Monthly Archives: September 2024

There is a lot of marketing hype around AI, due in large part to the immense potential of the technology and the promise that it is transforming businesses overnight. However, it’s important to dig beyond the headlines and to approach AI with a critical mindset, as the actual capabilities of AI systems may vary, and the technology is not without its challenges and ethical considerations.

Federal agencies should look past the marketing hype created by companies trying to sell to the U.S. government and understand the current state of the technology and how it can be leveraged.

Here are some ways to identify fact from fiction:

Broad Claims vs. Specific Applications: Companies often tout their AI solutions as revolutionary, capable of solving a wide array of problems. However, real AI technology tends to have specific applications. For example, a company might claim their AI can “transform customer service across all industries,” but genuine AI solutions are usually designed for specific tasks, like an AI chatbot trained to handle banking inquiries, not universally applicable across sectors.

Transparency and Peer Review: Genuine AI advancements are typically accompanied by research papers or documentation that details the technology’s workings, often peer-reviewed or presented at reputable conferences. If a company’s claims about an AI technology are not backed by publicly accessible research or technical details, it may be a sign of hype. Google DeepMind’s AlphaGo, for instance, was validated through peer-reviewed research and publicized matches against human Go champions, establishing its legitimacy.

Realistic Limitations: Authentic AI research acknowledges limitations. AI technologies, whether Large Language Models or AI vision systems, have constraints based on current technological capabilities. Companies that claim their AI solutions have no limitations or fail to discuss potential challenges are likely overselling. For example, while LLMs like Generative Pre-trained Transformer (GPT) are powerful, researchers openly discuss their limitations in understanding context or generating accurate information beyond their training data.

Evidence of Practical Deployment: Look for evidence of the AI technology being deployed in real-world scenarios. Companies might claim their AI can automate complex tasks, but real success is demonstrated through case studies or testimonials from credible organizations. For example, IBM Watson’s deployment in healthcare is a mixed example; while it promised to revolutionize cancer treatment, actual outcomes have shown the challenges and limitations of applying AI in such a complex field, illustrating the gap between hype and practical application.

Scalability and Performance Claims: Be wary of claims that an AI solution can effortlessly scale to meet any demand. Scalability is a significant challenge in AI, and genuine solutions will discuss how they address this issue. Overhyped AI products might promise unlimited scalability without discussing the technological infrastructure required to support such claims.

How to identify hype vs reality around LLMs

One example is the hype surrounding Large Language Models (LLMs), which often paints them as near-magical tools capable of understanding and generating human-like text with little to no limitations. This overenthusiasm can lead to unrealistic expectations about the capabilities of LLMs, especially among those not familiar with the nuances of AI technology. Some claim that LLMs can replace human roles entirely in complex domains like journalism, creative writing, or legal advice, suggesting these models can understand context and nuance at a human level across any subject matter i.e. an LLM can autonomously write an entire novel that is indistinguishable from one written by a human author, complete with complex characters, intricate plots, and deep emotional insights.

However, once you understand the stochastic nature of LLMs—their probabilistic, rather than deterministic, way of generating text, it becomes clear that while LLMs are powerful tools for generating human-like text, they do not possess a true understanding of content or context the way humans do. They generate responses based on patterns in data they were trained on, rather than any real understanding or reasoning.

This understanding helps temper expectations, highlighting that while LLMs are revolutionary tools for assisting with creative tasks, augmenting content creation, and automating certain writing tasks, they are not replacements for human creativity, insight, and expertise.

The government has vast amounts of data in different locations and AI has many advantages which save agencies valuable time, money and resources, but federal agencies must know their data – doing AI requires a deep understanding of what data is available and the context of the data.

John Mark Suhy is CTO of Greystones Group. He brings more than 20 years of enterprise architecture and software development experience with agencies including FBI, Sandia Labs, Department of State, U.S. Treasury and the intel community.

WASHINGTON (AP) — NATO has signed a nearly $700 million contract to have member countries produce more Stinger missiles, one of many steps the alliance is pressing at its summit in Washington to get each country to boost its own weapons production capabilities.

Outgoing NATO Secretary General Jens Stoltenberg announced the contract Tuesday at a Chamber of Commerce industry day focused on increasing NATO member countries’ defense manufacturing capabilities to deter future attacks.

“There is no way to provide strong defense without a strong defense industry,” Stoltenberg said.

The Stinger is a portable surface-to-air defense system that can be carried and fired by troops or mounted onto a vehicle and used as short-range defense against aircraft.

The Raytheon-produced system was one of the first weapons the U.S. shipped to Ukraine following Russia’s 2022 invasion. It is now among hundreds of types of systems, and tens of millions of rounds of ammunition, artillery and missiles, that countries have pulled from their stockpiles to help Ukraine. But the rapid push over the past two years exposed that defense firms both in the U.S. and in Europe were not set to produce at the levels needed in a major conventional war.

