Federal / Non-Federal Split

[Gumpmaster]

Have any of you been in a company that has undergone a federal / non-federal split? The company decides that you can only work on either federal work or non-federal work and splits up buisness groups to service the respective clients? You're not allowed to work at all on "the other side of the fence".

How did that work out for the company? Did you choose the federal side or the non-federal side? How did it affect the company long term?

 

[MiketheEngineer]

Never done/heard of that. But we do have "union" and "non-union" sides. Works fine.

 

[DRWeig]

Gump, I wonder what the purpose of such a split is? Is your federal work classified, perhaps? Just curious. Like Mike, I've never heard of such.



Good on ya,

Goober Dave

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[Gumpmaster]

No. It's a very large engineering company that is splitting, basically right down the middle. The restriction is purely internal. If you design a culvert for the Federal Highway Administration, you won't be able to design one for your local municipality even though you may work right next to the guy who does. It cuts across all disciplines.

It's driven by the federal accounting standards.

I was wondering if maybe Bechtel or another similar company had already done this. It seems like the large players are very rarely willing to step in a new direction like this unless someone else has already done it.

 

[KENAT]

Ah, Federal Accounting Standards and associated bureaucracy etc. potentially responsible for a disturbingly large amount of the deficit.

I've known defense/aerospace companies that had vaguely similar issues though I'm not sure I recall it being quite so draconian.

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[MiketheEngineer]

Sounds like a management/bean counter decision??

 

[cvg]

who designs anything for the FHWA? All highway work in the US is done for either State or County agencies, all receiving federal money for the construction. Work for federal agencies such as USACE, NRCS, FEMA etc. do not require this type of split. SOX compliance does not require it. the very large company I work for (over 10,000 employees) has not found a reason for such a split.

 

[Gumpmaster]

It's purely an internal requirement. We think we can profit more by compartmentalizing the federal work. The profit margin will be higher on the non-federal work because we can charge the same amount but save on the accounting. So the theory goes at least.

I see potential difficulties because of the separation of intellecual capital. We have some industry experts who will be prohibited from working for certain clients.

I'm very interested to see how it plays out. I was hoping to benefit from someone elses experience.

CVG, you're right. It's not directly for the feds, but much transportation money is from federal sources, hence fed lookalike contracts. Same effect in execution though.

 

[SAITAETGrad]

Often there is the belief that working on government contracts spoils individuals from efficient private work. The fear is that documentation requirements, etc. begin to blow up to be at the same level that the government is looking for in their contracts regardless of actual contract and regulatory needs. This fear is not without basis IMO...but putting up fences to separate the business is a fairly extreme way of managing it.

Does that sound like your company?

 

[Gumpmaster]

That may have been the case 5 or 6 years ago, but government contracts have been cut to the bone (for design at least). We sometimes get only half the price (and half the time) per sheet on federal work as we do in commercial or state/municipal work.

I think it's purely a bean counter decision.

It would be very interesting if we're the first to implement this.

There are audit firms which appraise the management of the large engineering companies. The large companies then look at what their competitors are doing and more or less emulate it. The result is that the similar size firms all move in a pack in terms of their pay, management concepts, HR style... At least that's what happens as far as I can tell (from my mid-level position). If we're the first, I would bet that some of the other bigs will follow in the next couple of years.

 

[cvg]

agree with sait, federal vs local vs industrial vs commercial clients all have different expectations. It's up to the project management team to recognize this and deal with it from both a marketing and project execution perspective. But splitting the company seems a bit extreme and non-productive way of dealing with this. Perhaps the COO and CFO need to have a heart to heart conversation and come to the realization that the reason for being is that we do engineering, not accounting. I certainly hope and expect that not all companies have a pack mentality...