Government Complexity and the New Federal Healthcare Mandate

October 30th, 2010

As a follow up to my last post (“U.S. government operations can be incredibly complex”), I wanted to provide a chart of the new U.S. health care system.  Healthcare represents 17% of the U.S. economy.  Unfortunately, Obamacare was passed with no one having actually read the bill.

Obamacare is modeled on Romneycare, the system in place in Massachusetts since 2006.  In the several years since Romneycare has gone into effect, healthcare costs have soared far beyond the national average.  Massachusetts now has the highest health insurance costs, the highest medical costs, the fastest rising costs and the longest waits for doctors in the nation.

Complexity itself is a major problem in organizational function.  The chart below does not bode well for the nation as a whole.  A larger version of the chart can be accessed here.

How to Develop, Sell and Maintain Gear for the Military

September 15th, 2010

U.S. government operations can be incredibly complex.  The KISS philosophy (“Keep It Simple Stupid”) doesn’t always apply even when those involved want it to, due to numerous laws and regulations.

The chart below, a summary published by the Pentagon’s Defense Acquisitions University, covers the process for purchasing equipment.  It serves as a pictorial roadmap of key activities in the systems acquisition processes.  It is available here in greater detail (You can click on any box within the chart on that page to zoom in.).  The back of the chart is available here.  This is version 5.3 of the chart; version 5.4 is available, but is not interactive.

More On Becoming a Leader

August 30th, 2010

As a follow up to my previous post, Warren Bennis, in On Becoming a Leader, asks, “Where have all the leaders gone?” in a book published in 1989.  That’s been a common theme in our society more than in recent times.  In fact, the political vitriol of today is nothing compared to, say, Lincoln or Washington’s day.  Sometimes, we recognize leaders long after they have vanished from the scene.  Bennis chose a theme that has occurred for generations.

Bennis states that leaders share at least some of the following:

  • A guiding vision: “The leader has a clear idea of what he wants to do – professionally and personally – and the strength to persist in the face of setbacks, even failures.”
  • Passion: “[T]he underlying passion for the promises of life, combined with a very particular passion for a vocation, a profession, a course of action.”
  • Integrity: Integrity, according to Bennis, consists of self-knowledge, candor and maturity, which create trust.
  • Curiosity and Daring: The leader wonders about everything, takes risks, doesn’t worry about failure, embraces errors, knowing he will learn from them.

On Becoming a Leader

July 16th, 2010

Warren Bennis is considered a pioneer in the field of leadership studies.  His books Leaders:  Strategies for Taking Charge and On Becoming a Leader have been translated into more than 20 languages.

In the latter book, Bennis notes that the leaders he’s interviewed agree on two points.  First, leaders are made, not born, and they “are made more by themselves than by any external means.”  Second, no one sets out to be a leader, but merely to express himself, freely and fully.  He distinguishes the second point from being driven, as many are, and leading, which few do.

Bennis writes that just because someone has the right ingredients doesn’t mean he or she will become a leader.  Motivation, type of character and luck all play a part.  His book On Becoming a Leader is a story of process, with no beginning, middle or end.  In his interviews with individuals in business, the media and arts, and others, he finds this story has many recurring themes:  the need for both formal and informal education, the need to unlearn, the need for reflection on what is learned, the need to take risks and the need to become competent and master the task at hand.

Four Excellent Private Resources for Federal Government Information

March 29th, 2009

As a follow up to my recent post about federal government resources, I wanted to discuss four useful private resources for accessing federal government information.

GovTrack.us allows one to follow the status of federal legislation using RSS feeds or customized trackers.  One also can research members of Congress, bills and resolutions, roll call votes, the Congressional Record and Congressional committees.

OpenCongress summarizes bills in everyday language and monitors related news.

The libraries of the University of North Carolina at Chapel HIll provide a long list of links to federal websites.  These includes links to the executive, legislative and judicial branches and their respective department, administrations, agencies, commissions, courts, etc.; links to federal laws and regulations; and links to bureaus and agencies providing statistics.

Finally, Project Vote Smart offers biographical information on candidates running for office, as well as their voting records, issue positions, interest group ratings, public statements and campaign finances.

Force Majeure Provisions in Outsourcing Contracts

January 20th, 2009

Last week, I provided a general overview of some of the compelling reasons for outsourcing at E-Solutions Integrator.  Outsourcing contracts need to be carefully negotiated as problems can have a huge impact on the company that outsources.

