B2G Blog - Public Finance

A Wisconsin turnaround: Reality v. Rhetoric

Wed, 22 May 2013 09:24:00 -0400

Written by: Joanna Salini, Stephen Moss and Alexandra Howden

In his 2013 budget address, Wisconsin Governor Scott Walker outlined a clear and concise vision for the coming biennium: more prosperity, better performance and true independence. Based on Deltek’s cross-vertical analysis (below), it is clear that Walker’s vision is on display, though perhaps not as ideally as his budget address reads.

The economic condition in Wisconsin has improved exponentially since its $4 billion deficit and unemployment rate of nearly 8 percent in 2011. Now, America’s Dairyland has mounted a comeback toward a budget surplus, and unemployment is almost a point less than the national average. In these favorable conditions, the governor has focused his attention on maintaining and improving core government functions – most notably, corrections, K-12 education, and Medicaid.

From FY 2013 to FY 2014, the governor’s recommended budget increased by 8 percent, while the budget for corrections and education only increased by 0.2 percent and 3.4 percent, respectively. Medicaid outpaced overall budget growth with a 14 percent year-over-year increase.

In line with a focus on better performance, Governor Walker’s budgetary priority of investing in correctional infrastructure sounds promising, but the reality might be quite different. In efforts to reaffirm the state’s commitment to public safety, Walker highlighted plans to improve and expand the state’s criminal justice system, which includes ensuring that all resources are used effectively to provide oversight of correctional facilities and its operations, as well as ensuring that all IT systems are up to date with the latest enhancements. Current systems in place within the Department of Corrections are antiquated and could potentially compromise the safety of those imprisoned as well as those released on electronic monitoring devices.

The Department of Corrections (DOC) manages 18 correctional institutions, 16 correctional centers for adults, two holds facilities, and two correctional institutions for juveniles. Wisconsin’s prison population is expected to grow by the end of 2015 by roughly 3 percent; therefore, per-capital annual inmate costs are also expected to increase. Rise in prison populations are also coupled with an increase in the number of offenders subject to GPS monitoring through community corrections programs. The number of tracked offenders is expected to grow by approximately 37.5 percent by the end of 2015.

The DOC has been plagued with insufficient funding and FTE positions available to accommodate these projected increases; therefore, new commitments have been made to fund positions and provide solutions to upgrade department-wide integrated justice information systems. While Governor Walker projects departmental budget increases for IT purposes, the overall budget does not accurately reflect this projection. Instead, the budget for DOC remains relatively stagnant with a slight decrease (less than 1 percent) in departmental expenditures, which indicates the DOC is more focused on maintaining current operations.

Other notable justice/public safety and homeland security projects in the state of Wisconsin include a Department of Corrections livescan fingerprint system and driver’s license identification card issuance and production for the Department of Transportation.

Governor Walker started off the year making some lofty promises. In his 2013 budget address, he repeatedly expressed the importance of education in the upcoming fiscal year and the need to provide all children a better and more equal education, as well as more affordable options for higher education. Walker directly related education to the developing workforce: “Our educational institutions need to be focused on, and held accountable to, the education of the next generation’s workforce.”

The governor continued to stress the direct correlation between an educated youth and a successful workforce. With an “ever-changing labor market for manufacturing, technology, and health care” as the landscape, Walker insists investing in higher education today will result in a stronger workforce and economy tomorrow.

“Beyond traditional educational investments, we will make smart, targeted, performance-based investments in our University of Wisconsin System, the Wisconsin Technical College System and traditional K-12 education to ensure our citizens have the skills needed for the jobs of today and tomorrow,” he said in his budget address.

In the Budget in Brief, Governor Walker laid out a 17-step plan for transforming education, which includes providing funding for academic and career planning software, promoting a new educator effectiveness system, and parental input systems for lower-performing schools.

All of these initiatives seem well and good, correct? Well, as the old parable goes, actions speak louder than words. While Governor Walker did increase the K-12 education budget from FY 13, he decreased spending from the agency’s request. In the Wisconsin FY 2014-2015 Educational Communications Board budget, the General Purpose Revenue Fund agency request increased by $151,700 for FY 2014, yet the governor’s recommendation decreased by $105,900. This not only denies the agency request for an increase necessary for the projected year, but falls $257,600 below the requested amount. All the while, the federal revenue remains constant, so there is no aid to new projects.

Governor Walker did stick to his promises by increasing the program revenue budget. While an increase of $562,400 was requested, the governor increased it by $567,900. This will allow a little extra room to grow projects or even add a few new measures. Additionally, Walker added a performance-based funding incentive to encourage schools to perform better and potentially earn $30,000 a year.

Total spending for education increased by 3.4 percent, which leaves room for some of these lofty goals to be accomplished. It may not be feasible to accomplish all of them in the fiscal year, but it will lead Wisconsin in the direction of more prosperity.

Critical to attaining the goal of true independence is the governor’s plan for state-administered entitlements. This independence rests on his budgetary pronouncements regarding the optional expansion of Medicaid contained within the pages of the Affordable Care Act (ACA). Walker, like many governors across the United States, chose not to opt-in to the ACA Medicaid expansion requirements. That expansion to eligibility for individuals at 138 percent of the federal-poverty level would affect the state’s bottom line to varying degrees in the near term.

According to sources including the Legislative Fiscal Bureau, expansion of Medicaid eligibility would actually save the state $65 million; however, the Kaiser Family Foundation fixes the bill at $725 million over the next nine years. With such varying information and the logically inconsistent position that adding millions to an entitlement program would save the state money, Walker opted for a middle-ground position.

