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Government overlooks diamonds in its own back yard

May 26, 2015 Leave a comment

Nearly a century ago, a speech called “Acres of Diamonds” ranked high on the entertainment charts. Russell Conwell, the founder of Temple University and the author of the essay on which it was based, delivered it 5,000 times between 1900 and 1925. Although part of the American canon of rhetoric, few nowadays know much about it. The main theme of the essay and speech is simple: Often people overlook their own back yards when seeking fortune and success. It’s an old-fashioned sounding piece, but it came to mind earlier this week during a panel discussion I moderated along with Jonathan Aberman of TandemNSI and Amplifier Ventures.

Our ostensible topic was how government program managers, R&D people and executives can more readily take advantage of the entrepreneurial and start-up technology community in the D.C. region, the federal government’s back yard. But a good deal of the discussion centered on the government’s seeming fascination with Silicon Valley. Homeland Security Secretary Jeh Johnson says he’ll establish a satellite office there. Defense Secretary Ash Carter also has the Silicon Valley bug. The Obama administration has recruited several appointees from the Valley, including Chief Technology Officer Megan Smith, lately of Google. The White House Digital Services team is headed by another ex-Googler, Mickey Dickerson. The rest of it is heavy with people from Twitter, Facebook, Amazon and the like.

With respect to DOD, maybe a little perspective is in order. Mike Daniels has been founder, executive, seller and acquirer of federal contractors for decades. He says Valley fever has swept the government before. He counts three times over the last 35 years or so. And every time federal leaders traipse out there looking for start-up diamonds, they find out how culturally different things are out there. Without judging which is superior, Daniels says he’s never heard a Valley venture capitalist or entrepreneurial say a primary reason for a new company was to help the government solve a problem. The systems integrators and technology product companies locally have often been started by former feds, including military officers. Daniels says their orientation is, of course to make money, but their frequently-stated mission is to help the government.

Tech veteran Anup Ghosh — he founded cybersecurity outfit Invincea — comes from DARPA and so has something of a federal orientation. He says federally-focused startups proceed from a different model than those in Silicon Valley. In the D.C. region, the typical model starts with government services. This lets them win some contracts, establish a revenue stream and make a profit fairly soon. It’s a bootstrap model that can lead to second-round financing. By contract, in the Valley startups tend to lead with groundbreaking products, little thought of revenue, and the agility to keep morphing until they hit on something someone wants to buy.

Ghosh argues, the services or body-shop model doesn’t scale easily because it requires a constant linear increase in the number of people to be able to do more professional services. By contrast, products, especially software, can scale exponentially without a matching overhead increase.

The bootstrap-contract model, according to former Naval R&D guy Bob Morgan, a founder of MorganFranklin Consulting, gives the D.C. startup community a boring reputation. But often, he and others note, the products they are working on are secret because they have a national security application. Or because the government is reticent, and doesn’t want contractors talking about what they are working on.

Ghosh, Morgan, Daniels all agree, the D.C. startup environment is smaller and more specialized than that of Silicon Valley, and it lacks a catchy and enduring moniker. Daniels noted the D.C. tech community tried to brand itself back in the 1990s, but whatever name it came up with quickly faded. Silicon Valley acquired its nickname around 1980, when silicon — semiconductor design and manufacturing, as opposed to software — powered the torrid growth of the place. Plus, its name came externally and spontaneously, not from an ad agency. Throughout the world, D.C. is inseparable from the federal government. Those of us who live and work in and around D.C. know it’s a real place with real people and culture, but no ad agency could alter the external view of it.

The D.C. region is rich in startups and entrepreneurialism in cybersecurity, biology and genetics, robotics, and data analytics. From the discussion I heard, the consensus is that the federal government’s requirements remain a valuable source of money to fuel this growth activity. TandemNSI founder Jonathan Aberman correctly points out that Silicon Valley itself was fueled early on by military and NASA requirements for products pioneered by Fairchild Semiconductor and its many offshoots. (The original company in San Jose, not the one in Portland, Maine is typically put at the top of Silicon Valley genealogy charts.)