The NATO summit is also occurring against a backdrop of uncertainty: U.S. political divisions delayed weapons for Ukraine for months and the upcoming presidential election is raising concern that U.S. backing — with weapons and troops — in case of threats against member countries may not always be guaranteed.

Donald Trump, the presumptive Republican nominee, has boasted during campaign speeches that he’d encourage Russia to do as it wished with NATO members that do not meet their commitment to spend 2% of their gross domestic product on defense.

In some cases, defense production lines were stagnant at the time of the 2022 invasion and are only now getting production numbers up. The buildup has been dependent on getting new, longer-term contracts signed to support more capital investment in the needed infrastructure.

“This is not about shifts or a bottleneck. It’s building new factories,” said Morten Brandtzaeg, the chief executive officer of Nammo, a Norway-based ammunition firm.

The war also spurred those NATO members to increase the amount they spend on defense.

Out of 32 NATO members, 23 are expected to meet the 2% commitment this year, up from just six before Russia’s invasion of Ukraine. That’s seen as still not enough, as Russia has leveraged the sheer size of its workforce to rapidly replace weapons lost in the war.

“If you want to fight a war for a long time, you need to have an industry behind you, that has the capacity for a long time,” Brandtzaeg said.

Estonian Defense Minister Hanno Pevkur told the Chamber of Commerce that Russia is now spending an estimated 7% to 9% of its GDP on defense. Estonia is spending more than 3% of its GDP on defense, but needs to do more to refill its stockpiles, Pevkur said.

Polish Defense Minister Władysław Kosiniak-Kamysz, who also serves as a deputy prime minister, said his country will commit at least 4% of its GDP to defense this year.

The war in Ukraine “exposed major weaknesses of Poland, of region and of the world at large,” Kosiniak-Kamysz said.

Since the invasion, the U.S. has provided more than $53.6 billion in weapons and security assistance to Ukraine. This support, at a time when the U.S. also is sending weapons to Israel and Taiwan, has strained the U.S. stockpile. The rest of the NATO members and other international partners have provided about $50 billion altogether in weapons and security assistance, according to the Kiel Institute for the World Economy, an independent research organization based in Germany.

National security adviser Jake Sullivan told Tuesday’s gathering that for the first time ever, the NATO countries will each pledge to make plans to strengthen their own industrial defense capacity. He said this would help the alliance “prioritize production of the most vital defense equipment we would need in the event of a conflict.”

The 32 members have widely varying defense industry sizes and capabilities, so each country’s plan could vary widely, from partnering with industry to partnering with other countries.

___

Cook reported from Brussels.

Taking the Army’s lead on bring-your-own-device initiatives, the Space Force and Air Force are preparing to enroll service members in the same technology this summer.

Airmen and guardians will soon be able to take advantage of the Hypori Halo Workspace Anywhere program that grants access to government apps, email, NIPRNet, sensitive data, and CAC-enabled websites via personal devices, including a phone or tablet, whether they’re in the office or not.

A spokesperson for Hypori did not give an exact date for enrollment, but told C4ISRNET it’s still on track to begin this summer.

“The Air Force and Space Force are actually already using our platform,” said Jared Shepard, CEO and president of Hypori, at the TechNet Cyber conference presented by the Armed Forces Communications & Electronics Association International late last month in Baltimore. “Now, they’re going to scale.”

Capitalizing on the need for integrated communications and the pandemic-fueled remote work environment, the Army, including its Reserve and Guard components, already began transitioning service members toward Halo, which as of June 11 became the only way Army.mil users can access Army 365 services from a personal device. Shepard said at the conference that 50,000 Army enrollees are using the service since that BYOD effort began as a pilot in 2022. Hypori was also awarded a contract by the National Geospatial-Intelligence Agency on June 6 to give a third of its workforce remote access to secure networks.

“[BYOD] is a top priority for us, and it is a game changer because when our soldiers and airmen are not at the armory, they have to be connected in a secure way,” said Kenneth McNeill, chief information officer of the National Guard Bureau, in a statement February.

Reservists and part-time members of the services especially have limited access to base networks, so giving them the flexibility to complete work from wherever they are will be a boon to the organization, leaders have said.

“In our dynamic environment, the Department of the Air Force is committed to providing user-friendly enterprise solutions which empower the force to work securely in a wide range of operational contexts,” said Air Force Chief Information Officer Venice Goodwine in a statement in March.

The technology also eliminates the need to carry two devices while ensuring their government and personal data are kept separate to minimize liability. The idea of “no data at rest” means there is no risk of compromise if the enrolled devices are stolen or lost, and it ensures that personal information stored on that device is not accessible by the government.

The technology, which also vets users, is also compliant with White House orders that ban TikTok on government devices due to concerns that the social media platform’s Chinese-based parent company, ByteDance, would get access to sensitive data.

“Industry has a responsibility that if it’s doing work for the Department of Defense, that it protects that data,” Shepard said.