Citing the unreliability of a federal government saddled with a $16.5 trillion debt that grows daily, and the virtue of an independent and free populace unencumbered by dependence on government, the governor opted for a slight expansion of Medicaid to include all impoverished Wisconsinites by lifting the enrollment cap for childless adults. This plan would make 82,000 more individuals eligible. However, the governor also places emphasis on the health insurance exchange as critical to reducing the number of uninsured individuals in the state. With the exchange, 87,000 people currently on Medicaid would be eligible for subsidized insurance through the exchange or a private plan. The net effect would be a reduction of the total number of Medicaid enrollees by 5,000, with a simultaneous reduction in the number of insured by 224,580.

As with all political statements, the Medicaid priorities espoused by Governor Walker must be examined within the context of the actual numbers proposed in his budget draft. As part of Deltek’s analysis of the Wisconsin budget, Medicaid spending was collected from FY 2006 through FY 2015. That data shows a 72 percent increase in proposed Medicaid spending – an increase from the FY 2011-2013 biennium of 14 percent per year. As with many other states, Medicaid spending is a main driver in funding growth and far outpaces the 8 percent increase from the FY 11-12 biennium to the FY 14-15 biennium.

Also on par with other states, Medicaid accounts for nearly a fourth of the entire state budget. For the past two biennia, that number (approximately 21 percent) has been holding steady, but is expected to rise to 22 percent of the total budget through FY 13-15. The governor’s decision to reduce the overall enrollment in Medicaid while covering more citizens through the use of insurance exchanges seems to be a responsible budgetary move that will allow the state more freedom and flexibility. For the purposes of analysis, it is too early to evaluate the governor’s cost-saving claims.

The economic position of Wisconsin has undoubtedly improved over the last few years; however, it has been described by some as still treading water. The budget proposal submitted by Governor Walker for the 2014-15 biennium reflects this reality, which bodes well for vendors conducting future business with the state.

Wisconsin has outlined an extensive list of opportunities that will most likely come to fruition in the coming years. The preceding vertical analysis of the corrections, education and health care markets provides an excellent in-depth backdrop by which vendors may position themselves toward achieving the Walker administration’s goals: more prosperity, better performance and true independence.

Vendor Takeaways:

There is a focus on corrections, education, and Medicaid in the upcoming fiscal year.
Detailed projects (as outlined above) have been forecasted for the year.
The governor's increase in budget will allow for bountiful procurement in the state.

Not a Deltek subscriber? Click here to learn more about Deltek’s GovWin IQ database and take advantage of a free trial. Also, click here for an in-depth analysis on State Correction Market Trends for 2013.

Hawaii's FY 2013-2015 Biennium Budget

Thu, 02 May 2013 09:29:00 -0400

In his FY 2013-2015 Executive Biennium Budget, Hawaii Governor Neil Abercrombie highlighted the daunting challenges that faced his administration during the last biennium, including a $1.3 billion potential budget shortfall that threatened deep programmatic cuts to department operations statewide. The governor utilized a fiscal strategy to only address pressing needs while investing in the state’s future, with goals to improve government efficiency and transparency. For this biennium, Hawaii’s gross domestic product (GDP) is expected to increase by 2.4 percent in 2013, while unemployment rates continue to decrease.

The new biennium budget (seen above in Figure 1) has several areas of investment, including:

Early learning and early childhood health
Education IT and digital curriculums
Increased resources for Hawaii’s aging population
Environmental sustainability and protection

The biggest gains by department from FY 2013-2014 include the Department of Human Services ($309 million), Department of Budget and Finance ($251 million), and Department of Transportation ($52 million). The Department of Hawaiian Home Lands saw a budget decrease of $140 million. Investments for FY 2014-2015 include $151 million for the Department of Human Services and $91 million for the Department of Budget and Finance.

Although the numbers in Figure 2 look as if Hawaii has invested millions in information technology, the numbers actually represent more transparency into Hawaii’s IT reporting. Deltek was able to gather more data on the total value of IT projects in the state for the biennium budget. Health IT was a major investment, including $2 million for its health information exchange (HIE), $45 million for Medicaid IT initiatives, and $15 million for an electronic medical record (EMR) system. The Department of Taxation is also investing nearly $32 million into its tax system modernization project for FY 2013-2015.

Despite tough times that followed the economic recession, Hawaii has laid the groundwork for a stable foundation and is continuing to increase both its GDP and IT spending. Vendors working in the education, health, and environmental space should check out Deltek’s analysis on Hawaii’s budget here, and brush up on the Aloha State in our state profile application. For a free trial, please click here.

House passes FY 2014 Budget Resolution; Senate Kicks Off Its Own

Thu, 14 Mar 2013 11:42:00 -0400

On March 13, the House Budget Committee passed the FY 2014 budget blueprint from Chairman Paul Ryan (R-Wis.). The structure of the plan drives a $7 billion surplus by 2023. According to The Hill, the plan is based largely on $600 billion in new tax revenue established in the American Taxpayer Relief Act (the legislative hook that kept the government from going over the “fiscal cliff” in January), as well as $716 billion in Medicare cuts originally established in the Affordable Care Act (“Obamacare”). Although Ryan opposed those cuts during his stint as Vice Presidential candidate last year, they figure prominently into his approach to deficit reduction.

Meanwhile, the Senate Budget Committee will begin its markup sessions on its own budget plan on March 14. What is interesting to note is that, while the House plan is mum on the subject of sequestration, the Senate version very clearly states an intention to “Fully replace the harmful cuts from sequestration with smart, balanced, and responsible deficit reduction.”

In the grand scheme of things (and on paper), the House and Senate versions don’t vary significantly from each other. The Senate proposal for Discretionary Budget Authority is $80 billion more than the House version, but the difference shrinks down to $16 billion by 2023. While $80 billion is a whole lot of money to me, it’s a rounding error when it comes to federal spending.

