 Good morning everybody. I think we'll try and get started here to stay on schedule. Thank you everybody for coming on behalf of the Defense Industrial Initiatives Group at CSIS. Welcome and we hope this will be useful, interesting presentation as well as discussion afterwards. My name is Guy Benari. I'm the Deputy Director of the Defense Industrial Initiatives Group here at CSIS. To my right is Greg Sanders, one of the lead authors of this report. You will notice that our program director, Mr. David Berto, could not be with us this morning. He sends his regrets. He's had a family emergency come up and unfortunately will not be able to make it in this morning. So with that, we'll get going. I think just one one household rule, if you'd please, silence your cell phones for the duration of this presentation. The other thing I forgot to mention is to welcome our viewers online. You are welcome to follow along using the presentation that was posted online in case you can't see the one that will be going through on the screen here. We'll try to hopefully maintain sort of a pace that allows the online viewers to follow along as well. I hope everybody has a copy of the actual report. We will be referencing the page numbers as we go through the presentation to help those viewers online as well as those here in the audience to follow along. So let's begin by understanding when we say professional, when we say services industrial base, what do we really mean? Maybe a little bit of history on our work here at DIG to those of you who are newcomers to our work. We've been doing this project of looking at service contracting for about five years now. We've had three previous editions of this report. We've also been looking at specific government agencies in terms of their contracting and multi-year trends in contracting. We've looked at the Department of Defense and the Department of Homeland Security. There are copies of those reports outside as well for those of you who care to look at those. But on service contracting specifically, what we've done in the past is look more closely at what we call professional services. So the first three versions of this report from previous years looked at a slightly narrower subset of service contracts. They did not include primarily service contracts in the construction and medical categories. These have now for this year's report been included. And really when we say service contracting today, we mean all different types of services. That are out there that the government contracts for. In order to make this data, we're still talking about one and a half million contract actions a year in service contracting, federal government-wide. We broke down the service contract actions into these key categories that you see up there on the screen and in your reports. In previous years, when we were doing professional services, we had five categories. The new category this year is the medical services category. And we folded construction services in with one of the five categories we had in previous years, which is the facilities-related services category. So that category now includes construction as well. A few notes on where we get our data and some things to note about that data. We use the federal procurement data system, FPDS, almost exclusively, although we do use other sources to cross-reference and cross-check the data in FPDS. This database includes all federal contracts and contract actions for product services and R&D. As you saw in the previous slide, by the way, we consider R&D a service and we include that in our service report this year and in previous years. The FPDS has some limitations that are worth noting before you get angry at what the data can or cannot show. The first limitation is that there's no classified data reported in FPDS. It only includes prime contracts. There's no subcontracts in there either. And one other, I won't go through this whole list, it's there for you to see and we go into details in the report. But one other important caveat is that there are sometimes classification issues in terms of how certain service categories are classified in FPDS versus in company records. The example we like best here, I think, is of the log cap contract, which for years in FPDS was classified as an R&D contract. Nobody knows why, at least nobody that we've talked to, there must have been a reason for it. It's now been changed. But of course, in the records of the companies that were performing this contract, this showed up as a logistic support or professional services support contract. That's now how it's classified. But again, for several years, it was an R&D contract and we've seen that with other contracts as well, where there's a mismatch between the way it's classified in FPDS and the way it's classified in the company's records or reports to shareholders. Anything else on this? Subcontract data is now becoming available, but it's primarily for 2011. We may incorporate that into future iterations of a report. But unfortunately, when it became available, it did not become available retroactively. Right, so we'll give it a year or two to populate and start looking at that then as well. And similarly, when we have noticed egregious errors like that, if they change the overall top line, for example, Emerson Construction in 2008 was given a 13 billion contract, was taken away shortly into fiscal year 2009. We made that adjustment, but as a general rule, we always follow FPDS's classification and we'll inform them if we note a notable error, rather than trying to change things on our end. Okay, the first slide on this deck is actually one of the last slides in your report, but this will be the last time that we make you flick back and forth. We'll stick to the order of the report once we get past this one. But we really thought that it's important to look at the service contracting world in the broader context of all government discretionary spending, and that's what you see here. The bottom blue bar on this chart is service contracts from 2000 to 2010. The red slice above the blue one is other contract spending. This is primarily products, but also includes anything that's unlabeled in FPDS. And then the green bar, or the green slice of each bar, is all other discretionary spending that the federal government funds. And so you see in the dotted line at the top of the screen, the share of service contracts as out of the total discretionary spending by the federal government. And it's been a steady, it's seen a steady increase over the last decade, as you can see, primarily between 2003-2008, after which it sort of plateaued and then dipped for the first time in 2009-2010 time frame. But at its peak, it was at about 28% of discretionary spending. It's now at around 25%. This next chart on page six of your reports, if you'll kindly flip to the beginning, shows you just the total numbers for service contract action spending. And by the way, when we say spending, the column we look at in FPDS is actual obligations. So this is money actually spent. And you can see sort of the rise in service contract spending over the last decade on the bars. Whereas the line, the blue line shows you the number of contract actions. And you can see on the right-hand side there on the legend that while the dollar amounts have grown at a 7.5 compound annual growth rate over this 11-year period, the number of contract actions has grown at twice that rate. So from a government perspective, if you consider the number of contract actions as sort of your workload for your federal contracting officers, that workload has grown significantly. If you're