With planning cycles for fiscal year 2025 in full swing, federal agencies again face the annual uncertainties around future resources and funding. The current challenge is compounded with the dynamics of 2024 as an election year and a broad array of new mandates and regulations that carry long-term implications.

While pending budgetary and political outcomes are still many months from resolution, carefully planned and justified digital transformation offers a safe harbor for investment decisions being made today. By finding opportunities to improve government efficiency and productivity while reducing costs, agencies can both gain needed advancements and mitigate risks from current unknowns. The key is readiness to make constructive moves quickly to be well-positioned for momentum and success on Oct. 1.

Starting off strong in FY25

Agency IT leaders may be giving some serious thought as to what to do in the first 100 days of the new budget year. One area ripe with potential is removing systems duplication across agencies with adjacent purposes. Consider one real example: a department within Agency A identifies and certifies individual claimants as legitimate victims of a particular type of crime. Department personnel had traditionally used spreadsheets to collect, track and analyze claimant data to decision benefits entitlement. Automating data collection and tracking allowed on-demand access for the entire program team, but also enabled a dozen other Agency A components to more easily coordinate with Agency B, an integral part of the justice system. Agency A’s productivity skyrocketed, with twice as many victims served in the year after implementation vs. the year before, without increasing budget or staffing; time to victim certification was reduced by half. Their IT investment also eliminated the need for a duplicate system at Agency B, which was now willing to accept Agency A’s certification decision – a win-win for everyone.

Digital transformation can also make a significant improvement in mission outcomes where poor or inconsistent system quality is leading to customer dissatisfaction. The biggest impacts will be found when new technology enables customer self-service, reducing time to benefit and concurrently reducing government employees’ burden of performing lower-value work like filling in forms. Effective planning will also help replace cumbersome, expensive aging technologies to make room for more cost-effective options and processes. Routine, manually-intensive activities could be made significantly better and faster using advanced technologies like artificial intelligence. The resulting talent enablement will empower staff to prioritize activities that are more important, and also likely more fulfilling, supporting workforce retention.

An additional option is to focus on known appropriations priorities (such as infrastructure, the Chips Act or supply chain sustainability, in the recent past). Understanding where the government will be willing to spend can help direct the alignment of an IT organization’s own investment strategy.

Maximizing year-end ‘bonus’ dollars

Agencies that may find themselves with the luxury of obligated but unused FY24 funds can apply that money toward sound end-of-year digital modernization investments that will deliver a big impact. Again, look for where automation can address system duplication or independently recognized poor quality or poor customer satisfaction. This is also a good opportunity to modernize a system that has been either unreliable, compromised, or otherwise proven to have significant shortfalls.

The key is to pursue technology opportunities that will produce a measurable business return. That requires innovative thinking for IT-minded people who often consider new technology only as a means to reducing operations and maintenance (O&M) costs – i.e., moving to the cloud for cheaper data storage or using low code software to reduce development costs. While any savings is helpful, these kinds of reductions have minimal impact, since IT O&M typically represents only a small part of an organization’s total budget.

Instead, approaching IT investment as a means to benefit business productivity (i.e., repurposing labor to higher-value needs or increasing customer transaction capacity with the same number of staff) can produce dramatically higher returns. And, because budgeted O&M expenses will have already been met, any extra end-of-year funds can be applied toward development, modernization and enhancement (DM&E) initiatives that might otherwise not get done, amplifying the payback of this ‘bonus’ money.

If IT leaders need some guidance on this journey, the discipline of Technology Business Management offers a valuable framework and tools that provide a consistent way to measure technology investments so that they can be translated to business value.

Solving a perennial problem

While government fiscal cycles will always impose some annual uncertainty, one thing is certain – the ongoing requirement for digital transformation is sure to continue as long as technology evolves. By focusing investments on business outcomes, agency IT leaders can not only appropriately justify their budgets but also advance their agencies’ mission fulfillment – no matter which direction the political winds may blow.

Jeff Myers is Senior Director of Government Contracts at REI Systems.

(AP) — Donald Trump became the first former president to be convicted of felony crimes Thursday as a New York jury found him guilty of falsifying business records in a scheme to illegally influence the 2016 election through hush money payments to a porn actor who said the two had sex.

Jurors convicted Trump on all 34 counts after deliberating for 9.5 hours.

The verdict is a stunning legal reckoning for Trump and exposes him to potential prison time in the city where his manipulations of the tabloid press helped catapult him from a real estate tycoon to reality television star and ultimately president. As he seeks a return to the White House in this year’s election, the judgment presents voters with another test of their willingness to accept Trump’s boundary-breaking behavior.

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Trump is expected to quickly appeal the verdict and will face an awkward dynamic as he seeks to return to the campaign trail as a convicted felon. There are no campaign rallies on the calendar for now, though he’s expected to hold fundraisers next week. It will likely take several months for Judge Juan Merchan, who oversaw the case, to decide whether to sentence Trump to prison.

