just one prong that contractors need to be aware of in terms of compliance. Certainly the government’s tools, not just DOJ, but agency IGs, things like the Defense Contract Audit Agency, but you also need to look on the other side and sometimes the other side is in your own backyard or maybe in your back office. And that’s whistle blowers. The whistleblowers, typically disgruntled employees, former employees, even competitors. And I find that while there’s always a risk of audit for a contractor, a lot of the bigger False Claims Act cases and a lot of the ones that certainly in terms of the sheer number are initiated by whistleblowers. And so if you’re a contractor, you really have to pay attention to this two-front compliance battlefield. Yes, you need to make sure that everything’s squared away for the auditor when the auditor comes knocking. But you also need to make sure that you’ve got the processes in place for people to be heard, for complaints to be heard and processed so that people don’t feel like the only way out is to file a whistleblower complaint. So it’s both formal government and informal from your colleagues and industry. As always, I think compliance is pennies on the dollar, but you really do have to look at it as a two front war.

Tom Temin Yeah. And if a whistleblower comes to you first and says, hey we’re overcharging on this contract, take it seriously, look at it before you end up in a False Claims Act situation where you could have punitive damages.

Larry Allen It’s far easier, Tom, to address issues when they come up and as opposed to just letting them sit. It’s great to have money rolling in, but if you know or should have known that you were overbilling on a contract, somebody calls it to your attention and you do nothing about it, You’re kind of setting your company up for a multi-year entanglement with all kinds of the oversight community. Lost revenue, fines potentially to pay, legal bills to pay, and then even up to and including loss of key personnel. If you want to show people how you take these things seriously and prevent yourself from being suspended from doing future business.

 

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