looking at it from the industry perspective, your average contract action has really decreased. Because the number of contract actions grew faster than the total dollars here. And so if you're operating in this sphere, the federal services contracting world, you're really in the recent years having to run fast just to stay in place. In order to make the same number of revenue from service contracts, you have to land a larger amount of those contract actions. And as a small data note, for 2005 and 2008, the number of contract actions had actually skyrocketed thanks to a change in classification by the VA. Their equipment-related rental and maintenance codes saw a huge increase. We think roughly explained by actually counting every instance of service and maintenance as a separate contract action. They've since changed their classification scheme. In 2009 and 2010, they're more in line with the rest of the government. So for 2005 to 2008, we removed those specific codes so that the data would follow the current classification and be consistent. All right. Slide number six is on page seven of your reports. And this shows you the breakdown of the service contracts into those six categories that we mentioned earlier. We'll go over them very quickly now and in more detail at a later stage in this presentation. But starting from the bottom is research and development, service contract actions. A quick methodological note here is that for the purpose of this study, we have removed from R&D services those services classified as research and development support services. These are not a substantial, not substantial in terms of the value, but in terms of a methodological rigor, we felt that they are more appropriately classified under the professional and administrative support service category. And that's where we've classified those. And again, bear in mind that since there's no classified data in FPDS, R&D in our minds is the category that has been affected the most by that. Because a lot of research and development contracts, primarily DOD, R&D contracts are classified. Second slice from the bottom is equipment related services. The green slice is the facilities related services and now construction as well this year. The purple slice in the middle is IT. Professional administrative and management support services, what we call PAMS, is the blue bar on the top. Between PAMS and FRS and construction, those are the two largest categories obviously in the federal services market. And the ones that have also grown quite substantially in terms of percentage. You can see those in the parentheses next to the legend there. PAMS growing at about 11% per year. FRS actually not so much, 5.3%. The fastest growing category is actually the smallest category in terms of share, in terms of dollars. That's the medical services category in the orange bar at the top, growing at almost 15%. But nevertheless accounting for just about $16 billion in the last fiscal year. And then other is all other services that aren't included in any one of those six categories. Significant share, but there's not one service code here in FPDS that amounts to any significant amount in terms of the dollars. And so we did not break those down beyond those six categories that you see up here. And as a note on medical, since it's a new report this year, the primary driver there is DOD spending. It's not HHS and so much of a growth can probably be attributed to the wars. In addition, remember this is only contracts, so various other mechanisms that the federal government delivers medical spending, grants, direct transfers, etc. Are not showing up in that category. And apropos DOD, we'll see this a little bit later in the presentation. DOD is the key driver for all service contracts in the federal market, accounting for about 60% of all the total dollars spent on service contracts every year. So for every, almost every category with a few exceptions as we will see, a majority of the growth can probably be attributed not just to DOD, but also in terms of the time frame during which it occurred to the wars in Iraq and Afghanistan. This next chart, page eight on your reports, shows the different contract vehicles used to contract out the federal service contracts. We've broken it down into two key categories and then of definitive contracts and indefinite delivery vehicles. And then broken down the IDV category into a few other subsets as you can see on the chart. What's interesting to note is the growth in multiple award IDCs indefinite delivery contracts. That's the orange slice second from the top on your charts, which accounted for 13% of the service contract actions by dollar value in 2000. 2006, I'm sorry, and in 2010 grew to 18% of all service contracts. By the way, feel free to ask any questions during the presentation or ask them towards the end, whatever your preference is. It was excluded altogether. Same for construction. And I should also note for our online viewers as it shows on the page, you can email into gsanders at csaas.org with questions and I'll try to monitor them as best I can. Next chart looks at the funding mechanisms used for service contracts. And again, we've tried to sort of use the categories that FPDS provides us, but then also collect them into broader categories for ease of both analysis and also understanding of broader trends. And so the main categories here that we have at the bottom in the blue are the fixed price contracts and at the top in the sort of grayish, reddish cost reimbursement dollars. You can see that there's been significant growth over this 11-year period in the firm fixed price contracts. In fact, that's the highest growth of all these categories from 37% by value of service contracts in 2006 to 43% in 2010. And part of that we attribute to the push since 2009 by the Obama administration to do more fixed price contracting just as sort of an overall policy. But as we'll see in some of the other slides in some agencies and in some service areas, this has been a trend that goes even further back than 2009. No, so there's these two distinct categories. Firm fixed price is the one that I was talking about that grew at the largest pace. But we've got other fixed price lumped together as the second category in this broader fixed price category, and that's the light blue slice second from the bottom on each of these bars. And there had been a rise in the combination category, which simply refers to contracts or contract actions that use multiple sorts of funding mechanisms, which of course increases the amount of ambiguity, makes them more difficult to study these issues. That has now dropped off from 2009 to 2010, which we consider somewhat commendable as it's part of an overall mechanism, overall drive to improve data quality in FPDS. The downside of this is that they are classified by the majority funding mechanism. So it is possible that some of these contract actions are 60% fixed price and thus are now entirely in the fixed price category. We don't have any transparency into that particular issue. But keep this in mind when interpreting 2009-2010 changes are driven in large part by a reclassification of combination rather than necessarily a growth in the individual category. We follow FPDS often breaks it up into individual parts, but they reserve a right to classify by majority of contract dollars. This is another one of those instances where we take the FPDS data as it is, which we for the most part do. But here more so than in other areas we don't attempt to sort of get into their heads and figure out why certain contracts were a combination versus others. Yes, it