The falsifying business records charges carry up to four years behind bars, though prosecutors have not said whether they intend to seek imprisonment, and it is not clear whether the judge — who earlier in the trial warned of jail time for gag order violations — would impose that punishment even if asked. The conviction, and even imprisonment, will not bar Trump from continuing his pursuit of the White House.

Trump faces three other felony indictments, but the New York case may be the only one to reach a conclusion before the November election, adding to the significance of the outcome. Though the legal and historical implications of the verdict are readily apparent, the political consequences are less so given its potential to reinforce rather than reshape already-hardened opinions about Trump.

For another candidate in another time, a criminal conviction might doom a presidential run, but Trump’s political career has endured through two impeachments, allegations of sexual abuse, investigations into everything from potential ties to Russia to plotting to overturn an election, and personally salacious storylines including the emergence of a recording in which he boasted about grabbing women’s genitals.

In addition, the general allegations of the case have been known to voters for years and, while tawdry, are widely seen as less grievous than the allegations he faces in three other cases that charge him with subverting American democracy and mishandling national security secrets.

Fitness for office

Even so, the verdict is likely to give President Joe Biden and fellow Democrats space to sharpen arguments that Trump is unfit for office, even as it provides fodder for the presumptive Republican nominee to advance his unsupported claims that he is victimized by a criminal justice system he insists is politically motivated against him.

Trump maintained throughout the trial that he had done nothing wrong and that the case should never have been brought, railing against the proceedings from inside the courthouse — where he was joined by a parade of high-profile Republican allies — and racking up fines for violating a gag order with inflammatory out-of-court comments about witnesses.

The first criminal trial of a former American president always presented a unique test of the court system, not only because of Trump’s prominence but also because of his relentless verbal attacks on the foundation of the case and its participants. But the verdict from the 12-person jury marked a repudiation of Trump’s efforts to undermine confidence in the proceedings or to potentially impress the panel with a show of GOP support.

The trial involved charges that Trump falsified business records to cover up hush money payments to Stormy Daniels, the porn actor who said she had sex with the married Trump in 2006.

The $130,000 payment was made by Trump’s former lawyer and personal fixer Michael Cohen to buy Daniels’ silence during the final weeks of the 2016 race in what prosecutors allege was an effort to interfere in the election. When Cohen was reimbursed, the payments were recorded as legal expenses, which prosecutors said was an unlawful attempt to mask the true purpose of the transaction. Trump’s lawyers contend they were legitimate payments for legal services.

Trump has denied the sexual encounter, and his lawyers argued during the trial that his celebrity status, particularly during the 2016 campaign, made him a target for extortion. They’ve said hush money deals to bury negative stories about Trump were motivated by personal considerations such as the impact on his family and brand as a businessman, not political ones. They also sought to undermine the credibility of Cohen, the star prosecution witness who pleaded guilty in 2018 to federal charges related to the payments, as driven by personal animus toward Trump as well as fame and money.

The trial featured more than four weeks of occasionally riveting testimony that revisited an already well-documented chapter from Trump’s past, when his 2016 campaign was threatened by the disclosure of an “Access Hollywood” recording that captured him talking about grabbing women sexually without their permission and the prospect of other stories about Trump and sex surfacing that would be harmful to his candidacy.

Trump’s voice

Trump himself did not testify, but jurors heard his voice through a secret recording of a conversation with Cohen in which he and the lawyer discussed a $150,000 hush money deal involving a Playboy model, Karen McDougal, who has said she had an affair with Trump: “What do we got to pay for this? One-fifty?” Trump was heard saying on the recording made by Cohen.

Daniels herself testified, offering at times a graphic recounting of the sexual encounter she says they had in a hotel suite during a Lake Tahoe golf tournament. The former publisher of the National Enquirer, David Pecker, testified about how he worked to keep stories harmful to the Trump campaign from becoming public at all, including by having his company buy McDougal’s story.

Jurors also heard from Keith Davidson, the lawyer who negotiated the hush money payments on behalf of Daniels and McDougal.

He detailed the tense negotiations to get both women compensated for their silence but also faced an aggressive round of questioning from a Trump attorney who noted that Davidson had helped broker similar hush money deals in cases involving other prominent figures.

But the most pivotal witness, by far, was Cohen, who spent days on the stand and gave jurors an insider’s view of the hush money scheme and what he said was Trump’s detailed knowledge of it.

“Just take care of it,” he quoted Trump as saying at one point.

He offered jurors the most direct link between Trump and the heart of the charges, recounting a meeting in which they and the then-chief financial officer of Trump Organization described a plan to have Cohen reimbursed in monthly installments for legal services.

And he emotionally described his dramatic break with Trump in 2018, when he decided to cooperate with prosecutors after a decade-long career as the then-president’s personal fixer.

“To keep the loyalty and to do the things that he had asked me to do, I violated my moral compass, and I suffered the penalty, as has my family,” Cohen told the jury.

