Emerging Trends in Government Procurement. Patrick Morrison, Washington Management Group James Shanahan, Financial Transaction Services

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1 Emerging Trends in Government Procurement Patrick Morrison, Washington Management Group James Shanahan, Financial Transaction Services September 18, 2012

2 The Washington Management Group Our Core Competencies - our clients appreciate and we pride ourselves on three critical core competencies 1. Experience we have successfully worked with clients of all sizes on a wide range of government contract related issues, especially GSA Schedules, for over 33 years 2. Relationships building positive, long term relationships with our clients and with agency management 3. Knowledge the government contract market frequently changes with new issues developing all the time. We stay current to insure that our clients are properly advised with the most recent developments to allow for educated business decisions in their best interests

3 The Deltek Tool Kit for Government Contractors

4 Financial Transaction Services (FTS) Financial Transaction Services (FTS) is an established leader in the payment processing industry and a full service provider of electronic transaction processing services for business-to-business and businessto-government companies that require a provider who can support the qualifications required for commercial, business, corporate (level 2) and purchasing card (level 3) transactions. FTS has been designated as an Approved GSA Vendor by the Office of Charge Card Management at the General Services Administration (GSA). FTS works with all levels of companies to implement best practices in payment card processing efficiency, compliance with industry credit card regulations, and optimization of industry interchange requirements to maximally reduce processing fees.

GSA Schedules Program Managed by General Services Administration (GSA) Federal Acquisition Service (FAS) and Veterans Affairs (VA) NAC Through pre-negotiated contracts, contractors supply services

5 GSA Schedules Program Managed by General Services Administration (GSA) Federal Acquisition Service (FAS) and Veterans Affairs (VA) NAC Through pre-negotiated contracts, contractors supply services and products to the Federal government, the largest consumer in the world 33 different defined GSA Schedule contracts and 8 VA Schedule contracts, categorized by type of services and/or products. Each Schedule has a series of sub-categories (SIN) for definition of specific services and products Schedules negotiated at 10 different acquisition centers across the U.S. ~19,000 contracts / ~12,000 contractors There are many ways to do business with the government, the fastest and least expensive way is through the GSA Schedules program

6 GSA Schedules Program A GSA Schedule has a base period of 5 years with up to three 5 year add-ons, can be a total of 20 years Commercial services and products Includes Trade Agreements Act (TAA) compliance requirements, but not Buy America Act (BAA) No maximum contract or order value Price increases may occur after the first year Additions/deletions may occur at any time International in scope Excludes construction and architect and design services As a Schedule holder, you upload your GSA Schedule information to GSA Advantage!

7 A sample landing page keyword search night vision goggles

8 GSA Advantage! Only as a GSA Schedule holder, can you upload your information on to GSA Advantage!, to: Reach the 700,000 registered users Be part of +70,000 e-buy RFQ s Get a portion of the $682 million in sales Successfully get some of the +842,000 orders placed Be exposed to the ~600,000 searches per work day Be included in the 30 million line items Source: GSA Advantage! Statistics for FY2010

9 GSA Schedules Program GSA Schedules Revenue FY 2000: just under $14 Billion FY 2011: $38.5 Billion VA Schedule Revenue $12.2B in FY2010 (not on chart) Significant growth factor adding services to the GSA Schedules program in the late 90 s

10 How Contractors Can Grow Top-Line Revenue & Profits in a Challenging Economic Environment Overview of the Economic Landscape The Economic Result Accountability = Transparency How Contractors can Support Transparency and Grow Revenue Overview of the GSA SmartPay program Level-3 Technology (Level-3 processing, benefits, PCI DSS Compliance) Business Needs Analysis Level-3 examples

Budgetary Pressures Overview of the Economic Landscape Impending budget cuts are anticipated to result in a further decrease in government spending on goods and services.

11 Budgetary Pressures Overview of the Economic Landscape Impending budget cuts are anticipated to result in a further decrease in government spending on goods and services. As a result, government contractors are shifting their priorities to focus on key areas where government is inclined to invest its resources. Contractors are also taking a deeper look at their existing portfolio of contracts to identify additional revenue sources to increase profit margins.

12 Procurement Policy Changes Strategic sourcing initiatives like the GSA s FSSI are being instituted to increase efficiencies and savings around the government s purchase of common goods and services.

Strategic Sourcing Overview of the Economic Landscape Continued Strategic Sourcing is being used to help the U.S. Administrations efforts to reduce federal procurement spending by $40 billion annually.

13 Strategic Sourcing Overview of the Economic Landscape Continued Strategic Sourcing is being used to help the U.S. Administrations efforts to reduce federal procurement spending by $40 billion annually. Ultimately, such initiatives will make it more competitive than ever for vendors as agencies will be buying smarter to save money.

14 Reducing Government Waste Some of the big stories on reducing government waste can be read on: An increase of auditors to reduce rising backlogs on recovering tax payer dollars improperly spent by contractors. Currently, the DCAA is seeking to hire hundreds of more auditors to assist in this area. The governments push to adopt technologies that will reduce waste with government resources and prevent instances of fraud and abuse. Recent legislation pending in the Senate, known as the DATA Act, that will impose a universal reporting requirement for recipients of federal grants, loans and contracts to the general public.

15 The Economic Result The ongoing economic and budget situation is forcing agencies and contractors to be more accountable and efficient by saving money in reducing waste, and preventing instances of fraud and abuse.