is, yes. This is a more detailed version. Next chart takes us into competition and the extent of competition that is used for service contracts. A quick methodological note here as well. While FPDS's definition of competition is based on the contract officer's definition, we take a slightly different approach here. We have again these two broad categories of competition and no competition. Third category is actually competition with single offer. That's the middle one in sort of the light purple. The reason we break that out is that looking at it from the industrial base perspective, the fact that a contract was competed but only received a single offer tells us that there really was no competition available to the government for that particular contract. And so we displayed the fact that for reporting purposes in FPDS and other government databases, the fact that a contract was competed is good enough to categorize it as a competed or a competition. We felt we needed to apply a more stringent limit here. And again, if there was only one offer, despite the fact that a contract was competed, we did not consider there to have been a competition. And so that's the explanation behind the way we've broken out the data here. And despite that, you can see that actually the full and open competition category where not only was the contract competed but there were more than one offer received by the government for that contract. That's the category that has grown the most from 42% of the dollar value in 2006 to 48% in 2010. Again, there was in the last few years a push by the executive branch to compete more and to increase the number of full and open competitions. What the breakdown of whether or not there were multiple offers allows you to do is see whether we've hit any sort of glass ceiling in terms of competition. There are many service areas where you might want more competition but you just can't get it. The way everything is classified for competition, so though it has a certain amount of holdover. So if something is initially competed or if it's offered to a small number, a lot of ones who involve pre-classification like FDIQ are probably in the limited competition category. Those are various areas like small business set aside and were like, where the number of competitors is limited for some reason but it is still competed. So I would suspect that's where most of it shows up. But all FDIQ dollars are in FPDS and they are all classified for competition. The FPDS rules as I interpret them, generally speaking, do as you say that it's off the initial competition. There is in fact a category for follow on to competed action you can see or you might not be able to see as it's tiny. So that is not consistent with the amount that happens in reality. So that is a very narrow definition of what a follow on to competed action is. In general, it's off of the initial competition. Can I answer your question? Sorry. It looks at the industrial-based side of the services market and it really shows you how many contractors are active in this market over the last decade. The blue part of the bar at the bottom of your, the dark blue at the bottom of your charts is the number of contractors who perform at least one contract action that's worth more than $25,000 in a particular year. And that part as you can see has remained relatively steady. There's growth there but it's not dramatic. On the light blue slices at the top of the bars on the other hand, these are the contractors who do contracts that are worth less than $25,000. They don't have any business with the federal government in the service area that's worth more than $25,000. And you can see the spike in that population. Part of that is attributable to reporting requirements in FPDS. In 2004 with the move to FPDS next generation, NG, the requirements dropped from $25,000 to $2500. So any contract worth $2500 or more is now in FPDS whereas in previous years it wouldn't have to be unless it was $25,000 or more. So part of the growth is attributed to that but we think that there's also part of that growth that's attributable to just the rise in sort of smaller chunks of work being undertaken by a larger number of companies. As the market grew and as again a lot of it driven by DOD and operations in Iraq and Afghanistan, it appears that a lot of smaller companies managed to get smaller contract actions just because there was so much more new work to be done. Yes, the $25,000 was sort of just our cutoff. It's not in the report but we do have those numbers and can follow up. Right. We picked that number because that was the reporting threshold for previous years. And you can effectively add another slice to each bar with a higher threshold and slice the data based on it. No, that's a very good point. We'll get to that in a minute actually. Why don't we move to the next chart and we can have that discussion. This chart on page 17 of your reports breaks down the services market by size of company. And again for the sake of working with a manageable number of categories, we've broken it down into small, medium and large companies here. And the classification is as follows. A small company is any company that in FPDS is classified as small. That's an easy one. It's usually based on the Small Business Administration's guidelines. So if you're a small company certified, that'll be entered into FPDS and we count you as a small company. The large companies, we consider a company to be large if it's doing $3 billion or more dollars worth of annual revenue. Not just from federal service contracts or federal contracts, any revenue, all revenue sources. So if you're $3 billion or more every year, you're a large company for our purposes. If you're neither a small nor large, you're a medium. And we've gone into a little bit more granularity in the report in terms of how we break down the medium size companies as well. Because we realize that not small or large is a pretty fuzzy definition of medium. But for these purposes, that's what we're working with. So effectively, if the SBA cut off for a small company and it varies by industry, but let's say it's around $20 or $25 million in annual revenue, the medium slice of each bar here covers companies that make between $25 million and $2.99 billion worth of annual revenue. So that's a pretty wide range there. Right, right, total revenues. Because we'll count it as a large. Yes, yes, yes. No, that's appreciated. I think our reasoning behind that was that for purposes of bidding and doing business with government, if you're a large company, you have sort of the overhead and the experience and the infrastructure, if you will, to do that better than a small company, even if that small company does a large extent of business with the federal government. And also for the purposes of just understanding the industrial base, we're interested in who's participating and not how much they're in for, if you will. We go into that a little bit later, but for the purpose of small, medium and large, we felt it was a better reflection of the way the industrial base is structured to go with annual revenue as opposed to government revenue. Sure. Absolutely. Yes, that's right. That involved a great deal of work. Where it's by nature imperfect, but we've gone through a variety of sources. This year we've actually started working with Bloomberg government, among other sources, who have also done their own consolidations. We've cross-checked with them. And our cutoff, we've inspected every company that has a contract revenue of at least half a billion. And our three billion dollar threshold is in part to make sure