The outcome provides a degree of vindication for Manhattan District Attorney Alvin Bragg, who had characterized the case as being about election interference rather than hush money and defended it against criticism from legal experts who called it the weakest of the four prosecutions against Trump.

But it took on added importance not only because it proceeded to trial first but also because it could be the only one of the cases to reach a jury before the election.

The other three cases — local and federal charges in Atlanta and Washington that he conspired to undo the 2020 election, as well as a federal indictment in Florida charging him with illegally hoarding top-secret records — are bogged down by delays or appeals.

Tom Temin: That rule was again today on noncompete. So what are you thinking about? What are you watching here?

Stephanie Kostro: Tom, thanks for having me, and I appreciate that you’re talking both about the Chevron deference decision from the Supreme Court in conjunction with this FTC rule. As you mentioned, this final rule came out months ago and it was supposed to take effect today, Sept. 4. But there are several cases out there in the courts that contractors are watching very, very closely. One of them was there in the Northern District of Texas where the judge had originally issued a preliminary injunction, which just impacted the plaintiffs in the case. And then, more recently, here on Aug. 20, the judge applied that injunction nationwide, which means this FTC rule on noncompetes does not go into effect today. And in these cases, whether it’s in Texas or Pennsylvania or elsewhere, the judges have been looking at this Chevron deference overturned by the Supreme Court. And what that means is back in 1984, the Supreme Court said, “If the law or statute is ambiguous, then you can use the agency’s reasonable interpretation.’ They had some flexibility to interpret, how to apply, what kind of authority that they had. What the Supreme Court most recently decided here in June is that, ‘No, don’t defer to the agencies. You just have to go by the letter of the law.’ And that’s going to throw a lot of sand and a lot of works. The FTC seems to be just the first one out of the gate.

Tom Temin: And this rule against noncompetes doesn’t seem to be rooted in any statute, but rather, just because the FTC chair doesn’t like it.

Stephanie Kostro: That’s exactly right. What the plaintiffs have alleged and it sounds like the judges have agreed in some cases is that there is no specific authority for the FTC to issue this kind of rule to say that you’re banning noncompete clauses, except for the most senior executives in the company. From a contractor perspective, this is problematic, and PSC submitted comments back when this was a proposed rule. And one of the comments that we submitted, and that we take very, very seriously, is that when a contractor puts together a proposal for a federal agency, they have to identify key personnel and those key personnel shouldn’t change from the time you submit a proposal to the time you do the work. If you don’t have a noncompete clause that keeps them, those employees somewhat attached to the company, you could really, really throw sand in the company’s works, right? And they could get in trouble for not having those key personnel anymore. So that’s the kind of issue the contractors are watching. I would say many of them heaved a very big sigh of relief that the Texas court issued an injunction here, and then we’ll see how it develops. We’ll see how the FTC responds.

Tom Temin: Right. And you point to something important for contractors and that is the crucial person may not be a senior executive of the company. They could be the person who is the best programmer of communication protocols or something and they could be very valuable, even though they’re not senior.

Stephanie Kostro: Exactly. The officials who are exempt originally from this FTC final rule are people like the company president or CEO. It’s not the program manager who you have actually doing the work on a government contract. And so we saw this have an outsized potential impact on small businesses where they only have a few employees, right? And so if you don’t have a noncompete clause that somehow ties them to the company as a government contractor, you could get in a lot of hot water.

Tom Temin: We’re speaking with Stephanie Kostro. She’s executive vice president for policy at the Professional Services Council and on another rule which the State Department has issued as interim final, which I never quite understand that reasoning. But nevertheless, it is interim final, and this has to do with enabling trade cooperation among Australia, the UK, the United States. This AUKUS kind of idea to bolster our presence, I guess below China, if you will. This rule is something you’re looking at. Also, give us the particulars of what it does and how it affects contractors?

Stephanie Kostro: Thanks Tom. This interim final rule is near and dear to my heart as someone who’s tracked export controls, and specifically, more recently, the AUKUS Trilateral Security Partnership very closely. And so what the interim final rule does is it creates an exemption for Australia, UK, and in some cases, Canada, which has long had an exemption from ITAR, certain defense articles and defense service exports with Canada. It creates also a Excluded Technologies List, or they call it ETL, where those are ones that we do have to have additional scrutiny. And they’re not just pushing the easy button to have Australia and the UK have access to this, but there are authorized users. There’s a process for creating the opportunity for re-exports and retransfers, etc. Long story short Tom, this AUKUS Trilateral Security Partnership is a fantastic idea by the three countries, not only to be able to codevelop, co-sustain, operate together, be interoperable, etc. But it also is sending a message to potential adversaries like China that we are serious, and we are a coalition of the willing, if you will, but also really in lockstep with each other. And I think what we need to do here is look at this interim final rule, submit comments by mid-November, which is where the comments are due, and then really have some near term successes. And that’s where PSC and our contractors, who are members, want to see some near-term successes. To really hammer that message home to China.

