Vying for contracts at any time, but especially in an ailing economy, can be competition at its most cutthroat, and partnering with the largest bureaucracy in the history of the human race is a complex undertaking.
Fortunately for Nevada, companies persevere, bringing with them revenue, jobs, much-needed expertise and an overall boost to the local and regional economies.
How much can large government contractors contribute to the community? The Economic Impact Analysis for Nellis Air Force Base in North Las Vegas, Creech Air Force Base near Indian Springs and the Nevada Test and Training Range (NTTR) in the Southern Nevada desert, for example, shed light on just how much of a plus these sites are for the Nevada economy. According to Air Force Colonel and installation commander Steven D. Garland, the numbers for fiscal year 2011 show the following:
- A combined operations and maintenance outlays of more than $513 million.
- There were approximately 10,809 military and 4,279 civilians employed between the two bases and the NTTR with a combined payroll of more than $1.15 billion.
- On any given day, about 967 temporary-duty personnel conducted business at Nellis, Creech, or the NTTR.
- There were an estimated 6,521 indirect jobs created with an estimated annual dollar value of $265.7 million.
- At the same time, the Las Vegas metropolitan area counted a total of 27,845 military retirees among its residents. The combined retirement payroll of 13,972 Air Force, 5,368 Army, 6,538 Navy, 1,584 Marines and 383 Coast Guard retirees amounted to a yearly salary of $646.9 million.
- The total economic impact of Nellis, Creech, & NTTR operations in Fiscal Year 2011 totaled more than $5 billion.
Contracting for the government comes with many strings. It was reported in early June, for example, that companies with federal government contracts or subcontracts may soon risk losing their contracts if they do not meet quotas to hire more disabled workers. The US Department of Labor is said to be considering changes to Section 503 of the Rehabilitation Act of 1973. The changes would require private employers with federal government contracts and subcontracts to set a hiring goal that 7 percent of their employees are qualified workers with disabilities. According to the Office of Federal Contract Compliance Programs (OFCCP), the proposed rule changes would also specify actions that contractors must take when recruiting, training, keeping records and implementing affirmative action policies, as well as guidance on how to comply with the law.
In addition, government contracts often end up becoming centers of suspicion and finger pointing. Case in point: according to Federal Times, Pentagon audits of its contractor costs have “slowed to a trickle in recent years, prompting critics to charge that billions of dollars in questionable costs are likely being paid but not flagged by auditors.” The number of audits conducted by the Defense Contract Audit Agency (DCAA) last year, 7,390, was less than a third of the 26,623 audits that were performed six years ago – despite the fact that the agency has ramped up hiring in the same period by about 20 percent. Because of the slowdown, the publication reports, there is a whopping $573 billion backlog of contracts – going back as far as six years – that have already been paid but have yet to be audited. The publication added that, “critics fear the agency will never catch up on that backlog because, by law, paid contracts more than six years old cannot be reviewed.”
The National Association of Government Contractors reported that “legislative efforts to promote higher small business goals when awarding federal contracts are gaining support among lawmakers.” On May 22, Senators Ben Cardin of Maryland and Mary Landrieu of Louisiana, chairwoman of the Small Business and Entrepreneurship Committee introduced the Small Business Goaling Act (S. 3213). The bill, if enacted, would raise the annual prime contracting goal by 2 percentage points, from 23 percent of contract dollars spent with small businesses to 25 percent.
Managing and Operating
“We are a managing and operating contractor to the U.S. Department of Energy, Nevada site office,” says Dante Pistone, Manager of Public Affairs for National Security Technologies LLC, a contractor at the Nevada National Security Site (NNSS), formerly the Nevada National Test Site. “We do more than just the security for the site. We manage the entire site, everything from homeland security to a lot of anti-terrorism training, testing and evaluation.”
The area of the NNSS, at 1,360 square miles, is larger than the state of Rhode Island. The site is surrounded by federally owned land and access to the site is, naturally, controlled.
National Security Technologies was formed in 2006 as a joint venture between Northrop Grumman Corporation, and three other corporate partners: AECOM, CH2M Hill, and Babcock & Wilcox. The company employs some of the most highly trained science, technology and engineering professionals in the country, working at sites in North Las Vegas, Nellis Air Force Base, Andrews Air Force Base in Maryland, Los Alamos and Albuquerque, New Mexico and Livermore and Santa Barbara in California.
The Nuclear Test Site, as the name implies, was historically used for nuclear testing, but that came to a halt in 1992 with the end of underground nuclear testing. “We still do some experiments out there,” Pistone points out, “because one of our jobs is to certify that the nuclear weapons stockpile is still viable. We are only one of the sites that does that, and we work with the National Laboratories.” The site provides an extension of the national laboratories’ experimental capabilities in support of the Stockpile Stewardship Program. The Site also has become the nation’s leader in Homeland Security with respect to nuclear/ radiological testing, training and emergency response. In addition to ongoing environmental cleanup of historic nuclear research and testing areas on the NNSS, non-defense research, development and training activities are conducted in cooperation with universities, industries, and other federal agencies.