that we have a fairly good chance of identifying the revenue of a private company. It is difficult. There is not a single standard source. There are some figures in the Federal Registry that are included in FPDS. Unfortunately, when we've inspected those, they're often off by an order of magnitude and by often, I mean at least half the time. So, in essence, we've tried to use any source we have available and to cross-check against multiple sources to discern that. But yes, there's not an unfortunate and simple answer. And I should also add, this is one area where we do think we have real added value because for our large classification, large trumps small. If you are a small company that has been bought out and we have noticed that either directly by looking for various merger and acquisition reports through Bloomberg or any number of other sources, when you are after the merger and acquisition has occurred, if half of your business was after it for that fiscal year, classified as large. So as a result, the percentage of small in our categorization is a bit lower than the official federal government percentage, which is consistent with the law in their case, but we thought it was more informative to follow large rather than small in that instance. So to now look at what the data actually show us, there's two interesting trends here. One is that it appears at least that the government small business set-asides are working. We know that in 96 or 97, I believe the government goal was set of having some 23% of government contracts being contracted to small businesses. In the federal services area, we're at about 20-22%, and that's been relatively steady throughout the 10-year period. The other interesting point is the rise and fall, if you will, of the large companies. You see that in the green line at the top of the chart, where for a significant amount of years during this past decade, the share of the market held by large companies was growing. But that sort of peaked in 2007, started dipping in 2008, and in 2010 dipped quite significantly yet again. Since small companies state relatively constant in terms of their share of the market during this period, the rise and fall of the large companies has come in parallel to the rise and fall of the medium-sized companies. Whereas in previous years, when we looked at professional services, and again we excluded the key category that was excluded from that was construction, we saw for professional services what we call the mid-tier squeeze, where the small companies remain constant, the large companies increase their market share at the expense of the medium-sized companies. When we look at the services market as a whole and include construction, and you'll see that when we discuss construction in more detail, the medium-sized companies come back in that area and as a result of that, and they do so in a significant enough manner that as a result of that, the share of the large companies actually decreases. Sure. Correct. Yes. Right. And so previous years reports and actually the 2010 data bears this out as well. There is in professional services without including construction, there is a squeeze in the mid-tier due to the increase in the large category. Next slide shows you the top 20 service contractors for 2000 and 2010. It shows you for each company what their federal services revenue was that year, and at the bottom you've got the total services contracts value for that year. So you can get a sense of how the share of the top 20 and the top five has changed. In fact, the share of the top 20 hasn't changed very much. It was about 32% in 2000 and about 30% in 2010. What's changed is the share of the top five out of the overall service contracting total. It's changed quite significantly from about 20% in 2000 to about 15% in 2010. What's also changed, and this is also very interesting for us, is the types of companies that made the top 20. In 2010 you see three companies in the health services sector. Healthnet, Humana, TriWest Health Care. No, not one of them was around in 2000 to a significant enough degree to put them in the top 20. Again, that's driven primarily by DOD. We'll see that when we look at the Department of Defense and also at the medical services more closely. The other interesting thing for us is sort of what we call critical mass, the amount of service contract dollars you had to pull in as a company to make it into the top 20. So you'll see that in 2000 it was about 760 million, sorry. In 2010 you needed about 2.2 billion to make it into the top 20. This seems like a good point to reinforce that this is prime contracts. So if you looked at sub-contract figures which would actually reflect revenue a bit differently in some ways, the distribution would be a bit different and we don't yet have the ability to track how much different. So we consider joint ventures a separate entity and as you'll see there are some joint ventures in here just by virtue of the business that they generate as a joint venture. These are primarily Department of Energy contracts for facilities, management and support types of contracts where it'll usually be university partnering with industry in order to manage places like Los Alamos and Savannah River and things like that for DOE. Yes Larry? Bechtel was in the fifth place in 2000. But companies like URS, no but you're right but URS, I'm trying to think, look at who else. And some of these are more dramatic of the work spending actually in prior years. KBR is down a bit and Hal Burton did go up a fair amount from 860 million as you might expect. Now that still, the war spain still shows up in a variety of ways, but it's now more distributed than the, we've seen some prior reports. Right. Actually that's a good point. If you look at some of our earlier reports, I now remember that the text does discuss the entry of companies like Floor and other more sort of construction services related companies into the top 20. That showed up in around probably 2005, 6, 7, that time period when we were more active in those areas in Iraq and Afghanistan. One additional note? Right. Absolutely. One additional note on joint ventures. Joint ventures are classified as large companies if any of their components are large. So most joint ventures are large. And one, you can see the effect of our joint venture classification in the University of California, which in 2000 was largely operating on its own, but in 2010 is not on the list despite being part of a good number of joint ventures. This next chart, it's Table 3.2 in the report on page 39, shows you the sort of cross area pollination in 2000, 2010 between the various service categories or service areas. What is interesting here, there are several interesting things. The first is that there seems to be a lot of cross area relationships between the PAMS category and the IT category. You see, for example, that about 33% of the companies, the IT companies in 2000, were also active in the PAMS area. In 2010, that grew to 46% of the companies. So almost half the IT companies are also doing PAMS work. You see that a lot of the R&D companies are also doing PAMS work. And interestingly, now that we're looking at medical, you see that a lot of the medical service companies are also doing PAMS work. Part of that is just that PAMS is one of the larger categories and so a lot of business is driven by that. The other professional services category also falls within PAMS. That was where log cap ended up and so there's probably a slight methodological issue that if you're not that well categorized, you have a fair chance of ending up in PAMS if you are a professional