Tom Temin: And by the way, what do we know about the Australian defense industry? I mean, people sometimes are surprised to realize that not just France and Germany and to some extent, Great Britain, but Norway, Sweden, Finland, a lot of these nations you wouldn’t think have really strong development capabilities for weapons platforms. You can see them at the army show. They have exhibits every year. What about Australia? Do they have what we would want to buy or do we just want to sell to them do you think?

Stephanie Kostro: It’s a combination, to be honest, Tom and what we’re looking really in the U.S.-Australia relationship is what can we do together because they do have some comparative advantages in certain areas of emerging technology, etc. And so as we look at what we can do together, co-development, co-sustainment, coproduction, etc., and really helping them to figure out how they can sustain those submarines that we’ll be helping them get in as part of this AUKUS partnership. That’s what we’re looking at. And to be honest, we’ve had government support from the Australians, UK and U.S. government officials to create what is called an Advanced Capabilities Industry Forum. PSC is one of four U.S.-based trade associations alongside our Australian trade associations and UK trade associations. We all get together regularly, and we talk about exactly this: How can we leverage each other? What are we going to buy from each other? So I think it’s a great question Tom. It’s still nascent at this stage.

Tom Temin: And you hinted at something really important and that is the sustainment capabilities. It’s great to give a nuclear submarine to a country or sell it to them, but really the challenge for those things is as much sustainment and safe operation over long term as building in the first place. And not too many nations have that capability.

Stephanie Kostro: That’s exactly right. And what you don’t want to do is have a submarine in Australia and have to bring it back all the way to the United States for maintenance, right? So you can’t really do that, and so creating that capability within Australia is really going to be critical.

Lawyers say the Justice Department’s intervention in a fraud case involving Georgia Tech could serve as a key warning to contractors about the risks of ignoring federal cybersecurity requirements.

In a landmark case for its “cyber civil fraud initiative,” DoJ last week filed suit against Georgia Tech, alleging that the university knowingly failed to meet contractual cybersecurity requirements. The agency joined a False Claims Act whistleblower lawsuit brought forward by current and former members of Georgia Tech’s cybersecurity team in 2022.

The complaint alleges Georgia Tech’s Astrolavos Lab neglected to implement several cybersecurity controls required as part of its contracts with the Defense Department.

DoJ alleges the lab specifically failed to implement a system security plan until at least February 2020. The complaint alleges the university didn’t have required antivirus software installed on the lab’s computers and devices until December 2021.

And the suit additionally alleges that in December 2020, Georgia Tech submitted a false cybersecurity assessment score to DoD, even after an employee warned the university that the score was misleading.

In a statement, a Georgia Tech spokeswoman said DoJ’s filing “misrepresents Georgia Tech’s culture of innovation and integrity.”

“Their complaint is entirely off base, and we will vigorously dispute it in court,” the spokeswoman said. “This case has nothing to do with confidential information or protected government secrets.”

While DoJ has announced several settlements under the cyber civil fraud initiative, legal experts said the Georgia Tech case appears to be the first in which DoJ has intervened. Bob Metzger, head of the Washington office for law firm Rogers Joseph O’Donnell, noted how much work went into the DoJ complaint.

“Perhaps this case, in its density, is intended to combat anyone who might hold the misapprehension that DoJ is not serious about using the False Claims Act as a means not only to punish companies that it decides to pursue, but also to warn any other companies of the importance that they thoroughly understand their obligations and thoroughly perform those cyber obligations without acts that are indifferent, misleading or fraudulent,” Metzger said.

The complaint focuses on Georgia Tech’s alleged failure to heed warnings from employees that the university was not meeting National Institute of Standards and Technology (NIST) cybersecurity controls required by DoD contracting rules.

DoJ’s lawsuit highlights the importance of “having a way for employees to raise concerns about compliance concerns around cybersecurity and then making sure you have mechanisms in place to address those,” Kate Seikaly, managing partner at law firm Reed Smith, said in an interview.

Previous False Claims Act settlements involving federal cyber requirements have focused on issues like breaches of patient data. But Seikaly noted that the Georgia Tech case is squarely focused on contractual cybersecurity requirements and their importance to national security.

“The Georgia Tech case, when I compare it to some of the settlements, strikes me as a very quintessential cybersecurity case,” Seikaly said.

Lawyers at Shepard Mullin Richter & Hampton wrote in a blog post that the Georgia Tech case is poised to “have significant implications for entities that contract with the federal government and outlines areas of focus for agencies when it comes to cybersecurity.”

“Contractors should focus on having adequate documentation to support security assessments and plans, understanding where data is housed or transmitted within information systems in order to properly scope assessments, and ensuring any reports to the government are accurate and complete in order to limit False Claims Act risk,” they wrote.

Meanwhile, the university spokeswoman claimed that Georgia Tech was told it would not be subject to “cybersecurity restrictions.”