Silicon Valley today isn’t inclined towards selling to the federal government as a business goal. And, as local venturist Mark Walsh points out, big bets on tiny companies without revenue and serial business failure are common in the Valley .In the D.C. region, business failure and loss of investors’ money is less forgivable. Plus people who bootstrapped a company, got government contracts and have some sort of cash flow aren’t accustomed to the idea of ceding control to a V.C. More evidence of the big cultural divide.

All new companies, regardless of origin, face the same hurdles in selling to the government, the panelists agree. Ghosh says there’s nothing in the Federal Acquisition Regulation to prevent a company from getting a contract within five days should an urgent need arise, but typically the bureaucracy plays it safe. Often for good reason. By the same token, the purportedly 18-month minimum sales cycle for a federal agency isn’t so far off what those same companies encounter when selling to the Fortune 500.

Not fully answered the other morning were these questions:

  • Does Silicon Valley really hold the scratch to the government’s technology itch? My take, yes and no. Of course there are companies originating in the Valley that could help solve federal mission challenges. It requires a great deal of research the selectiveness. Whether the Pentagon needs a mini-Pentagon off U.S. 101 is debatable.
  • Does the government overlook the acres of diamonds in its own back yard? I don’t think so. Invincea itself is a case in point. Lots of product and services companies got their start with federal requirements, and not just items unique to the military.

In Silicon Valley, people start companies with an idea, and expect the world to join in. No one realized there was a better way to hail a taxi cab. But Uber — we’ll stretch the Valley to include San Francisco — became a valuable company,  billion dollar unicorn, in Valley parlance, without owning a single car or employing a single driver. But a mobile app will never get a human to Mars, or destroy an cutthroat enemy, or analyze a half-trilliion-dollar federal program to ferret out waste, fraud and abuse. Given the size and diversity of its missions, the government needs to talk to entrepreneurs everywhere.

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Fact: Federal Employees Have Property Rights To Their Jobs. So There

May 14, 2015 Leave a comment

In my line of work, I learn something new every day. I’ve been at this a long time, so it’s particularly gratifying to get some insight into something I thought I thoroughly understood.

The most recent example came in my latest, more-or-less monthly interview of Merit Systems Protection Board Chairman Susan Tsui Grundmann. Susan is one of those rare people with an exquisite balance of qualities. She seems idealistic and realistic at the same time. She hews to the mission, but retains just a tincture of skepticism. She knows more than she says, a refreshing characteristic. She’s open but discrete. And she has a sense of humor.

Grundmann pointed out some things that everyone should know, but need pointing out nonetheless.

This fact startled me: Career federal (and other public) employees have a property interest in their jobs. It’s a major distinction with the private sector. It’s a long established fact. But when’s the last time you heard it stated? Grundmann points out, this property interest has been affirmed by the Supreme Court through its insistence on due process for removing federal employees or other adverse actions. It requires 30 days notice, followed by the right to an appeal hearing. If an employee does something seemingly criminal for which imprisonment could result, removal requires 7 days advanced written notice. This apparatus of due process grew in direct response to the spoils system of the 19th century.

However frustrated members of Congress or editorial writers might be by the performance of managers at the Veteran Affairs Department, Drug Enforcement Administration, or Secret Service, those employees have a constitutional property interest in their jobs and are entitled to due process. All of this apparatus doesn’t absolve supervisors from good management, because poor or malfeasant performers can and often are removed from federal employment. The property interest doesn’t translate into immutable tenure.

In fact, that was another standout fact in the Grundmann interview. Between 2000 and 2014, 77,000 feds were fired for performance. We don’t know how many else left ahead of being fired. But this fact belies the popular notion that a federal job is a job for life.

Grundmann was annoyed that media outlets often mischaracterize how federal civil service due process works. One national newspaper stated, but later corrected, that federal employees removed for cause stay on payroll until MSPB completes its adjudication. That’s flat wrong, Grundmann says. They’re not being paid.