Source: Summary tables, “The Path to Prosperity: A Responsible, Balanced Budget” (House), “Foundation for Growth” (Senate)

While the topline numbers suggest a chance at compromise, the two diverge significantly on the path to those numbers. As noted earlier, the Senate version replaces sequestration which won’t be an easy sell. And Ryan’s version basically relies on the elimination of Obamacare (but also relies on the additional revenue that Obamacare would bring in).

Source: Summary tables, “The Path to Prosperity: A Responsible, Balanced Budget” (House

That’s not going to go over well in the Senate, the House will not be a fan of repealing sequestration, so ultimately both versions are likely dead in the water.

Do big contracts mean big failure?

Thu, 14 Mar 2013 09:52:00 -0400

Procurements and contracts don’t always go as planned. While this is not exclusive to any one type of contract or industry, it is often the very large contracts that have complications, to put it mildly. Mega statewide or citywide contracts have lots of requirements that often apply to several systems. These sizeable projects include revamping radio infrastructure, building out 911, upgrading Medicaid management information systems (MMIS), and major financial system overhauls, all of which require significant time, money and sometimes a bit luck.

Large projects often require longer-than-normal procurement processes due to several factors. First, large projects require lengthy solicitations (request for proposals), which in turn require more time for vendors to develop their response. Second, the comprehensive bids submitted take longer for agencies to review and determine a successful bidder. Additionally, the approval process can often be an uphill climb. Oversized projects carry significant price tags and therefore the buy in from governors, mayors or commissioners isn’t always a quick process. Add all of these pieces together and you have the makings for a drawn-out procurement.

There are a number of projects we can look to in various industries to see how these types of initiatives are often unsuccessful. In the health care industry, the Medicaid management information system procurement field has been plagued with an innovation-squashing procurement cycle – they are typically over budget, deadlines are missed, and systems are outdated by the time they are installed. A study in 2012 found that three out of seven states undergoing an MMIS procurement resulted in canceled projects. Five out of 10 states in the MMIS design, development, and implementation phase experienced significant delays. Some notable MMIS delays include the state of New Hampshire, which recently convened a budget conference committee in the legislature due to concerns with the length of its MMIS implementation. The state’s $61 million MMIS contract with Xerox was the largest computer contract in state history in 2005, and the state now estimates the system will be running by April 1, 2013, which is five years behind schedule, prompting a $15.8 million contract extension.

West Virginia awarded a $248 million contract to Molina, which is now under protest after the original RFP was twice canceled. South Dakota canceled its MMIS contract with CNSI due to cost overruns and being sued by the vendor. The state has now reached a settlement and is in the process of renegotiating a contract for a new MMIS.

Although states recognize that changes need to be made to the costly, burdensome MMIS procurement process (with its few titans), the right answer doesn’t seem to have been discovered yet. With a new set of individuals gearing up to enroll in Medicaid in the coming years, can states afford new systems burdened with the same problems?

The public safety industry is also not immune to procurement failings. The state of New York began planning its statewide wireless network in 2000. After a draft proposal in 2001, it issued an RFP in June 2002 and eventually awarded a contract to M/A-COM two years later in April 2004. The project was expected to cost just less than $2 billion over the 20-year contract. However, the project immediately began to experience delays, and after several years, many failed system tests and the inability of M/A-COM to fix the issues, the state canceled the contract in 2009. The failed and subsequently canceled contract had a major impact on M/A-COM, as it would any company losing a $2 billion contract during a tough economy. Soon after this project hit the fan, Harris Corporation purchased Tyco Electronics Wireless Systems (M/A-COM). It’s unclear whether this sale was a direct result of the failed New York contract, but certainly makes for a curious coincidence.

The state of California has had several run-ins with large procurements that have been delayed or canceled. The Los Angeles Regional Interoperable Communications System (LA-RICS) has been delayed due to a large procurement that was canceled after being deemed illegal. More specifically, the LA-RICS contract was illegal because of its large scope of services. After months of reviews and the eventual cancelation, the project was broken up into various pieces, each procured separately, with a combined estimated price tag of $600 million. The California Administrative Office of the Courts also had major delays leading to the cancellation of its half-billion dollar court case management system (CCMS), which was riddled with issues. The state is now moving forward with a new system.

Finally, on the financial side of the state and local market, New York City will forever be remembered for CityTime. The city sought to upgrade its payroll system; however, the selected vendor, Science Applications International Corporation (SAIC), has since been removed from the project and is required to pay the city $500 million after a judge ruled in the city’s favor. The project included SAIC employees accepting bribes and stolen or completely wasted money as part of the project implementation. Issues with the system led to numerous scams and scandals, all of which caused the project to go from a $63 million project to a more than $650 million project. The irony is that the upgraded system was supposed to prevent employees from cheating on their time cheats; instead, the city was cheated out of millions of dollars.

Since this disaster, SAIC split in two – the government services business separated from the division that provides technology for national security (now called Leidos), health care and engineering. Is it possible that this large scandal, like the radio project involving M/A-COM, led to the SAIC division? While we may never know the answer, Marjorie Censer, reporter for the Capital Business section of the Washington Post, alluded to the CityTime scandal as well as declining revenues causing the split.

Analyst’s Take

Large contracts that follow large procurements are often doomed from the start. While it is not unheard of for massive projects to move forward without a hitch, they are huge undertakings that often lead to issues down the road. When agencies solicit bids for these projects, vendors must ensure that they are prepared for the extensive planning and negotiations that will occur prior to implementation. Agencies have become aware of the inherent issues that may present themselves with these types of projects, and like Los Angeles learned, splitting up a project into smaller pieces may be the way to go.