Lawyers tend to use the same  boilerplate provisions despite the type of contract.  That can be a killer in an outsourcing transaction.  For example, one provision that should be carefully reviewed is the force majeure provision.

Force majeure literally means “greater force.”  Force majeure excuses a party from liability or from performing its obligation if some unforeseen event or circumstance beyond that party’s control prevents it from performing as required under the contract.  Thus, force majeure clauses commonly cover Acts of God, such as natural disasters, war, strikes or labor unrest, riots, and the failure of third parties (e.g., subcontractors, suppliers) to perform their obligations to the contracting party.

When negotiating an agreement to outsource on behalf of a client, one should read and limit the list of categories under which force majeure may be claimed.  Sometimes, the vendor’s contract provides includes an unnecessarily broad list.  Additionally, one should limit the duration of any enforced delay.  Consider how long a force majeure event lasts.  Forever?  If so, no one will provide the service.

A force majeure event for one of the vendor’s other customers should not be a force majeure event for your client.  Further, one should make a distinction between a supplier and a subcontractor, the latter typically being more easily and quickly replaced.  Depending on the type of contract, one should consider whether the failure of a supplier should be a force majeure event.

Force majeure events should not include power or equipment failures.  The vendor should have immediate backups when these events occur.  Similarly, software defects should not be force majeure events.

When a force majeure event occurs, it should not relieve the vendor from implementing its disaster recovery plan.  In fact, it must do so when such an event occurs.  The client should have its own business continuation plan as well.  The client should have insurance If the risk can’t be minimized in a particular area.

The Black Book of Outsourcing: How to Manage the Changes, Challenges, and Opportunities and The Outsourcing Handbook: How to Implement a Successful Outsourcing Process are good places to start when considering an outsourcing arrangement.

An Overview of Outsourcing

December 13th, 2008

When I was with Day, Berry & Howard, I negotiated large, complex outsourcing contracts for a number of Fortune 500 companies.  For example, in one instance, it was more efficient for a pharmaceutical company to outsource its help desk to an expert provider of such services rather than to manage and maintain the resources necessary to operate the help desk function in-house.  In another instance, a bank outsourced its data processing function to an expert provider of data processing services for lenders.

This expertise I gained came in handy at E-Solutions Integrator, Inc. (e-SI). because it helped us to grow much more rapidly on limited resources. In the early days of e-SI, when we landed a project, we needed to quickly add software developers.  However, we didn’t want to hire full-time employees for a variety of reasons.  This was because the Internet – and our business – was growing so rapidly that it was hard to predict our needs and we didn’t want to take on employees we might not need in a couple of months when a project ended.  So we used the leverage of contractors and ultimately, we engaged hundreds of individuals  – in addition to our own core employees.

Outsourcing worked for us.  We hired contract organizations that provided employees in India.  This provided the flexibility we needed and increased our margins, as software developers in India cost significantly less than in North America.  Yet, we did have concerns and were careful to manage them.  These concerns included quality control, security issues and time constraints from having our resources on the other wide of the planet.

Broadly defined, outsourcing is subcontracting a process to a third party.  That process could involve a product or a service or part of either.  It could also involve a specific business function or a non-core competency of the organization.  We outsourced overseas, which technically, is called “offshoring.”

The Outsourcing Center is an Internet portal for information on methods to outsource information technology.  The Outsourcing Institute is a professional organization dedicated to outsourcing.  For individuals in the U.S. the Contract Employees Handbook is focused on helping contract employees manage their careers.

As it was, at e-SI, we grew and survived the Internet downturn because of the flexibility of being able to outsource.  Ultimately, though, we opened our own offices in India as our business prospered and our projects and customer list expanded.

All About The Mortgage Process

November 6th, 2008

Getting a mortgage can be a confusing process.  There’s a lot of paperwork and there are many loan programs to choose from.  In this post, I’ll provide an overview of the mortgage process and what you should expect from a mortgage consultant.

Goals

The mortgage process is substantially similar whether you are purchasing or refinancing a property. In both cases, your mortgage consultant should start by asking questions and listening to your goals.  That way, he or she can help you achieve your goals.  However, too many mortgage consultants start by telling you what to do based upon what is most profitable to them.

Your consultant should ask a number of questions, starting with, “What type of property would you like to purchase or refinance?”