Contracting with the United States federal government – the largest bureaucracy in the world — is a unique experience. According to Pistone, however, business as usual is the rule of thumb. “There are some hoops we have to jump through, but they’re pretty much there for a reason. We build that into our business plan and go forward. We’re a private business just like any other private business, so we’re in business to make a profit. What we do is apply business efficiencies and economies where we can to streamline the operations at the site. We’ve done so pretty effectively since 2006.”
NSTEc won the contract with a successful bid in 2005. In fact, the company itself was formed specifically to bid on this contract. There have been several annual renewals since then as well as a new, open bid scheduled for 2014.
One of the primary things that government contractors bring is jobs. “We receive government funding for our contract, and all of our employees are local,” explains Pistone. “That money comes in from Washington, DC, and is spent locally, so we contribute significantly to the economy. Depending on what’s happening on site at any given time we have 2,500 employees. The payroll and the contracting is significant for small and medium-sized businesses in Nevada. We have a pretty substantial impact.”
The Hawthorne Army Depot (HWAD) lies in the western-central region of the state, about 140 miles southeast of Reno, on the southern shore of Walker Lake. It sits on 150,000 acres of semiarid land surrounding the Hawthorne community in Mineral County. It is a government-owned, contractor-operated military industrial installation. The resident contractor is Day and Zimmerman/Hawthorne Corporation. Together, there are approximately 700 government and contracted personnel.
The main mission of the Hawthorne Army Depot is supply depot operations (SDO), says Stephen D. Abney, Chief of Public Affairs for the Joint Munitions Command. “That is, an ongoing requirement to store, receive and ship assets stored at the depot. HWAD’s secondary mission is ammunition demilitarization efforts.” The site was selected in the 1930s because of its location — relatively near the Pacific coast, but on the other side of the Sierra range, and thus out of range of attacks from the sea.
The work at HWAD is federal. HWAD is part of the Joint Munitions Command, the Army organization charged with storage, distribution and demilitarization of conventional (not nuclear or chemical) munitions for the Defense Department. The operating contractor of HWAD won the operations and maintenance property management contract on a competitive basis.
“Government projects always take longer to get processed and actually get to bid as compared to private projects,” notes Patty Wade, founder, owner and President of Wade Development Company, Inc. and Wade Consulting Group, LLC in Reno and Las Vegas. “There is extensive review and permitting involved in all government projects that takes a lot of time and the accounting and reporting once under construction is extremely involved.
“The majority of government projects that I am familiar with are associated with development — infrastructure and roadway,” adds Wade. “These projects are usually funded by federal surface transportation program and omnibus funds and administered by the state of Nevada and the local agencies.” Additional funding sources that were utilized on the Fernley (Exit 50) Interchange Project, she adds, included state gas tax, interstate maintenance discretionary funds, earmark funds, SAFETEA-LU NV056 and SAFETEA-LU NV060 (SAFETEA- LU stands for Safe Accountable Flexible Efficient Transportation Equity Act: A Legacy for Users).
Most of the recent projects, Wade points out, have been conducted in a collaborative arrangement with the federal, state and local agencies working together to coordinate efforts and funds “in order to accomplish projects in the most cost effective manner.”
All government projects also have a requirement to include a disadvantaged business enterprise in their team of contractors and adhere to prevailing wage provisions. While private projects constructed in public rights of way do follow the same standards, they tend to process much more expeditiously than government projects.
Wade believes that the state of Nevada, which receives funding for numerous projects each year, is “very competitive with other states for these funds. Contractors from other states frequently bid on government contracts in Nevada, but the majority of the projects that we have been involved in have all been constructed by Nevada contractors.”
While development projects, especially infrastructure and roadway projects, are usually funded by federal and state sources, most are now conducted in a collaborative arrangement with several agencies working together to coordinate efforts and funds. These agencies, she says, “pool their resources and provide in-kind support to these projects in order to achieve the best project and the greatest cost-efficiency for the community and the region.”
The bidding process in Nevada is, understandably, similar to that found in other states. The majority of contractors working in the state of Nevada are familiar and prepared for the process. “While I believe that the bidding process is very competitive but fair,” Wade points out, “the process takes a lot of time. The insurance requirements for government projects are extensive, and that, coupled with the disadvantaged business enterprise and prevailing wage requirements, limits some contractors from competing for these projects.”
Most of the contractors that come to Nevada to perform work on government projects, according to Wade, immediately embrace the communities within which they work. “They become community partners and supporters as soon as they arrive. These contracting companies are employing hundreds of local workers for these projects, which helps the employment base and jobs creation substantially—even if for only a finite 12-to-18 month period.”
These and other pluses that are inevitably tied in with construction projects subsequently support the local and regional economies. “Additionally,” says Wade, “these companies are usually very supportive of local community and charitable events, and donate substantial sponsorships for local clubs, sports, and school/university activities.”