It would be easy to advise hiring a consultant to assist with planning and procurement processes, but many of the projects mentioned did in fact utilize a consultant. Agencies that commit to large-scale, high-cost projects must establish working committees and regular meetings throughout in order to safeguard themselves, the project, and the tax and grant dollars that make it happen. As part of this, assigning a clear-cut chain of command can help minimize problems and ensure everyone is properly designated to specific tasks if issues arise. When every stakeholder is part of the process from the start, there is less likely to be problems with a new agency added to the mix.

Additionally, when working in the health care and general government IT sphere, a solid quality assurance and independent verification and validation team can clearly define project goals and establish target dates for those goals. Vendors and the government are then held accountable throughout the implementation process.

Not a Deltek subscriber? Click here to learn more about Deltek’s GovWin IQ database and take advantage of a free trial.

Sunshine Week: Transparency of Texas, FY 2012 IT expenditures

Mon, 11 Mar 2013 10:20:00 -0400

Sunshine Week, which coincides with National Freedom of Information Day (March 16), is a national initiative organized by the American Society of News Editors to highlight the importance of open government to the public. In recognition of Sunshine Week, Deltek’s analysts will be taking transparency and contract data collected from state transparency websites and our own GovWin IQ database to highlight IT expenditure trends and procurement analysis in the state and local market.

Today, we take a look at total IT spending for the state of Texas for FY 2012, which was gathered from a top-ranked Texas transparency website. The cumulative spending data collected represents a variety of purchasing vehicles, including purchase orders (PO), statements of work (SOW), procurement cards, and statewide and agency-specific contracts used to purchase IT commodities and services.

Texas spent $132 billion in FY 2012; at $693 million, IT spending only made up .524 percent of that total. In FY 2012, Texas spent 89.2 percent of its total IT expenditure on services over commodities, most of which was spent by the same 10 to 12 state agencies, commissions, and institutions. Health and human services, higher education, justice and public safety, and transportation verticals represented roughly 71 percent of all commodities purchased. Health and human services, justice and public safety, social services, and public finance verticals encompassed approximately 62 percent of all services spending.

Each IT line item (software, hardware, maintenance services, etc.) was grouped under one the following categories: IT and telecom commodities; telecommunications services; IT professional services; and IT and telecom repair and maintenance services.

Analyst’s Take

With such a concentrated spending pattern, qualified IT vendors looking to do business with the state of Texas are best focusing their efforts on agencies and departments within these top verticals. IT vendors looking to get a share of that $693 million should know more about the state’s procurement process. For instance, Texas has bottle-necked most of its standard IT procurement needs through statewide cooperative contracts, which are handled by the Department of Information Resources (DIR). Most statewide contracts come up for renewal every four to five years, and Deltek’s state and local team monitors these contracts as well as any other more specialized IT procurements not supported by DIR.

A few statewide contracts currently being monitored in Deltek’s GovWin IQ database include:

Deltek will publish a full length report,“State Government Transparency Report 2013,” providing detailed itemized IT expenditures for the state of Texas and many other states in the coming weeks.

GovWin IQ subscribers can learn more about these statewide contracts in the provided links. Non-subscribers can gain access with a GovWin IQ free trial.

GAO?s Federal Financial Audit Calls Out Ongoing Information Security Deficiencies

Thu, 07 Feb 2013 16:46:00 -0400

If there is any federal topic that competes for prominence with that of the budget and financial policy then it must be the topic of information security, or cybersecurity as it has become widely called. Even a recent Government Accountability Office (GAO) audit of the government’s latest financial statements highlights some significant issues with federal information security practices. GAO’s findings in this area reveal both risk areas as well as weaknesses where agencies need to improve.

Each year, the U.S. Secretary of the Treasury, in coordination with the Director of the Office of Management and Budget, is required to submit to the President and Congress audited financial statements for the U.S. government. The GAO is required to audit these statements and their latest report not only highlights issues with the government’s finances and financial reporting but also notes some significant deficiencies with its information security practices.

Information Security Risk Areas

GAO has consistently reported information security as a high-risk area across government since 1997. They acknowledge that progress has been made in enhancing performance measures and reporting processes necessary for monitoring and assessing the effectiveness of agencies’ information security programs (e.g. FISMA). GAO also acknowledged progress in moving the government toward using trusted internet connections, increasing continuous monitoring capabilities, and improving authentication through use of smart cards credentials. However, “serious and widespread information security control deficiencies” continue to place federal information, systems and assets at risk, including:

Inadvertent or deliberate misuse of federal assets,
Unauthorized modification or destruction of financial information,
Inappropriate disclosure of sensitive information, and
Disruption of critical operations.

Information Security Deficiencies

The specific information security control deficiencies that GAO identified are related to the following areas:

Security management,
Access to computer resources (data, equipment, and facilities),
Changes to information system resources,
Segregation of incompatible duties, and
Contingency planning.

While, clearly, these kinds of deficiencies increase the risk to federal financial management systems and the data stored on and transmitted by them, the reason GAO cites for these deficiencies is what is most concerning. According to GAO, “a primary reason for these deficiencies is that federal entities generally have not yet fully institutionalized comprehensive security management programs, which are critical to identifying information security control deficiencies, resolving information security problems, and managing information security risks on an ongoing basis” (emphasis added).