service. Alright, this next part of the presentation starts digging a little deeper into each one of these service areas. And we start with the IT area. We'll go through these relatively quickly because there's a lot of ground that we've already covered. But really what we've tried to do both in the report and in this presentation is to give you sort of snapshots of each of the service areas by the various categories and components that we've discussed up until now. So for each of these service areas, the six that we've discussed so far, you'll see on the top left the breakdown by government customer. And this is where you'll see for most areas the dominance of the Department of Defense. That'll be the green bar, the green piece of each bar at the bottom of the top left hand chart. You'll see the extent of competition in the middle top row. You'll see funding mechanism, contract vehicle and contractor size, the small, medium and large breakdown at the bottom right there. And at the top right you'll see the list of top ten contractors for 2010 for each of those service areas. So we'll go through these relatively quickly pointing out some of the, for us, more interesting trends and data points. For IT, I think the interesting piece here is, or one of the interesting pieces here is the share of the market held by small companies. This is the service category with the largest share of the market held by small companies. It's about 28% in 2010. The other piece in looking at the breakdown of small, medium and large in the IT sector is the rise of the large companies. You'll see that their share, that's the green bar there at the bottom right hand chart, their share grew from about a third to more than half over the ten year period. The next area we look at is PAMs. That's on slide 16. Again, you see the dominance of DOD and also the rapid growth in this service area from the DOD customer. You see that most of these service contracts are actually competed with multiple offers being received. That's the middle chart at the top row. You see that it's about evenly spread in terms of value between fixed price and cost plus contracts. And on the bottom right hand side, you will again here see the pretty significant squeeze in the share of the market held by medium sized companies. We talked earlier on about, if we were looking just at professional services, how you see a more significant squeeze of the mid tier companies. When you look at an even smaller subset of just the professional administrative and management support service category, the large companies grow from about 35% of the market in 2005, 6% to about 42% in 2010, and the medium sized companies drop from 42% to about 35%. With the small remaining relatively constant at, again, 22%. Although you will see a slight countervailing trend in 2010 where medium continued to grow, but large dropped a little bit. We speculate that stimulative spending might be a driver there, but that's a trend you'll see in a few different areas. Specifically in 2010, it was a good year for the mid tier fairly across the board. Looking at R&D services, this is one of the more dramatic charts in terms of how skewed most of these smaller charts are. You'll see that the Department of Defense really is the almost only game in town for R&D service contracts. For the most part, there are cost plus contracts. Who knew? Nobody doing any fixed price R&D work these days, or in the past 10 years actually. The other green colored bar that jumps out at you here is on the bottom right hand side again. We can really see that the R&D market is the large companies market. It's really tough to make it in this market as a small company and as a medium sized company as well. Both of these categories have been declining as a share of the total market whereas the larger companies have increased their share of the market to almost 65% in 2010. I'd wager that since most of the work is done at DOD and most of the work is cost plus, most of DOD's R&D contracts are cost plus contracts. We have not broken it down into by government agency based on the type of the contract that comes in. Next chart, number 18, page 30 in your reports, looks at the equipment related services market. This even more than R&D is sort of the DOD domain. Again primarily driven by operations in Iraq and Afghanistan. A lot of equipment related services associated with that and a lot of the business as you can see from the list of top 10 contractors going to those companies that actually make the equipment that's being repaired. So probably no surprise there either to most of you. Interestingly here again there's a trend of the mid tier losing ground to the larger companies with the small companies maintaining their share. What's interesting here will be to see how once operations in Iraq and Afghanistan wind down as they are how that will affect this service area. On the one hand there might be a sort of a reset of the equipment with old equipment being retired and new equipment being bought. On the other hand we might just fix what we've gotten and try and make it last a little longer in which case this category will probably continue to be a growth area. Next chart is facilities related services and construction. Here as we hinted at earlier the DOD dominance is slightly less visible. And there's actually another player another government customer that takes a significant chunk of the FRS and construction market and that's the Department of Energy. That's the dark blue slice of each bar on the top left hand chart. The other interesting thing here for us and we've hinted at this as well earlier on is the role of medium sized companies in the facilities related services and construction area. This is one of the few service areas where not only is there not a mid tier squeeze there's actually a large tier squeeze if you will the large companies are losing ground to the small and medium sized companies. So small companies account for about 28% of the market value in 2010 for this area and medium sized companies for about half of that market. And one thing to note with the Department of Energy being such a dominant player and the Department of Energy fairly exclusively using large contractors. Everything I just said is even more true for the non DOE FRS and construction market. You can see how large the DOE is there and they're a very unique customer as we'll see later. Last category is medical services. Again this is a new category for us so everything we see here is new. But we were surprised actually at how large a share of this market went into the Department of Defense. Again there's almost no other government customer that even shows up on the chart in a significant manner. And again the companies that you see on the top right hand table there. Not your traditional defense or research and technology types of customers a very specialized market here. It'll be interesting to see if some of the larger defense contractors or construction and FRS contractors try to sort of make their way into this market. Given that it's been the fastest growing in the last 10 years we've already seen some anecdotal evidence of some of the larger aerospace and defense companies trying to make inroads into this market through mergers and acquisitions. The next set of slides. The cut off for being included as a government customer in our list of customers that we broke out was to have at least $10 billion worth of service contracts dollars obligated for that particular year. And VA didn't make that cut. It might be that just for medical services they would be a more significant customer and therefore show