  • If you want to make a purchase, your consultant will want to know…
    • What is your price range?   If you don’t know, he or should should be able to help you determine the price range for which you qualify.
    • How much money would you like to invest, if any?  Despite the credit crunch, there are still loan options that do not require significant down payments.
    • How much money do you have for closing costs and prepaid expenses, if any?
    • Is the monthly payment amount important to you?  If so, how much would you be comfortable paying on your mortgage each month?
    • How long do you intend to own the property?
    • Are you working with a real estate broker or sales agent?  If not, the consultant should be able to refer you to someone in the area in which you wish to purchase.
  • If you want to refinance, your consultant will want to know…
    • What are you trying to achieve in pursuing a refinancing?
    • How long do you intend to own the property?
    • What is the estimated value of the property?

By listening to your goals, your mortgage consultant can help you determine the loan programs best suited to achieve them and to meet your needs.

Prequalification and Preapproval

Prequalification and preapproval only occur in the purchase process, so if you are refinancing, you can skip this step.  In some locales, prequalification is the norm and in others, home sellers and real estate brokers and agents will require you to be preapproved.  You do not need to have a specific property in mind to get either a prequalification or a preapproval.  However, in both cases, your personal mortgage consultant sahould assist you.

  • Prequalification – Prequalification is an estimate of your purchasing power.  In short, it is an estimate of the price you can afford to purchase a property.  Your mortgage consultant will order your credit report and ask questions about your employment and income.
  • Preapproval – Preapproval means that based on the information you provide, a lender issues a loan approval with conditions.  Your mortgage consultant will order your credit report and ask questions about your employment, income and assets.  Depending on your goals, he or she may provide you with a checklist of information required for a preapproval.  Once your mortgage consultant collects the information, he or she then submits the information to a lender (or, if he or she works for a lender, it is processed through the lender’s system).  The lender will issue a preapproval with conditions that will vary depending on the property and on you and your circumstances.

Getting preapproved is a more thorough process than prequalification, but one is not numberswiki.com

necessarily better than the other.  It depends upon what is the norm in the place where you want to purchase a property.

Application

Your mortgage consultant will put together and submit a loan application and related documents and submit them to a lender.

  • If you previously have been preapproved to purchase a property, you’ll most likely only have to update the information you provided when you applied for a preapproval.
  • If you are refinancing or previously were prequalified to purchase a property, your consultant will ask you questions about your employment, income and assets.  Depending on your goals, he or she may provide you with a checklist of information required to complete the loan application.  Your consultant will order your credit report if it has not previously been ordered.

Depending on the type of property, the loan program and your personal circumstances, you may have to provide documentation supporting your income, assets or employment. Your mortgage consultant will advise you of the requirements. He or she should guide you along every step of the process and answer all your questions.

Processing and Underwriting

When your loan application and related documents are complete, the mortgage broker or lender’s processing center begins work on your loan.  This can include verifying your income and assets, ordering an appraisal of the property’s value and ordering a title search from the lender’s attorney to make sure the property has clear title, among other items.  If you’re working with a mortgage broker, the broker’s processors will transmit the loan package to the lender, who then begins the underwriting process.

In underwriting, the lender will evaluate the information that has been collected about you and your property.   Lenders have thousands of loan programs for residential and commercial purchases, refinances, construction or investment.  Therefore, the underwriting criteria will vary for each loan and according to your personal circumstances.  However, some factors the lender will consider in its evaluation are the value of the property and whether it believes you can repay the loan in a timely manner.

Upon making a satisfactory underwriting determination, the lender will issue a formal loan approval, known as a mortgage commitment letter or conditional approval letter.  The letter will state the terms and conditions under which the lender is willing to make the loan.  The conditions will vary depending on the property and your personal circumstances.  A typical condition, though, is that the property must have an appropriate amount of insurance.

The processor typically will work with your mortgage consultant and the lender to satisfy the conditions set forth in the commitment letter.  Once the conditions are satisfied, the loan will be ready for closing.

The Closing

At the closing, you will sign various documents that allow your loan to be put in place.  These include a mortgage (evidencing the lender’s interest in your property), a promissory note or mortgage note (your promise to repay the loan according to specific terms and conditions) and other similar documents.  If you are purchasing a property, the seller will transfer title to it to you at the same time.

At the close of the transaction, the mortgage is recorded in the land records of the city or county (Where the recording occurs varies depending on the state in which the property is located.).