Implications

Much has been said about the national security concerns over the information security preparedness of public- and private-sector critical infrastructure, including energy, financial, transportation, health, communications, and others. While some legislative and policy initiatives seek to increase federal regulatory authority over these areas it seems that such moves may be premature until federal agencies can get their own information security house in order. As GAO recognized, until agencies identify and resolve these and other information security deficiencies and more effectively manage information security risks going forward, federal data and systems will remain at risk of disruption, destruction and unauthorized disclosure. This ongoing challenge is why, even in an atmosphere of budget scrutiny where no area or program seems safe from the budget axe, information security remains a priority and will likely seen increased resource allocation – in internal staffing, outside contractor support, and technological tools and infrastructure.

From Fiscal Cliff to Fiscal Roller Coaster

Fri, 04 Jan 2013 11:54:00 -0400

After a protracted pre- and post-election battle, President Obama and Congress have reached an agreement to avoid what is probably the most telegraphed punch in history: the “fiscal cliff.” But before we get too excited (whether it be because they were able to accomplish much of anything in this session of Congress or because we could possibly be retiring the annoyingly overused phrase “fiscal cliff), let’s take stock of what’s actually happened and what it means for federal contractors.

The most significant outcome of this legislation (aka the American Taxpayer Relief Act of 2012), for citizens is that there will be tax increases for households with taxable income over $450,000, tax stability through extended tax relief programs for everyone else, and an extension of unemployment benefits. The most significant outcome for government contractors: you have to wait another 2 months to know if and how sequestration will occur. While most are glad to see the players reach any kind of agreement, the general consensus is that this bill avoids the cliff but puts the government on a roller coaster. February and March will see agencies heading up yet another steep hill as Congress and the Administration work through yet another debt ceiling debate, sequestration rears its head again on March 1, and the current FY 2013 Continuing Resolution expires on March 27. March 27 is also the date that the spending reductions must be evaluated and implemented unless other legislation is enacted.

The American Taxpayer Relief Act of 2012 includes two sections under the sequestration provision:

1. Postpones the sequester until March 1 and adjusts the discretionary caps down about $4B for FY 2013 at the time that the President triggers sequestration. The original post-sequestration discretionary caps were $546B for security agencies, and $501 for non-security. This new bill adjusts those to $544B and $499B respectively. For FY 2014, caps are reduced from $556B and $510B to $552B and $506B, a total of $8B.

Note that “security” and “non-security” agency categories were defined differently for the original caps; security agencies included DoD, DHS, VA, State and Other International Programs and the National Nuclear Security Administration (NNSA). After the failure to identify deficit reductions, the definition of “security” agencies was revised to budget function 50- National Defense.

2. Allows the transfer of retirement funds to Roth IRAs without distribution.

Considering the $109B in cuts that would happen each year for the 9 months of FY 2013 that would be impacted, that equates to approximately $12B per month. By reducing discretionary caps and increasing tax revenue generated from retirement transfers, the government delay effectively pays for the two-month delay by this combination of cuts and revenue increases.

Impact on Contract Spending

Table 1. below provides a quick perspective on the potential impact of this sequestration delay on the contracting community.

Table 1

It’s clear that this bill is not aimed at addressing sequestration, but as we’ve been speculating for awhile now, “sequestration-like” cuts will happen whether it’s through formal sequestration or more targeted cuts through the appropriations process. By kicking the can down the road a bit, sequestration coincides with the expiration of the current CR, which is an opportune time to make adjustments.

As agencies wait an additional two months for the ax to fall, they will continue to procure, albeit not at the same level as needed or previously planned in some cases. Sequestration does not impact dollars that are already obligated, so agencies continue day-to-day operations and obligate dollars to effectively “lock in” what they can while they can. A December 20 memo from Defense Secretary Leon Panetta asserted that while they are planning for sequestration, the immediate impact would be minimal. For contractors, this could mean that effects of budget cuts wouldn’t necessarily be deeply felt until summer (though most contractors have already started to see the impact of the uncertainty surrounding sequestration).

In the meantime, contractors should be hustling to determine the worst case scenario for their affected programs and talking to agency POCs to learn:

Which budget accounts fund their contracts.
Potential percentage cuts to the relevant budget accounts.
The priority placed on the contract and/or contract options and modifications to learn if they will likely be funded even under sequestration.
The possibility of moving options, modifications, task orders, etc. to be funded in the second quarter of FY 2013 to avoid the sequestration ax.

While it is a relief that some of the larger issues have been addressed with this legislation, it does not change the height of the cliff for contractors; it simply buys them more time to find a better fitting parachute.

American Education Week: K-12 IT market overview, 2012

Fri, 16 Nov 2012 13:01:00 -0400

Vendors considering moving into the K-12 IT market should know that this market has its own needs, demands, budget cycles, and procurement approach, all separate from the general state and local market. With 13,600 K-12 school districts in the U.S., including private and charter schools, there is no shortage of customers. K-12 public schools spend, on average, $580 billion a year, $70 billion of which is spent on non-instruction expenditures. The task at hand is finding your footing in the market and finding customers who are seeking your services and/or goods. Before that step, vendors should learn the terrain to determine if demand for their goods and/or services is congruent in the K-12 market, and worth the venture now or in the future.

Market drivers

The Obama administration has placed strong emphasis on incentivizing education reform to raise student and teacher performance, with the hopes to meet future workforce needs of a globalized U.S. economy. Federal funding such as Race to the Top and statewide longitudinal data system grants help fuel many states’ focus on education performance initiatives. Due in part to increased federal funding, many governors’ priorities have piggybacked on federal initiatives to improve classroom performance.

Another driver stems from the apparent collapse of No Child Left Behind (NCLB), as states are being allowed to pursue a wide range of uncoordinated reform strategies. Still, in the wake of NCLB, nationally accepted and verifiable criteria of best practices and cost-savings models are still a long way off. State-level response has come in the form of the National Governors’ Association Common Core State Standards, which is a set of curriculum standards to ensure college and career-ready students. This is currently the closest thing to a nationwide education standard.