up on these charts. But they didn't make it if you will into our top six, seven government agencies and departments list. And so we didn't include them here in any of the analyses but you're right that's probably there's probably some some dollars going to VA in this category. You can see that the other bar under government customer is the second most prominent in that graph. And so VA would appear in that other bar as would other medical civilian agencies. It's also worth specifying that we follow the contracting agency and not the funding agency that may not be relevant to this particular discussion. It's most relevant to the GSA but when we save a customer we mean who is contracting not who is paying for it. So this last set of charts will look at a similar breakdown of sort of one page overviews but this time by government customer. And so starting with the Department of Defense for each one of the top six agencies I think actually here we focused on the five biggest ones. We'll break it down into sort of the categories that we've seen earlier. The difference here will be that on the top left hand side you'll have the breakdown into the service areas for that particular government customer. So this is the breakdown for DOD. Again few surprises there for those of us and I think that's the majority of this audience who follow the department and work with the department. Large chunks of service dollars going to R&D, PAMS and facilities and construction related services. DOD is one of those government agencies that have sort of been improving in terms of how much they compete, how much of their service contracts they are competing. And you can see on the middle top hand top row that there's been a steady and significant growth in the level of competition with multiple offers in DOD's service contracting. You'll see sort of the probably list of usual suspects on the top right hand side in terms of who the top ten suppliers to DOD are. And at the bottom right hand side the trend in terms of the breakdown of small, medium and large companies for DOD business has again been one of the small companies maintaining their share at around 20% and the large companies increasing theirs from about 40% to about 50% over the ten year period at the expense of the mid-sized companies. It does but it's a lot of work because you have to cross reference mergers and acquisitions to past business. So technically the ability to do that sort of breakout is there. We haven't done it just because it was so time intensive but I would say it's probably both. That this growth in the share of the market that goes to large companies is both a result of they're getting better at getting these contracts and they're also merging and acquiring smaller companies that already have contracts. Right, we don't know. The next department we're looking at is the Department of Energy slide 23 on page 46. Here again the picture is very, very skewed and unidirectional for most of these charts. You'll see that most of DOD's service contract dollars go to facilities in construction related services. They're primarily cost plus contracts and they go primarily to large companies. And what's interesting here is that the share of the small companies is almost insignificant. It's less than 5%. Some years it's as low as two. Whereas large companies account for about 80% of the DOE services market. And again you see in the top ten list a lot of joint ventures here. For the most part these are university industry collaborations. NASA on page, on slide 24, page 49 of the report is the next agency we looked at. Interesting for us here was the split between PAMS and R&D dollars. With PAMS sort of rising over the last few years as you see in the top left hand chart. Again there's a preference for cost plus contracts at NASA. Out of the top agencies that we've looked at they're probably the ones that have the least competition in their service contracting. And as we wrap up sort of the top three agencies DOD, DOE and NASA it's worth noting that together the three of them account for about 75% of the federal service contract market. DOD is about 60%. The top three are about three quarters of the market. Larry? Yes. We didn't do that here but it follows the same sort of numbering scheme. 6162 and slightly different coding but it's essentially very similar to the DOD categorization. Absolutely. Excellent. That was a single large contract to Caltech and we validated that USAspending.gov and Bloomberg reports the same thing. We are a little suspicious of it. What likely happened is that it was a multi-year contract reported in a single year for obligation purposes. We don't obligate you. Right. Which would mean that it was somewhat misclassified. We're going to further look at that. NASA is not a agency, the primary agency we've broken out in the past. So this is one of those cases where we try to simply highlight this is what we know and as we learn more and hopefully as the data corrects itself if necessary, or we find out the exact reason for a bad large spend, we'll update our report. The FBS has a funding only transaction option. So to the degree that it is being written out to a contractor over multiple years, it should be showing up over multiple years. So the general pattern should be that unless Caltech got a significant check that year, it should be in multiple. Though this might be an instance where it all came in one year or more likely it was spread and this was just how they put it into the system. To about 15%. DHS is the next agency we, department we looked at. Here what's interesting and by the way we had to have a whole separate report on DHS. There are copies outside if you are interested in digging a little deeper in that market. That report covers products and services. This again is just the services slice of it. But the same is true for DHS overall because it's really an amalgamation of so many different entities that were sort of forced under one roof in 2002, but only really started contracting out as a single entity in about 2004. That's why you see the several years worth of no data in these charts. There's really no major trend that you can discern here. TSA is very different from Customs and Border Protection and they're very different from the Coast Guard and so the multitude of entities here makes pulling out specific trends very difficult. The one thing that does come out and is interesting again to us from an industrial based perspective is the breakdown of small, medium and large companies. DHS has consistently done better than the government goal of 22, 23 percent to small businesses. In fact, they've for the last five or six years been at about 30 percent of their service contracts to small businesses. Another 30 percent or so goes to medium sized companies and about 40 percent to large companies, which by the way is down from about 50 percent in 2005, 2006. Again, this can in part be explained by the fact that there are so many different entities at DHS, some of which probably lean towards doing business, more business with small and medium sized companies than with large companies. There just aren't that many large companies probably out there that make the specific widgets that different pieces of DHS are interested in. So it's much more of a balanced market in terms of the industrial base here. Larry. FPDS, yes. It is there. You've got address. I think you might even have zip codes and things like that for each of the contractors. And so, yes, the potential is there to break it out by geographic area and where the business is performed. Yes, there's both. And I think we should start