“The government told Georgia Tech that it was conducting research that did not require cybersecurity restrictions, and the government itself publicized Georgia Tech’s groundbreaking research findings,” the Georgia Tech spokeswoman said in the university’s statement. “In fact, in this case, there was no breach of information, and no data leaked. Despite the misguided action by the Department of Justice, Georgia Tech remains committed to strong cybersecurity and continuing its collaborative relationship with the Department of Defense and other federal agencies.”

DoJ’s lawsuit does not point to any specific cyber breach or data loss due to Georgia Tech’s actions. But the complaint argues that more than $19 million in contracts awarded to Georgia Tech amount to false invoices due to the lack of cyber compliance.

While DoJ may be pushing the limits of its civil cyber fraud initiative by claiming damages without a breach or loss of data, Metzger noted that the complaint brings forward strong evidence that Georgia Tech failed to implement several specific cybersecurity requirements.

“Even supposing one questions the intervention complaint as ‘overkill,’ and even though large damages and penalties claimed are claimed in the absence of any alleged injury-in-fact, without doubt this action should be received as an important warning to all federal suppliers that contractual cybersecurity requirements can be ignored only at your peril,” Metzger said.

The intervention in the Georgia Tech case comes as DoD finalizes rules for the Cybersecurity Maturity Model Certification (CMMC) program. CMMC will require many contractors to receive a third-party audit of their cybersecurity compliance as a condition of contract award.

Metzger said while the timing of DoJ’s intervention in the case is “more coincidental than coordinated,” it could help bolster CMMC’s rollout.

“CMMC says, ‘We’re going to assess whether you do all 110 of these things and if you don’t, you’re not going to be eligible to get a contract,’” Metzger said. “And that’s pretty powerful stuff by itself. If you put an overlay of the Georgia Tech intervention complaint, it’s saying, ‘Not only are you exposed to loss of contract opportunity, you’re exposed to very sizable damages for any contract that you might get and perform if you misled the government as to your compliance.’”

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Which type of contractor does the best work for federal agencies? Small business? Large business? Women or veteran owned? Researcher James Hasik says it’s those owned by their employees, ESOPs, that on the whole perform the best.  He joins the Federal Drive with Tom Temin with more details.

Interview transcript: 

James Hasik 

I tapped into a think here to for little used database within the federal government that is nonetheless vast and I think, has enormous potential for telling federal procurement officials a great deal more about about about how their contract is performing, if they actually just looked at the data statistically. I looked at what’s called the CPARS, the Contractor Performance Assessment Reporting System reports. These are basically required on any federal contract of meaningful size, of a few hundred thousand dollars, both during and after completion of the contract. And this has been a requirement for all federal agencies since about 2003. So they’ve got the feds have millions, actually tens of millions, of records that you can go look at. Ah, if they let you see them. Okay, so this was the trick I wanted to take a look at, and I had some sponsorship, admittedly, to take a look at employee owned companies to see, hey, do they actually in the first question? Do they perform better? And if I could get at those federal reports about these numerical rankings for how their contracts work, I could learn a great deal, I thought. But I had to find a small group, or even a medium-sized group, any group of companies, that would actually provide me their CPARS reports. And that’s what I found at a trade association that represents 100% ESOP-owned firms that are involved in federal contracting.

Tom Temin

Were you able to get a sample large enough of all types of contractors, such that you could project what they said about the ESOPs?

James Hasik 

So that’s always a fair question. In this case, I had somewhat over 600 contracts to look at, which is a pretty good sample size. There were some what we call in statistics, fancy word, fixed effects of having to deal with the fact that I only actually had 20 contractors to look at, but I checked to see if individual, you know, firms, were having too much effect on my I checked statistically. There are methods to see if they were having too much effect on my overall sample, and that that turned out not to be true. The results were terrific, quite frankly, and they were significant at well past what statisticians call a 99% level, which means that when we’re looking at the results, there’s less than a 1% chance that it’s a result of randomness. It’s highly likely that that the nature of data is actually is creating that effect.

Tom Temin 

Tell us what you found, then, with respect to ESOPs versus other types of owners, right?

James Hasik 

Let’s get to the point the you know, if you, if you take a look at, and it was a little narrow. I had to look at just over from 2017 through 2023 to get a good sample firms that are involved with what we call non-systems, which basically means professional services, more or less professional services contracts with the federal government, which is a great deal with the ESOP companies do, right? You could look at four of the categories in which they get rated. Those were ones where I got some tractability, quality, schedule, cost, project management, stuff that people care about a lot, right? So if you you take a look at the ESOP companies, if you contract with one of them over that time period, for example, you had about a 79% chance that at the end of the contract you’d be giving them an excellent or a very good rating, okay? But all other companies not 79% it was 57% on schedule. You had a 73% chance of having a CPARS with an excellent or very good with an ESOP firm. 74. With all other firms, 54 and they’re just similar for cost and similar for management. In other words, there was 15-to-20% difference in the frequency of really good scores, and this was a highly statistically significant result.