Nationwide school enrollment is at 54 million, and student population is expected to increase by nearly three million more students by 2019 (CAGR: 0.7 percent). More than half of that total (1.7 million) will come during the next five years. Spending in public schools continues to increase year over year, and is averaging around $12,700 per pupil. The need for public school teachers is also expected to rise. With roughly three million classroom teachers today, approximately 225,000 more teachers will be in classrooms within five years (CAGR: 1.4 percent).

Landscape

Contracted goods and services in the K-12 market are expected to enjoy a compound annual growth rate (CAGR) of 2.9 percent over the next five years, down from 3.1 percent in the 2010-2015 forecast period. This decrease is due primarily to the fact that by the end of 2010, most IT projects funded by federal stimulus dollars had worked their way through the system.

Lifecycle PC consumption is a continual concern for many school districts. In the average school district, most PCs are more than five years old, with many being closer to 10 years old. Unfortunately, few districts can afford to adhere to a five-year PC lifecycle turnover, even in the best of times. Procuring maintenance and support services to keep computer equipment operational is the next best thing. Most school districts participate in statewide or regional cooperative contracts to satisfy general IT maintenance needs.

Emerging classroom and administrative technologies are naturally seeing an increase in demand, while much of market capacity remains primed for growth. The low market capacity for classroom technologies, ranging from 4 to 16 percent, has more to do with specific technology availability and usage rates during classroom instruction. As demand increases, so will opportunities for interactive whiteboards, classroom response systems, handheld/mobile devices, computer/Web-based assessments software and classroom learning software. Because many of these mentioned technologies are viewed as “extras” rather than essentials to increasing student performance, there is a lot of head room for potential demand in the long term. Once K-12 budgets get back on track, more funds will free up for these emerging classroom technologies.

The market capacity for administrative technologies is relatively open, with an average range of 65 to 75 percent still available. This is where federal and state policies, mandates, and grants really drive the growth of technologies, including student information systems, business intelligence/analytics solutions, assessment management systems, and special education management systems. These technologies are quickly becoming the go-to tools for increased efficiency and performance on both the state and local K-12 education levels.

For the full report on the Primary/Secondary Education IT Market, 2011-2015, please go here.

Remember to stay connected to Deltek’s General Government Services team via Twitter @GovWin_GenGov for more updates on trends, analysis and opportunities in the public education IT market.

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This Week in Deltek's American Education Week Blog Series:

Monday, November 12th - American Education Week: Top education opportunities and trends, 2012

Tuesday, November 13th - American Education Week: K-12 virtual learning procurement, 2012

Wednesday, November 14th - American Education Week: State and local education data systems, 2012

Thursday, November 15th - American Education Week: Race to the Top District grant a new local level market driver

Deltek Pulse: General government services September review

Tue, 09 Oct 2012 12:44:00 -0400

Tracked opportunities by vertical segment and number of new solicitations released:

· Public Finance: 2

· E-government: 3

· Enterprise Resource Planning: 1

· Term Contracts: 1

· General Government Services: 6

· IT Consolidation: 1

Notable upcoming, current, and awarded projects:

On September 13, the city of Detroit released an RFP for human resource payroll and benefits hosted services. The city is seeking to upgrade its outdated system with an anticipated completion date of November 2013.

The Illinois State Board of Education (ISBE) released an RFI for an instructional improvement system on September 7. The ISBE is seeking feedback regarding the RFI, not vendor solutions.

The state of Wisconsin, on behalf of the Department of Employee Trust Funds (ETF), released an RFP for data integrity consulting services on September 19. The consulting RFP is a smaller part of a much larger initiative for the transformation, integration and modernization of the retirement and benefits administration system. The department is interested in implementing a new solution to empower customers to become better educated about their benefits without reliance on ETF. The state estimates an RFP will be released for the project by summer 2013, with the solution implemented by fall 2013.

The Vermont Department of Education may release an RFP for an automated data store. Bids for a change management specialist and a technical lead/project manager have already been released to support the state's vertical reporting student information system. There is no estimated timeline for when the automated data store and the vertical reporting system bids will be released.

Denver Public Schools will be issuing a new RFP for an enterprise monitoring and management solution. The project, which was recently canceled, is estimated to be about $1 million, and the release date is unknown at the time.

The city of New Orleans included a need for an enterprise resource planning (ERP) system as well as a citywide data warehouse in its 2013-2017 capital improvement plan. The ERP system has been marked as high priority, and the data warehouse is ranked number five. While funding has not been established for either project, according to the Innovation and Information Technology Department (IT1), it is estimated that the ERP system will have a minimum value of $25 million, and the data warehouse project is estimated at $10 million.

The city of Chicago is currently reviewing proposals submitted in September for an aerial and underground communications cable contract estimated to be between $1 million and $5 million. Deltek will report on the award and bid tabulations once negotiations are finalized.

Miami-Dade County accepted proposals for an electronic bidding solution in September. The contract is estimated to be worth around $200,000. The opportunity has entered the cone of silence, and Deltek will report on an award once information becomes available.

The Massachusetts Operational Services Division (OSD) has begun making awards for the $750 million telecommunications network services project. Cellco Partnership (doing business as Verizon) and Galaxy Internet Services have been moved to fully awarded status. There are still many vendors under review, and the state will continue to make awards on a rolling basis.