16 Accountability = Transparency To help drive accountability, the OMB has made the push for Open Government. Accountability = Transparency Under this initiative, executive departments and agencies are directed to take specific actions to implement principles of transparency to make data more available, expand opportunities for citizen participation, and increase collaborative decision making. Ultimately, by incorporating the three principles of transparency, participation and collaboration, agencies will be better equipped in becoming more accountable and efficient with saving money by reducing waste, and preventing instances of fraud and abuse.

17 How Contractors Can Support Transparency and Grow Revenue How Contractors Can Support Transparency and Grow Revenue How can contractors support agencies efforts in becoming more accountable with transparency? How can government contractors expect to grow top-line revenue and profits in the current economic climate of declining government spend, procurement policy changes and increased audits? An effective way to simultaneously increase transparency and grow revenue approach is to update credit card financial processors to become Level-3 compliant.

18 GSA SmartPay Program The GSA SmartPay card represented $30.6 billion in total spend for FY10. Agencies/organizations received $325.9 million in refunds in FY10 (net of GSA fees) In FY10 agencies/organizations avoided over $1.5 billion in administrative processing costs, using the GSA SmartPay Purchase Card Agencies/organizations have received over $1.4 billion in gross refunds since the start of GSA SmartPay

19 SmartPay Card Industry Facts When a purchase card, such as a GSA SmartPay card, is accepted as payment, Level-3 data Level-3 must be Processing captured and passed along in order to qualify at the best rates through Visa and MasterCard interchange. Level-3 line item detail contains an item description, quantity, unit-of-measure, price, discounts applied and sales tax information in addition to the merchant establishment information and cardholder information. Level-3 transactions will typically reduce costs to process transactions by 25-50%. Such a substantial savings can be placed back into a business and can have a significant impact on margins.

20 Level-3 Benefits For the Government Level-3 Benefits Accountability and transparency Cost avoidance Leveraging of card for strategic sourcing Refunds when cards are used For the Contractor Faster funding Savings Increased sales potential Success Stories PCI DSS Compliance

PCI DSS Compliance: Sound Business Practice The Payment Industry s PCI DSS Compliance: Data Security Sound Standard Business (PCI Practice DSS) states: PCI Data Security Requirements apply to all

21 PCI DSS Compliance: Sound Business Practice The Payment Industry s PCI DSS Compliance: Data Security Sound Standard Business (PCI Practice DSS) states: PCI Data Security Requirements apply to all members, merchants, and service providers that store, process or transmit cardholder data. PCI DSS Compliance is sound business practice as it helps to: Achieve fundamental best practices by avoiding fraud and clarify where data is stored. Uphold brand by adding value to a company s name and increasing customer confidence Avoid investigation and remediation costs, and fines and fees that can damage a company s brand/reputation.

22 Level-3 Compliance Level- 3 processing becoming Level-3 recommended Compliance and/or required for: PoST Pilot Program Schedules 67, 51V, 58I and FSSI Schedule 70 require Level-3 processing Four more schedules have been selected to require Level-3 processing

23 Getting Set Up to Accept Level-3 Transactions is Easy Getting Set Up to Accept Level-3 Transactions is Easy! Becoming Level-3 compliant is easy. Below are the three simple steps to take in order to process Level-3 transactions and start receiving the benefits. 1. Determine the type of software to be utilized 2. Establish a merchant account with a Level-3 processor 3. Start processing Level-3 transactions

24 Level-3 Examples: What are the Value Components? Client Level-3 Examples What are the Value Components? Previous Processor Previous Gateway New System/ Gateway Savings Additional Benefits C Engineering Company Local Bank IC Verify PayFlow Pro 38% - Qualify for Level-2 and Level-3 processing - Automates to Accounting System - PCI Compliant I Holdings Co. Local Bank Authorize.net ERP System 45% - Converted three accounts into one - Set up for Major Account Customer Service - PCI Compliant - Eliminated two transaction entries and integrated into ERP system

25 Questions? Patrick Morrison Washington Management Group James Shanahan Financial Transaction Services A copy of the presentation slides will be sent to all registrants within 2 business days from events@govwin.com.

26 Free Business Needs Analysis 7 Steps: 1) A Comprehensive Business Needs Analysis: Review current payment process. - Look for inefficiencies or missed opportunities - Streamline process 2) Level-3 Processing, Reporting, and Monitoring - Educate on Level-3 data and requirements - Ensure proper data is captured and processed - Monitor transactions for Level-3 qualifications 3) Customized Software Integration - ERP - Accounting Software - Virtual Terminal

Free Business Needs Analysis Continued 4) In- Depth Training - On Level-3 processing - Proper use and function of payment system - Ongoing support 5) Security Recommendations - Maintaining PCI/DSS

27 Free Business Needs Analysis Continued 4) In- Depth Training - On Level-3 processing - Proper use and function of payment system - Ongoing support 5) Security Recommendations - Maintaining PCI/DSS Compliance - In house security recommendations 6) Cost Savings Analysis - Analyze current fee structure - Reduce costs through interchange optimization - Implement best practices to maximize cost savings 7) Level-3 Compliance Certificate - Proof that your company has the ability to process and pass Level-3 transactions

Electronic accounts payable: increasing compliance, control and security

Electronic accounts payable: increasing compliance, control and security As the federal government approaches the digital transformation, Mastercard stands ready to discuss with agencies and organizations