in the habit of repeating the questions for our online viewers. But for geographic information, there is vendor information and also place of performance information. So we don't use that as of yet, but there's ways to look at both. You said DHS with worst agencies went to look for the data in terms of percentage of contracts that were then approved since last year? Fortunately, there is a good answer in 2006, Hurricane Katrina. And yes, if you actually look at the unlabeled in funding mechanism and competition, it's still notable, but there are very real percentage improvements. In fact, that happened for much of the government. We include a later table that we may not go over in this presentation, but tracks serious improvements by most of the government customers for their labeling. I think the GSA is one notable exception, NASA to some degree. So still would like to get that smaller, but kudos for what they've done from 2009 to 2010. And good point in 2006, that's a lot of trailer and sort of shelter related service contracts there for that year. Yes, I think it's actually both, I'm not sure. In separate research we've done for Iraq and Afghanistan where we've made more use of that. There often isn't detail beyond country, but we do see contracting offices based in the US have place of performance in Iraq and Afghanistan. So at least some of the time it's based on where it's actually taking place, but we'd have to start using that data more to give you a detailed answer. The question to quickly repeat, does place of performance track contracting office or where the work actually takes place? The last government entity that we'll go into in this presentation and there are a few others in the report. But the last one for this presentation is we've lumped together the Department of State and the Agency for International Development for purpose of getting again sort of a broader sense of where our diplomacy and development service contracts are going. And not surprising they're going into the PAMS area. I say not surprising, but it's worth noting that things like private security contracts are included in that category. In fact, they're categorized as other professional services and we include those under PAMS. That accounts for some of the growth in that category. And you can see that in the list of top 10 companies on the top right hand side where you've got sort of a nice mix of sort of private security contractors, development contractors like Cmonix and development alternatives as well as some of the sort of more traditional construction and security contractors. This is a project for supply chain management. It is managed by two fairly small companies and near as I can figure out is largely a pass-through for a variety of others. Their partner institutions include Boozowen and Northrop as well as I believe about a dozen others. And the question was about PFSCM. Also as a minor methodological note, state and aid as well as HHS are one of a few places where the other funding mechanism actually shows up. That was not broken out in the main top line chart, but we include here because a few customers and areas actually do make use of that area. I don't think we've identified specific contracts there. It is surprising that there is even a significant amount of R&D money coming out of state and aid. It'll be interesting. We can dig a little deeper into that and see if there's any one or a handful of contracts that are driving that and then say whether or not they really are R&D contracts. It might be another case of erroneous classification as we saw with the log cap contract. The specific code, the question of state and aid, R&D, the specific code that often gets used erroneously is services management and support, which is meant to refer to research, the management and support of research into services. But the title itself can be a little confusing. We've noticed that there's been some significant reclassifications out of that code, so it appears to be a crackdown. I do not know if that drives this phenomenon, but it wouldn't be that surprising. Of note also here, again in the bottom right hand chart is the dominance of actually medium sized companies in this area. So small companies, a very insignificant share of the market here and large companies, relatively steady, but the majority of the growth has been in the share of medium sized companies. So that's pretty much what we have for you today. We wanted to leave you with some of what we consider the key to be the key policy areas or policy issues that this data can help us see. And we address those and others in the last chapter in the report that you have. But for the purpose of generating further discussion either here or later, we wanted to put a few of what we consider to be the key ones up here on the board for you. Certainly in the current budgetary environment where everybody is scrambling to generate savings and cut costs, it'll be interesting to see whether that affects the services market as well. In the past years, we've seen certainly on the DOD side, but for a lot of the other government agencies spikes in spending, the likes of which we'll probably not see again in the near future. We've also interestingly seen in the last few years an increase in the workforce, and yet that has come in parallel with an increase in service contract dollars. And so it'll be interesting to see how those trends continue in the next few years. I think it would show up in the PAMS category, but it wouldn't be all of the PAMS category. So I'd be careful about drawing any conclusions based on that relatively broad category. We can break that category down into its individual service codes. We haven't done that for this purpose, but that'll allow you to get it a more precise indication of what you're asking. How large essentially the share of CIDA contracts or sort of support. No, that's a good point. Again, the data allows you to take a closer look at that, and we haven't done that for the purpose of this report. Right, right, right. Sir, actually if we're in the formal Q&A session now, we've got a mic that we can pass around, and if you actually please introduce yourself and we'll take any questions you might have. So I get the first one. Thank you. Jason Miller, Federal News Radio. I guess two related questions. The first one is, I know you guys look at the task order contracts and the use of federal supply schedule as they're reported in FPDS, but was there any thoughts about breaking those out separately, especially some of the bigger government-wide acquisition contracts, SOUP, which is I know more products, but has some services, or NIH, CIOSP2, or Alliant. And then a second question is, if you could offer some insight in terms of there's been a big push by OMB, the administration to cut service contracting, specifically the professional administrative management support services. Are you starting to see that yet and do you foresee that in your 2011-2012 reports really taking the bigger effect? So the FSS GWAC and the like are included in the other IDV category, or FSS and other. That varies reasonably from agency to agency and from area to area. It's notable if you look at information communications technology, that's one area where basic heavy use, unsurprisingly GSA also has heavy use. It hasn't quite registered in dollar terms enough to get into a more detailed breakout, but it might be worth doing from a policy basis, and we have that detail. So if you'd like to talk more about this afterwards, we certainly can. Regarding your second question, Jason, for our online viewers, I'm on chart 6, page 7 in the