Industry analysis

The number of tracked cloud computing solutions projects in the GovWinIQ database has increased over the past seven years. There are 125 state and local bids that have been released or are scheduled to be released in 2012, with an estimated total value of $438 million. An interesting point to note is that the estimated value of all active cloud bids in the database ($567 million) nearly matches the total combined value of awarded cloud bids procured in the past ($638 million).

California Assembly Bill 2508, sponsored by Assemblywoman Susan Bonilla, became a law on September 11, 2012. The law prohibits state agencies from awarding call center contractors whose employees reside outside the United States and the state of California. A similar federal bill in Congress is awaiting passage in the Senate Committee on Commerce, Science and Transportation.

In 2010, the Illinois governor signed the Performance Evaluation Reform Act (PERA), requiring all school districts to change their performance evaluation standards for teachers and principals by September 1, 2012, and enact a new system by 2016. A 32-member Performance Evaluation Advisory Council (PEAC) was established to draft recommendations for the state’s performance evaluation system.

The Chicago Teachers Union went on strike after trying to negotiate public education reform with the Chicago government for nine months. The strike caused the city to go deeper in debt and debilitated efforts to improve IT education in the classroom.

The state of Maryland released an RFP seeking consultants to review the procurement process in Maryland. The governor has made it clear that this is a high priority for the state. The RFP lists several factors that have held back the procurement process, including “increasing complexity of procurement laws, increased reporting demands for agencies, insufficient training, growing vendor dissatisfaction, underutilization of technology and competing demands of numerous socioeconomic programs.”

Analyzing state and local cloud procurement in the GovWinIQ database

Fri, 28 Sep 2012 14:47:00 -0400

At this point, it’s cliché to talk about cloud computing as an emerging technology, as that point of view now strikes most IT consumers as behind the times. We’re not just approaching an SaaS/IaaS world anymore; there’s enough evidence to suggest we are already there.

The move toward cloud adoption has largely been a top-down measure, with the federal government driving implementation through its “cloud first” strategy, and state and local governments largely following along. It is not a coincidence that the first two federal CIOs (Vivek Kundra and Steven VanRoekel) of the Obama administration view cloud computing not as a choice, but imperative for a 21st century IT enterprise. This attitude has permeated throughout federal agencies and sent the message that it’s okay to take a few risks in pursuit of a more efficient and flexible IT landscape. Even the CIA is getting in on the action, announcing plans to utilize Amazon-like cloud services to handle certain big data functions within the agency. When the most secretive organization in the U.S. isn’t afraid of a technology, it’s a sign that a tipping point has been reached in the debate on government cloud use.

I was curious to see what our own data revealed about state and local cloud implementation over the past half decade, so I jumped into GovWinIQ’s IntelliSearch database, ran some targeted searches for cloud solicitations, and converted them into data visuals. With the important caveat that correlation does not prove causation, the results provide some support for the top-down cloud theory. Up first is the number of solicitations released by year. Please note that the red line represents the total number of opportunities within a category, while the graphs themselves represent total dollar value.

Okay, so we are not exactly blowing your mind here. State and Local cloud solicitations have been on a steady rise over the past seven years, and seem to have fully entered the national purchasing bloodstream around 2010. GovWinIQ is tracking 125 state and local bids with significant cloud computing components that have been released or are scheduled for release in 2012. That’s up from 104 solicitations in 2011, and just 65 solicitations in 2010. This trend holds true for overall estimated value as well, with $254 million in 2010, $343 million in 2011 and $438 million in 2012.

What is interesting here is the fact that the estimated value of all active cloud bids in the GovWinIQ database ($567 million) nearly matches the total combined value of awarded cloud bids procured in the past ($638 million). In other words, there is almost as much government investment in cloud this year as there has been for all the other years combined that we have tracked this technology. Keep in mind that awarded contract values are not obtained for opportunity alerts (as signified by the “expired” category), so this may skew the data some. Nevertheless, it’s clear that state and local cloud procurement has seen some pretty incredible growth in just the past two years.

Most cloud bids are classified under the general government vertical, so it is not surprising to see which vertical takes the top spot. More interesting is the fact that health care and social services come in second and third. This largely jives with health care IT spending rising for years, partially driven by the adoption of health information exchanges created via the Affordable Care Act.

Analyst Take

It’s an exciting time for cloud vendors, with governments at all levels jumping into the fray and purchasing cloud services. While the recession has had a dramatic impact on state and local budgets as well as federal funding for state and local governments, it appears the worst may be behind us, and forecasted increases in state and local IT spending should only accelerate cloud adoption nationwide.

Notable cloud computing tracked opportunities in the GovWinIQ database:

New York

New York State Cloud Computing Email Services

Maryland

SaaS Statewide Personnel System Project Implementation

North Carolina

Statewide K12 Education Cloud Project

Statewide Private Cloud Services

Michigan

Great Lakes Information and Technology Data Center Implementation and Operating Services

Illinois

Cloud Computing Solution

Texas

Statewide Cloud Services

Wisconsin

Enterprise Email Cloud Computing

California

Cloud-based Email Collaboration and Implementation Solution

The Numbers are In: More Details About Sequestration Emerge

Mon, 17 Sep 2012 11:42:00 -0400

The federal contracting community has been waiting with bated breath for more details to determine the impact of sequestration on their businesses. Although the Budget Control Act (BCA) of 2011, which brought sequestration to the table, provided a (fairly) clear description of the dollar impact at the aggregate level, the impact at the program level is still unclear. The devil is in the details, so as the true implications of sequestration became more clear, and the deadline closer, Congress became more concerned with how the sequestration cuts would be implemented. To force the administration to provide those details, they passed the Sequestration Transparency Act (STA) which Obama signed on August 7. Potentially the shortest piece of legislation on record (a whopping 2 pages), the STA gave the Obama administration 30 days to report, for each account to be sequestered, estimates of the “level of sequestrable budgetary resources and resulting reductions at the program, project, and activity (PPA) level based upon the enacted level of appropriations.”