Post-Closing

Good service does not end with the close of your transaction.  If you have any questions or concerns in the future regarding your mortgage, a good mortgage consultant will be there to assist you.

What is the VIX?

October 29th, 2008

The VIX is a measure of market risk, sometimes called the fear index.  It is used to gauge investor sentiment – whether the broad stock market in the United States is bullish or bearish.  VIX actually stands for volatility index.  it is the ticker symbol for one of the volatility indexes created by the Chicago Board Options Exchange (the “CBOE”).  In fact, the VIX is the most widely used volatility index, and was introduced by Duke University Professor Dr. Robert Whalley in 1993.

Volatility is the fluctuation in the market price of an underlying security.  The VIX measures market expectations of near-term volatility conveyed by S&P500 near-term options prices.  Specfically, the VIX presently is calculated by measuring the volatility of out-of-the-money put and call options on S&P500 stocks for the two nearest expiration months.  It anticipates the volatility of the S&P500 over the next 30 days.  A VIX of 30 means, roughly, that over the next 30-day period, the S&P500 will move 30% on an annualized basis (i.e., more info

8.66% over the next 30 days).

Typically, the VIX is inversely related to market tops and bottoms.  For example, a high VIX implies pessimism and usually means a market is bottoming.  Low values imply optimism.  However, using the VIX solely to determine a market bottom or top doesn’t work because the method isn’t foolproof.  However, there’s no cap on how high the VIX can go.  Historically, a VIX reading of 30 has been a high number. but the VIX has traded over 70 in October, 2008.   Consequently, It should not be used in a vacuum, but is best used with other indicators in order to provide investment guidance.

On March 26, 2004, the CBOE began offering futures contracts on the VIX for trading.  On February 24, 2006, the CBE listed options on the VIX for trading.

VIX and More is a blog that follows the VIX.  Volatility Trading is a new book with a CD-ROM on trading the VIX.

Foreclosure and Two Ways to Avoid Going Through It

October 21st, 2008

Foreclosure means that a borrower can not make the required principal and/or interest payments on a loan secured by an interest in property.  Because of the borrower’s default, the lender has a right to terminate the borrower’s interest in the property.  The procedures vary from state to state, but the end result is that the lender either can take ownership of the property or sell it and the borrower’s equitable or statutory right to redeem the property is barred forever.

Approximately 95% of all residential mortgages in the United States are being paid on time.  That means that there are problems with about 5% of mortgage loans.  If mortgagors (e.g., the homeowners / borrowers) do not pay their mortgage loans, they will lose their homes.

Two other options exist for those facing foreclosure.  First, the borrower can offer a deed in lieu of foreclosure.  This means that instead of waiting for the foreclosure process to occur, the lender consents to accepting the borrower’s property interest immediately.  If the value of the property is below the remaining mortgage debt, the lender usually agrees to forgive the difference.

The second option is known as a “short sale.”  In this case, the borrower sells the property for less than the remaining mortgage debt.  The lender’s consent is required and, as in a deed in lieu situation, the lender usually agrees to forgive the excess owed on the debt.

In both options, the homeowners lose their homes.  Yet, this still can be preferable than going through foreclosure.  First, it takes less time, so the home owner who knows there is no way he can keep his home can shorten the process and the pain.  Second, the home owner also will no longer be legally obligated to pay the debt.  Third, if a foreclosure occurs and the home is later sold for less than the amount owed on the debt, some states allow a lender to pursue the unpaid amount.  However, with deed in lieu or a short sale, the lender almost always consents to forgive any remaining debt.

How a Company May Legally Make a Campaign Contribution to a Candidate for Federal Office

October 14th, 2008

The Federal Election Commission is charged with administering and enforcing the financing of federal elections.  The states individually govern financing law for non-federal, state elections.  For a local election, state law and local ordinances govern.

For a federal election, both profit and non-profit corporations, membership organizations, trade associations and labor unions are prohibited from contributing to or spending money on behalf of a candidate.  However, they may establish or contribute to a political action committee (“PAC”).

Two types of PACs exist, separate segregated funds (“SSFs”) and nonconnected committees.  SSFs, which the afore-mentioned types or organizations can form and administer, may only solicit contributions from individuals associated with the sponsoring organization.  They may absorb the costs of establishing and administering the PAC.  By contrast, nonconnected committees are financially independent and must pay for their expenses using the money they raise.  PACs must register with the Federal Election using FEC Form 1 and have reporting requirements regarding their receipts and disbursements.   Downloadable campaign guides for both types of PACs are available on the FEC website.

