Defense Contractors Under the Gun
HIGH STAKES
High Stakes™ provides best practices for communicating on the most critical corporate, legal, and international issues of the day.
THIS ISSUE: DEFENSE CONTRACTORS UNDER THE GUN
THIS ISSUE: DEFENSE CONTRACTORS UNDER THE GUN
It’s easy to understand why some defense contractors are feeling under the gun. More than 190,000 private defense contractors are still working in
Iraq
and
Afghanistan
; high-profile reports of waste, fraud, and abuse provided ample campaign fodder in the last election; and Democrats have taken control of
Washington
,
D.C.
and a war-weary nation. If history is any guide, very public investigations are sure to follow.
To protect their reputations, defense contractors must go on a calculated messaging offensive.
In this issue we examine communications strategies that defense contractors can deploy to innoculate their brands with the audiences who matter most…Gain insight from former Under Secretary of Defense for Acquisition, Technology and Logistics Jacques Gansler...Study the blogs that cover defense contracting issues…And take a look at what defense contractors can expect in a new political environment.
With the executive and legislative branches of the federal government in the midst of transition, defense contractors should be preparing for what promises to be a high-profile Iraq War postmortem in 2009. Contractors have often been too ready to assume a defensive posture. In fact, there is ample opportunity for a calculated offensive that will shape the debate before media and politicians do it for them.
To protect their brands and defend their credibility, defense contractors must position themselves favorably if/when the spotlight shines on them. It is seldom enough to flatly deny wrongdoing. Deploy a prescient, proactive, and prolonged communications strategy aimed at Congress, DOD inspectors, as well as the general public, depositing ample goodwill in the trust bank before future withdrawals leave you in the red.
For example:
Leverage core values. Freedom, liberty, democracy, patriotism: these values drive the defense contractor’s mission. Contractors must make the most of every opportunity to highlight the vital support role they play in keeping American troops safe and American interests well-served. Reproduce powerful front-line visual images in communications materials. Talk about the role your company plays to enhance national security.
Articulate specialization and expertise. In many cases, the contractors in
Iraq
and
Afghanistan
are the only companies on the planet that can do what they do. Whether securing oil fields, protecting high-level officials and diplomats, or providing vital services to troops at the tip of the spear, define what you bring to the mission and articulate how rare the expertise really is. Message: The returns easily justify the public’s investment.
Be fully transparent and cooperative. Contractors should consider making financial information public before it’s requested by regulators, reporters, or Congress. Most defense contract information is already publicly available through the Defense Contract Audit Agency, so these critical audiences can get it anyway if they want it. Blunt the impact and diminish the newsworthiness of any negative content by taking the initiative to post candid details to their websites.
Put the focus back on policy. Defense contractors work within the legal and regulatory framework set forth by Congress itself. If it is the law that’s flawed, lawmakers should be held accountable, not contractors who abide by existing policy every step of the way.
Prepare for the media circus. Pick spokespeople wisely and train them ahead of time for every firestorm, from congressional committees to ambush media interviews. For defense contractors, it is particularly important to craft and deliver messages with maximum clarity and candor.
The Honorable Jacques S. Gansler served as the Under Secretary of Defense for Acquisition, Technology and Logistics from November 1997 until January 2001. In this capacity, he was responsible for all matters relating to Department of Defense acquisition, managed an annual budget of more than $180 Billion, and led a workforce of 300,000-plus. Today, he is a professor and holds the Roger C. Lipitz Chair in Public Policy and Private Enterprise at the University of Maryland's School of Public Affairs.
A recognized expert in defense contracting and its diverse issues, Mr. Gansler shared his thoughts with High Stakes:
What aspects of defense contractors’ work in
Jacques Gansler: I think that the press has blown the fraud issue way out of proportion. The problems in defense contracting these days have much more to do with waste than they have to do with fraud.
If you take the total defense budget and subtract what’s spent on manpower, you come out with hundreds of billions of dollars being spent for goods and services. And if you are wasting 10 percent of that, we’re talking about huge numbers. That’s tens of billions of dollars. On the other hand, the fraud, the illegal actions, they come out to only tens of millions of dollars at most. Fraud is not where the major problems lie, but it’s what gets the headlines, and most of the attention.