Tom Temin 

We’re speaking with Researcher James Hasik. He’s an independent defense researcher and consultant. He also lectures at the University of Maryland. And I guess the obvious question then is, why? What is it about ESOPs that make them perform better on average, typically in this manner?

James Hasik

Right now, naturally you’d wonder about that, and unfortunately, the you know so the statistical correlation will not necessarily get at the underlying causation, right. But why? But there’s a lot of research before the research I did in other places that analyzed that with other methods, and it kind of gets down to all of it basically gets down to the employee ownership. It’s reasonable to presume, and it’s been repeatedly demonstrated in other research, that individuals care a good deal more about what they’re doing if they actually have an ownership stake in the enterprise when you’re going into work, it’s your business, not the boss’s business, that you’re actually taking care of when you’re taking care of your customer. And that seems to have over decades, we’ve seen this, and it’s not just in the United States. It’s not in the countries that have employee ownership programs. Quite a few of them do. It’s a pretty dramatic effect.

Tom Temin 

Just give us a little bit of a clue as to the inside operations of an ESOP. They still have a CEO. People still have bosses. They’re not like socialist collectives. Fair to say, they operate. Rate, like companies.

James Hasik 

They do actually, and so that actually change. It is not a commune, you know, it’s, it’s not a it’s not a collective, it’s not, it’s not a partnership either. It is sort of a unique ownership structure, the ESOP itself in the United States. And there’s even a board of directors, okay, that effectively are there to sort of govern the management. Ultimately, the boss is still in charge, but when the board of directors is responsible to the employees and the boss is responsible to the directors, while there’s a little bit of a game of telephone there, okay, there’s a little bit of detachment, and there’s still, what we call management, some agency problems, okay, nonetheless, the boss knows who his bosses are, okay? And it’s the people for whom he’s the boss. So there’s some circularity there in the management that helps keep things on track. And we’ve also noticed, other research not mine, has indicated that firms can be not always, but can be more conservative in their approach to growth. Okay, they might not do crazy things all the time, because they actually care very much about the longevity of that firm. And that was another finding we had, actually, was that ESOP firms are much more resistant to as a separate statistical analysis I did, much more resistant to consolidation. And this has been kind of known by people, you know, in the [Mergers and Acquisitions (M&A)] community much more resistant to consolidation in the defense industry that federal contracting. That is that else, sure.

Tom Temin 

There’s another effect too, I guess, is that the employees have a financial stake long term in the success of the company, because when they leave, they can often cash out.

James Hasik 

Oh, this is absolutely true. Again, not my research, but others. Over decades, it has indicated that, you know, employee owners, they wind up with much greater wealth, much higher income. They wind up generally longer job tenure. They have better better health care benefits. They even have more frequent access to good daycare, you know, sponsored by the company, than at other types of companies. It’s a huge difference. Frankly, I can understand why people actually enjoy working for and yeah, employee satisfaction tends to be a good deal higher than other firms as well.

Tom Temin 

Which strikes me as something very contemporary. As you know, federal agencies are on this so-called customer experience drive, and we’ve had company after company, agency after agency, say, Well, the best route to good customer experience is to start with good employee experience. This seems like a time tested manifestation of how to make that happen.

James Hasik 

I think that this is, this is some data, actually, that we can now hang on top of that, or hang from if you will, pardon me, that inference. It’s a very you know, when I was working with colleagues to check my results and to test my hypotheses, I got almost a universal view from both academics and practitioners alike that, ah, employee owners would possibly deliver better customer service because they care more? Yeah, that makes sense, and now we’ve actually got some data that indicate it as well.

Tom Temin 

So what should procurement shops do with this information? Because they still have to have, for the most part, fair and open competitions, but on the other hand, a lot of these companies are probably on government wide acquisition contract task order slots.

James Hasik 

Well, there is, there is a recent change to federal law that now allows you know the details are getting baked into the acquisition regulations, the specifics there’s recent change to federal law through you know, previous Authorization Act that indicate that at least within the Defense Department, it is now easier to provide a non-competed follow on contract to an employee owned company that you previously selected competitively, at least from some sort of competitive group, because the thought, then, is you can have a higher than likely outcome that would be positive, not just in the first contract, but also in the second contract. I mean, that would be an interesting thing. Also to look at that I haven’t did not look at is whether or not we can find an effect, looking at, do we have, do we have chain effects with, serially, serial hiring of the same employee owned firm, right? Vice the, you know, the same other owned firm, if you will. But the federal law has been changed, and it is now somewhat easier to retain an ESOP for follow on work.

Tom Temin

If you’re really smart and starting a company, start an ESOP, get some other transaction authority contracts, and then you’re greatly positioned for the follow on production. ,

James Hasik

That is absolutely a business strategy. I mean, it is. It is a way to make a lot of your friends and fellow employees very well off. It is not maybe a way to make the boss fabulously wealthy. But hey, you know you maybe you should go into venture capital, if that’s your ambition.

Copyright © 2024 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.