All political commitees, such as a PACs, that register and file reports with the FEC are considered 527 organizations.  They are organized under Section 527 of the U.S. Tax Code.  However, the concept of a 527 organization is broad and not all 527 organizations are required to file with the FEC.

The federal contribution campaign limits for 2007-08 are as follows:

Emergency Economic Stabilization Act of 2008

October 7th, 2008

Congress passed, and President Bush signed on October 3, the Emergency Economic Stabilization Act of 2008, H.R. 1424 (the “Act”).  The purposes of the Act are twofold:  It authorizes the Secretary of the Treasury (the “Secretary”) to restore stability and liquidity to the U.S. financial system and to do so in a manner that protects home values, college funds, retirement accounts and life savings; preserves home ownership and promotes jobs and economic growth; maximizes overall returns to American taxpayers; and provides public accountability to the exercise of that authority.

That’s a tall order.  The key provision involves a Troubled Asset Relief Program (“TARP”).  Under this program, the Secretary, through an office of Financial Security that is to be established, may purchase up to $700 billion in financial institution assets.  The assets must be residential or commercial mortgages or securities, obligations or other instruments relating to such mortgages originated on or before March 14, 2008 or other financial instruments that the Treasury determines necessary.  They may be purchased from all U.S. institutions of all sizes, including the licensed U.S. branches and agencies of foreign banks.  The Treasury can manage and sell the assets or enter into financial transactions regarding any purchased asset.

Some other provisions that sought to increase financial stability include an increase in FDIC deposit insurance from $100,000 per account to $250,000 per account until December 31, 2009 and an authorization for the SEC to suspend mark-to-market accounting.

The Act also included a number of unrelated provisions relating to tax relief, tax cut extensions, an R&D tax credit,  tax incentives, mental health and creating environmentally-friendly jobs, among others.

The House Majority Leader, Steny Hoyer, offers a section-by-section summary of the legislation here.

Federal Government Resources

September 30th, 2008

It can be very helpful at times to anticipate what the law will be, not what it is.  A change in the laws, rules or regulations affecting your industry can have a dramatic effect, for example, on how your company operates or the success of a transaction or even of your entire business.

Being a member of industry organizations will help keep your company abreast of potential changes in the law.  But given what’s happened in Washington the past week with a proposed bailout or other solution to address the credit crunch in the U.S., tracking legislation directly via the source can be more timely.

To that end, there are some excellent federal resources available online.  The Library of Congress offers Thomas, which provides easy access to federal legislative and other information.  I primarily have used Thomas to search for specific text in Bills under discussion and Committee Reports, but it includes links to access current activity in Congress, Public Laws since 1973, House and Senate roll call votes since 1989, Presidential nominations, and treaties entered into by the U.S. since 1990, among many other options.  Thomas also has links to other House, Senate, Executive and Judicial Branch resources.

Another useful federal resource is USA.gov, the official U.S. gateway to all government information.  There’s so much information that it can be overwhelming, but the U.S. government has done a good job of providing it on the Internet.  In my opinion, their websites are better organized and easier to use than those of many private companies.

Copyright Flowcharts and Checklists

September 23rd, 2008

I am a big fan of flow charts, process maps and checklists in streamlining and organizing work.  While the downside is that you might miss important detail, I believe that the gains usually outweigh the costs in time saved and energy expended.

I previously highlighted Erik Heels’ excellent drawing that explains copyright law in my post here.  IP law firm Bromberg & Sunstein has a useful flowchart for determining when U.S. copyrights in fixed works expire.  Federal copyright law states that a work is “fixed” when it is embodied in a tangible medium of expression.  If a work is not fixed, it is not eligible for federal copyright protection, although it may have protection under state law.

Cornell University has posted a chart, Copyright Term and the Public Domain in the United States, that details copyright duration in a different format.  The Copyright Advisory Network of the American Library Association offers a Digital Copyright Slider to determine if copyright protects a work that first was published in the United States.

The Copyright Management Center at Indiana University offers a Checklist For Fair Use.  U.S. copyright law basically defines “fair use” to mean that one can use a copyrighted work without infringing on the copyright.

Finally, on a more general level, Professor Lionel S. Sobel has produced a flowchart, a Copyright Navigator, a digital annotated concept map of the fundamentals of U.S. copyright law.