I recently chaired a commission that looked at this question specifically and on the problems of managing contractors in the expeditionary environment of Iraq and Afghanistan. And the Congress was very responsive to the fact that we found that there are not naerly enough people in the government with the background and experience to be able to manage the contracts and contractors.
In fact, one of the things we found was that only about 38 percent of the people who were in the jobs of contracting and contract management were even certified. That’s been the biggest weakness over there and throughout the DOD; and that’s what Congress and the DOD need to be looking at.
What are some of the greatest misconceptions about defense contracting in
Jacques Gansler: I think there’s a major misconception among the general public about profit. One of the things that people are arguing is, “Well, this must be really loading the pockets of the contractors working over there.” The reality is that the largest single contract over there is the LOGCAP [Logistics Civil Augmentation Program] KBR contract. Even though this is a very large contract, the percent profit on their sales has been negotiated at only one percent with a possible award fee of up to two percent. Compare that to the profit margins of Exxon or Microsoft or companies that have 15-30 percent profit margins. There’s really not a large profit margin here.
Another thing that I sometimes tend to do when I testify is point out to the Congress that the actual overruns in defense contracting – which is another area that they highlight all the time – are significantly lower than the programs that Congress manages. Look at the recent publicity on the Capitol Visitor’s Center, or the Boston "big dig", or the Trans-Alaska Pipeline, for an idea of what I’m talking about.
What messages do defense contractors need to be communicating and who are the audiences that need to hear them?
Jacques Gansler: When a contractor gets called before Congress, it’s clearly important to point out precisely what it has been achieving and whether or not the customer – the military and, by extension, the American people – has been satisfied with the results.
Then, I think the contractor has to suggest acquisition reforms based on its own experience – and those improvements should preferably address the waste part of the equation. That means full transparency and an honest appraisal of what’s transpired.
Finally, the public needs to be convinced that these defense contractors are dedicated, conscientious people who have the nation’s best interests at heart. In my own experience, both in industry and government, I have found that the overwhelming majority of contractors are precisely that. I think that, in a certain sense, the public perceives that, if there’s one case of fraud, then it’s everywhere.
That is not the case, and it’s up to defense contractors themselves to ensure that the public and its representatives know the truth.
The blogosphere isn’t just a branding and marketing tool. It is an early warning system to help companies see around corners and predict what’s coming next. For defense contractors cast as suspects in the impending examination of what has worked and what has not worked in
Iraq
and
Afghanistan,
blogs provide massive intelligence needed to plan the next move.
Here’s a look at three particularly important blogs that defense contractors should watch closely in the coming months:
The Washington Post's Government Inc.
Government Inc. covers “the good, the bad, and the sometimes very unsettling” when it comes to the world of government contracting. This blog, which is maintained by Washington Post staff reporter Robert O’Harrow Jr., focuses on issues ranging from defense intiatives to welfare programs. If it’s newsworthy and deals in any way with federal procurement, it will probably be covered by Government Inc.
Danger Room – Wired.com
The tagline “what’s next in national security” says it all. From breaking news to smaller stories that rarely reach the mainstream media, Danger Room covers the wars in
Iraq
and
Afghanistan
in great detail, often landing exclusive interviews with top Defense Department brass.
Defense Procurement News
Founded in December 2007, Defense Procurement News “provides in-depth coverage of the Defense Procurement industry.” The blog covers recently issued RFPs, contract awards, and other news and events of industry significance.
When President Bush signed the 2008 National Defense Authorization Act into law, he also established the Webb-McCaskill Commission on Wartime Contracting – a bipartisan congressional body modeled after the Truman Committee, which held 432 hearings, called 1,798 witnesses, issued 51 independent reports, and put more than a few defense industry executives behind bars during and after World War II.
