Philip Martin is CEO of Cora Systems, a worldwide leader in providing enterprise project and portfolio management solutions.
The last thing any of us need is yet another acronym, but you have to admit, VUCA fits the bill. It really does feel like the world has become a bit more volatile, uncertain, complex and ambiguous.
But an interesting thing has happened since we came out of Covid. Governments across the globe are responding in what would have once been called a “Keynesian” way. Instead of leaving everything to the markets, they’re taking whatever action they think is needed to foster economic activity in their own backyard.
Nowhere is this more evident than in the U.S., where three of their recent Acts, the IIJA, the IRA and the CHIPS Acts, are together injecting an estimated $2 trillion into the economy there. This is very exciting for any company operating in the government contracting sector.
There are, as I see it, three areas that present a combination of opportunities and challenges for the GovCon sector.
Technology
Technology is transforming all industries, but nowhere more palpably than in aerospace and defense. Precision munitions, ubiquitous sensors and unmanned vehicles, along with AI, quantum computing and robotics, are transforming the way we move on land, sea, in the air and, increasingly, through space. Space-based technology is now a vital component of global security, and funding for space-related technology is very much on the rise.
More generally speaking, the U.S. federal budget for R&D in science and technology topped almost $200 billion for the first time in 2023. And in 2022, the government created the Office of Strategic Capital (OSC) to help companies that are developing technology vital to national security with the available funding.
What all this means is that large, established primary contractors and agile startups are going to need to band together. The former can benefit from the cutting-edge technology being developed by the latter, while the latter will need help navigating the infamous “valley of death”—that delay between when the DoD first engages with you and when they finally give you the green light and release the funds.
All companies will need to be increasingly aware of heightened national security concerns around everything from securing the supply chain for electronic components to the protection of intellectual property. This brings me to my second point.
Cybersecurity
Cybersecurity is fast becoming the number one concern throughout a number of government departments, especially for the DoD. And C4 (i.e., command, control, communication and computers) continue to be the areas most under threat, which is beginning to have practical implications for the way departments interact with GovCon companies.
In October 2021, for instance, the DoJ launched its Civil Cyber-Fraud initiative. This means they can prosecute government contractors for any fraudulent behavior around cybersecurity issues. And by February 2022, they’d already announced their first successful prosecution, resulting in a fine of $930,000.
Obviously, everyone appreciates how important it is to have robust internal controls around cyber hygiene with a document management system that’s unimpeachable. And yet, by far, the biggest problem for all businesses around cybersecurity is the overreliance on legacy software systems. That’s probably my biggest takeaway from more than 25 years in this business.
Our clients might not always be aware of it, but one of the most important services we do for them is providing them with a constant stream of patches and updates to ensure that all our products, and the system as a whole, are secured against whatever the latest cyber threats are.
Hackers are rarely criminal masterminds. They’re just relying on the fact that most people are too busy to address their software issues and to employ a system that’s adequately up to date.
Compliance
Compliance, of course, is always fundamental, and meeting all your regulatory requirements is of paramount importance for any primary contractor working with federal or state bodies.
You need to be absolutely certain that all your documents are kept permanently up to date in real time and are immediately accessible. Ideally, whatever software solution you use produces a reliable, readymade audit trail by time- and user-stamping every action anyone takes.
But all this increase in government spending means they are examining how contractors deliver their projects with even greater scrutiny. In 2022, for instance, the settlements and judgments that were made under the False Claims Act (FCA) exceeded $2.2 billion.
Although only a small percentage of that figure involved the DoD, as historically FCA cases tend to center on the healthcare sector, that DoD percentage is expected to increase significantly in the immediate future. All of those advances in AI and ML will mean that cybersecurity will play an ever more central role in all our lives, especially for any company that deals with the DoD on a regular basis.
So between cybersecurity threats, continued pressures on the global supply chain and growing geopolitical tensions, these are indeed interesting and VUCA times. For many people, this will feel a little bit scary, but for some of us, these are exciting challenges waiting to be successfully overcome.
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