report. You can see that most of the total service contracts in 2010 dropped by about 10 billion overall. That did not affect the PAMS category, which remained steady at about 96 billion over the last two years. It's risen considerably in the previous years, in the last few years it's remained constant. So we have yet to see any significant shift in how the government obligates its PAMS contracts. Speaking of the trends in the last few years for some of these categories, the IT category has been the only one to grow, albeit by a relatively small amount. It's just about a billion dollars from 2009 to 2010, but that was the only category to grow in that period of time. Interesting, because if you track back sort of IT spending even earlier than 2000, that has been one of the slower growing service areas in recent years. Most of the growth in that area occurred in the early 90s. Also, I should add, DHS is another major user of the other IDV categories. And if any of our online viewers wish to submit questions, again the email address is gsanders at csas.org. It should be on your screen as well. Karen, sorry, could you wait for the mic, Karen? Karen Wilson from Boeing. A question for you on page 69 of the report. It talks about competition and sole source might be more valuable in some cases. And you talk about CAGR being different. Can you talk a little bit more about what you were trying to communicate in that context? So we were basically looking back at sort of what the data shows us in terms of the growth rates for each of these competition categories over the last, in this case, 10 years or 11 years. You don't see the CAGRs up on the chart here and they're in the text, but we were just trying to give a better sense of what the year-on-year growth rates have been for some of these categories. We were specifically looking at the competition with a single offer, which as you can see goes from $13 billion in 2000 to $52 billion in 2010, and still has significant growth, admittedly only from $39 to $52, if you look from 2006 to 2010. The single offer competition is, as we discussed earlier, indicative of competition not serving the desired purpose. Just offering it for competition might get some benefits, but I believe it's widely understood that actually receiving multiple offers is the desired goal of competition. And so perhaps if you are pointing out competition and only getting a single offer, another mechanism may be more appropriate. Does that answer the question? Cecil. Cecil Black from the Boeing Company. Dr. Steven Fuller of George Mason has produced a study that said the impact of sequestration on the Department of Defense Investment Program, that's RDT&E procurement, would generate 1 million 8,000 job losses in America. And since this is a very substantial market, larger than that in fact, I wonder if you could draw some implications on the basis of what you've observed in your data that would give us a feel for what is the implication and job losses in the services sector as a result of both the budget caps that are already in place and the potential impact of sequestration. That's a great question, but one of the harder ones to answer because we don't have data on number of employees for each of these companies that are tracked in FPDS. We can cross-reference with, possibly, I actually possibly cross-reference with other data sources to get at that. But right now what we have is the number of contractors, which as we saw in one of these earlier slides, is at around 157,000. That's number of companies. So if you want to extrapolate from that in terms of what reductions in service contracts would mean for the industrial base and therefore for employment, I'd say that that's probably not too big of a stretch, but it's not something that the data can tell us. Is that a fair... Dave, please. University of Massachusetts, Dave Patterson, National Defense Business Institute at University of Tennessee. University of Massachusetts at Amherst every year puts out what is a billion dollars of defense spending. And this last year they said a billion dollars of defense spending generates or sustains 11,600 jobs. And it's up from 8,333, which I can't account for, but I'll go with their number. And so you start to work it backwards. For every 1% of unemployment, it's about 133 billion dollars if you take what they say is being true. Defense dollars, right. Yes, sir. Probably the ideal with this sort of thing and if anyone wishes to partner with us on this would be if we could actually get the multipliers for various sectors. I don't know whether it would be better by government customer or by service area. I suspect it might actually be service area to look at where different hits would affect in different ways. And the multiplier effects are one of the key areas there, but a bit beyond the expertise of this report as is. Any other questions? Tom, please. Do you have any data on the contracting personnel workforce across the agencies? Not from FPDS and actually I don't know where a good open source for that data might be. See if my logic is correct. Your data has shown over 10 years large increase in services contracting. An increase in contract actions and an increase in competitively awarded contracts. So all of those proposals going in have to be read and evaluated by someone. I think the contracting staff has remained relatively flat. It would be interesting to see that data because it seems like it's a bit of a triple whammy. And we in the industry, I'm sorry I'm from PAE, we in the industry see longer delays, just a lack of bandwidth to process the work of the government. I think that's a fair point. I remember seeing some data that maybe not in the last year, but there were attempts to do more insourcing in certain agencies and departments at least. But you're right, overall the trend is there's more contract actions, there's more contract dollars, there's more contract tours and there's more competition. And yes, I think it's not a stretch to deduce from that that the workload on the contracting workforce or even the contract evaluation workforce is much increased. Right. We have hold those numbers before. I think we had used a GAO's source as our source, but I believe we haven't seen anything for the past few, maybe even several years. The trend was stagnation and we haven't read anything and other sources to indicate otherwise. But I don't remember if they broke it down into services versus product acquisition workforce. And that's one of the issues that we highlight in the report is that acquiring services is different from acquiring products. And yet the majority of the acquisition workforce is trained for product acquisition. At least traditionally that has been the case and there's no trend to indicate that that's changing significantly. And I will again, giving credit, we often do raise various concerns about data quality. And I am certain that the contracting workforce is as overworked as ever, but they have managed from 2009 to 2010. And in past years as well to make notable improvements in classification in several areas. So I don't think that is indicative of it being less overworked, but I think it shows that they've made it a priority and should be complimenting for such. Okay. So if there's no further questions, thank you very much for being here with us either in person or on the web. And if there's any follow up questions or areas that you think would be interesting to look at in this field or using this data, we'd be very happy to hear your thoughts on those. Thank you very much again. Oh, and thank you to co-offers Jesse Elman and David Morrow.