Last week I wrote about fed-bashing, and how I’m skeptical that it really is a thing, to use the Buzzfeed-age vernacular. What is a thing is widespread misunderstanding of the rules for federal civil service. That’s why anyone who has an interest in federal civil service, or chooses to carry on that it should be exactly like the public sector should read the MSPB’s new report to Congress. It details the due process and, equally important, the history and court cases behind it.

Few federal employees, or anyone, probably remembers James Loudermill. His 1979 dismissal as a security guard from the Cleveland Board of Education ended up at the Supreme Court, which upheld the due-process-from-property-right principle. He might not have been the finest test case. He’d been convicted of grand larceny 10 years earlier, but lied about it on his job application. Justified as the summary firing may have seemed, ultimately he was found to have been denied due process and his property right to his job was upheld by the Burger court.

Do Feds Really Receive Regular Evil-Tongue Lashings?

May 7, 2015 1 comment

Fed-bashing might headline a lot of articles and interviews, but I question whether fed-bashing exists as a palpable phenomenon. Or whether it’s loud or prominent enough to justify hang-dog morale on the part of federal employees.

Two thousand years ago the Talmudic scholars cautioned against the “evil tongue” — disparaging of people by the spoken word. Many cultures share this orientation. When I used to teach the Dale Carnegie course, the very first human relations principle instructors were to convey to class members was, “Do not criticize, condemn or complain.” Given the level of discourse nationally, you’d think hardly anyone thinks that way. The “sticks and stones…” ditty lacks truth — words and name-calling can and do cause damage.

Like many readers, I’m addicted to the comments sections in big publications. Political stories, harshly polemic columns, and sensational reports with heavy cultural overtones often generate thousands of comments. Some of them I read with my hand close to covering my eyes, as if watching a slash-and-guts movie, so vitriolic the posts often get.

To qualify as fed bashing, I think statements or published material must meet certain criteria:

  • It originates in the mainstream, not from the fringe. Taken as a whole, fringe groups hate everything. So anti-government raves coming from Timothy McVeigh groupies or The Westboro Baptist Church don’t count. Or…
  • …it lumps every federal employee in when using particular ones, like some of the failed managers at Veterans Affairs, as if everyone at VA was bad. And…
  • … its source carries sufficient standing or prestige with ordinary people such that they might take away from the disparagement the distinct possibility that federal employees really are all bad.

Many statements that might strike the ear as fed-bashing really aren’t. A story in the Wall Street Journal the other day detailed how administrative judges at the Securities and Exchange Commission prevail in 90 percent of the cases. That leads to the legitimate concern that the rulings don’t come from an impartial judiciary but rather from agency employees judging the charges brought by friends and colleagues. I’m not issuing my own opinion here, just pointing out the arguments. So if someone were to say, as someone inevitably will, “I don’t want some bureaucrat deciding a case brought by another bureaucrat, I want a honest-to-goodness judge!” I judge that not to be fed-bashing but rather an opinion, however clumsily stated, that a powerful administration lacks sufficient oversight and is prone to conflict of interest.

Congress remains a rich source of what some construe as fed-bashing. Regular debates over federal pay and benefits can produce the feeling of being bashed. But think about this: Compensation of employees in every industry, public or private, ultimately respond to markets. In my career of close to 40 years, I’ve twice had pay cuts imposed by employers citing financial or economic conditions. Like millions of worker bees, I’ve seen changes in pension plans, 401K contribution formulae and health care benefits — rarely for the better. Lord knows the media, whatever that is, gets regularly bashed (often in the media) — and often deservedly so. I bash it myself sometimes!

My advice for federal employees who think they hear fed-bashing: Shrug if off. Out of 319 million Americans, probably 300 million only occasionally even think about the federal government. The rest have opinions falling somewhere on the scale from the John Birch Society to the  Socialist Party of America. If you work in the public sector, you operate in close quarters and at the behest of politicians and their appointees who, in many cases, signed up precisely because they thrive on conflict. So sometimes you’ll get splashed with what hits the fan. Most of the time, it’s not aimed at you. Sometimes you gotta duck.