According to the office of Senator Clair McCaskill (D-Missouri), the commission will:
- "Investigate federal agency contracting for: (1) the reconstruction of Iraq and Afghanistan; (2) the logistical support of coalition forces in Operation Iraqi Freedom and Operation Enduring Freedom; and (3) the performance of security and intelligence functions in Operation Iraqi Freedom and Operation Enduring Freedom;
-
Expand the Special Inspector General for Iraq Reconstruction's (SIGIR's) authorization beyond Iraq Reconstruction and Relief Funds. In consultation with the commission, the newly-expanded SIGIR will conduct audits of wartime support contracts for logistics, security, and intelligence functions in Iraq and Afghanistan, as well as reconstruction contracts in Afghanistan. The collaborative effort between the Commission and SIGIR will result in specific findings and recommendations to improve inter-agency wartime contracting; [and]
-
Study and investigate the impact of the government's growing reliance on civilian contractors to perform wartime functions. It will assess the extent of waste, fraud, abuse and mismanagement of wartime contracts, and the extent to which those responsible have been held accountable."
As Dr. Gansler points out in the interview above, defense contractors should make most of every opportunity to collaborate with government overseers as well as offer their recommedations for reform. The goal is to be seen as part of a solution, rather than part of a problem.
The Commission on Wartime Contracting is a maquee venue for such collaboration. Contractors are well advised to both monitor its proceedings and identify opportunities to work with it after the first meeting on February 2, 2009.
When news cycles are measured in minutes rather than hours, rapid responses to crisis are absolutely essential to winning the communications battles.To help ensure success in the Court of Public Opinion, Levick Strategic Communications presents the Crisis Communications Desktop Reference. It is a fully searchable, downloadable desktop resource covering more than two-dozen topics of urgent concern to business. It provides, with a click of the mouse, the strategic guidance you need at the moment a crisis strikes. Download the complementary Crisis Communications Desktop Reference today.
Making Your Point
Making Your Point, a new book by Levick Senior Vice President David Bartlett, examines the fundamental strategic considerations driving effective communication. It defines that key component called “emotional intelligence.” It provides the simple powerful tools to make a point in person, prepare and deliver effective speeches and presentations, get messages across in a media interview, and communicate during crises. Making Your Point is an easy-to-use communications guide for professionals and non-professionals alike. Order your copy today.
Making Your Point, a new book by Levick Senior Vice President David Bartlett, examines the fundamental strategic considerations driving effective communication. It defines that key component called “emotional intelligence.” It provides the simple powerful tools to make a point in person, prepare and deliver effective speeches and presentations, get messages across in a media interview, and communicate during crises. Making Your Point is an easy-to-use communications guide for professionals and non-professionals alike. Order your copy today.
Stop the Presses: The Crisis and Litigation PR Desk Reference – now in its second edition – is a survival manual for corporate leaders, board members, lawyers, and communications specialists. This book provides the dos and don’ts of crisis planning and communications and articulates the essential strategic guidelines for navigating myriad bet-the-company issues. Order your copy today.Future High Stakes™ issues
Airlines:
After what promises to be a turbulent holiday travel season, we’ll examine how the airlines can best deal with the ups and downs of an industry in constant turmoil.
Labor and Employment:
Outsourcing jobs is the latest among many recent communications challenges for management – especially if newly elected politicians pursue their agendas.
Outsourcing jobs is the latest among many recent communications challenges for management – especially if newly elected politicians pursue their agendas.
Energy:
With a newly-empowered President and Congress looking to make good on its green promises, how can energy companies position themselves at the forefront of sustainability?
More to come:
- Antitrust
- Board or Board Member Liability
- Coming to America
- Diversity
- Education
- Executives Behind Bars
- Food
- Global Capital Markets
- Intellectual Property
- Internal Communications
- Internal Investigations
- Monetizing Moments
- Money Laundering/Money Transfers
- New Media/Social Networking
- Product Liability
- Professional Services Crises
- Public Equity
- Whistleblowers
- Reputation Management – Celebrity
- Reputation Management – Corruption
- Reputation Management – SEC Investigations
- Tourism
- Trade
Next month in High Stakes: THE AIRLINE INDUSTRY: CRITICAL ISSUES PROFILERATE