My team of analysts and I, who have analyzed the federal budget account-by-account, literally laughed out loud at the idea that the administration could pull together that amount of information within 30 days. We wondered if they could even find the people who knew the people who knew where the data was within 30 days. The report acknowledges this challenge by stating that, “Regularizing reporting across different budget accounts and agencies requires the resolution of many definitional questions, and the sheer volume of data presents administrative challenges that require additional time for OMB to address.”

OMB Report Applies BCA Percentages to Major Budget Accounts

Released a week after the September 7 deadline, the report sheds some light onto the impact of sequestration, but not much. The BCA established a uniform percentage reduction across accounts, specifically stating that “except as otherwise provided, the same percentage sequestration shall apply to all programs, projects, and activities within a budget account.”

Those percentages vary, depending on the sequestration category as seen in the chart below:

Key Areas of Sequestration and Exemption

Although the number crunching is far from over, OMB’s report does shed some light into areas that will be subject to sequestration and which areas will be exempt:

Preliminary analysis of the data shows a few trends:

· Defense hit hard, but small elements of major accounts have been shielded. The relative size of DoD budget accounts make them very large targets, but there are elements of the major accounts that are under exemption. There are several accounts in which DoD exempts nearly as much (or more) as it sequesters, such as:

Defense-wide: Defense Health Program, Operation and Maintenance, and Research, Development, Test and Evaluation
Navy: Operation and Maintenance
Army: Operation and Maintenance and Procurement
Air Force: Research, Development, Test and Evaluation

· Agencies’ working capital funds are largely protected. In most cases, all of the vast majority of working capital funds have been exempted. Some contract work is funded from these accounts.

· Fund accounts with economic implications are largely exempted. Although not completely exempt, many of the accounts that support insurance and credit programs are exempt.

· Senate and House member compensation is exempt. Although general salaries and expenses are sequestrable, compensation for Senate and House members, approximately $127 million is exempt.

· Contractors and government employees will take hits. With the exemption of military personnel compensation, employees of most agencies will likely be impacted as a large percentage of most Salaries and Expenses accounts are sequestrable. Accounts funding general operations and facilities management are largely sequestrable so contractors will be impacted.

· States (and other grant holders) will be impacted. Although some grant accounts are fully or partially exempt (such as State Medicaid Grants), others are sequestrable, such as:

HHS Child Care and Development Block Grant
HHS Social Services Block Grant
HHS Affordable Insurance Exchange Grants
HHS State Grants and Demonstrations
HUD Homeless Assistance Grants
DOT Capital Investment Grants

What’s Next?

The most glaring omission from this report and previous discussions is implementation. How will agencies execute these cuts, especially when they will occur after the fiscal year has already started (and under a continuing resolution)? Sequestration is not a new concept so OMB likely has plans for implemention – they’re just not yet sharing them with us.

Clearly, most contracts are funded from defense and non-defense discretionary accounts, but the details provided do not yet allow for much insight into specific program impacts. OMB noted that additional time was needed to report on sequestrable funds at the PPA level, which is something that those contractors prepping employee pink slips would find of great interest. That data would allow for some level of mapping between sequestrable programs and contracts, and allow contractors to prepare themselves for the eventuality of sequestration or, at a minimum, mitigate the impact that the uncertainty has created.

Deltek Pulse: General Government Services August review

Mon, 10 Sep 2012 09:51:00 -0400

For years, Deltek’s health care/social services and justice and public safety teams have offered monthly recaps of their vertical’s procurement activity. Now, Deltek is launching a new edition of the Deltek Pulse recap series with a monthly review of general government services activity. These recaps will encompass several opportunities Deltek tracks in the GovWin IQ database outside of health care and justice and public safety.

Tracked opportunities by vertical segment and number of new solicitations released:

General Government Services: 8
Term Contracts: 5
Public Finance: 4
Education (Primary/Secondary): 3
Economic Development/Regulation: 2
E-government: 1
Enterprise Resource Planning: 1

Notable projects:

The North Carolina Department of Public Instruction (NC DPI) issued a request for proposals (RFP) on August 20 for identity and access management for the North Carolina Education Cloud. The NC Education Cloud (NCEdCloud) will provide a cloud-based infrastructure for the statewide K-12 education enterprise. The system will upgrade from an LEA-hosted server infrastructure to cloud-hosted infrastructure.

The state of New York is in the beginning stages of a massive IT infrastructure overhaul, called the IT Transformation Project. The umbrella program included the release of a half dozen RFIs last year for services including cloud computing services, data center services, converged network services, and enterprise identity and access management software. The first formal RFP was issued on August 22, 2012, seeking IT office equipment. Expect more RFPs for this major project in the coming months.

The Wisconsin Department of Public instruction (DPI) released an RFI in 2006 for the development and deployment of an online educator licensing system for the DPI Educator Licensing Project. This month, the department decided to purchase software and services for the Educator Licensing Online (ELO) project from Iron Data without soliciting bids. The system must be implemented by June 2013 in order to comply with the terms of a grant awarded to the state.

The city of Naperville, Ill., released an RFI in 2011 for an e-procurement e-payment service provider. On August 10, 2012, the city released an RFP for accounts payable services, including procurement card services and e-payables. The city intends to continue using Sungard-HTE for its ERP system, and will also consider stand-alone solutions as well as those that will integrate into the current ERP.

Industry analysis:

The mismanagement and corruption regarding procurements released by the New York City Department of Information Technology and Telecommunications (DoITT) caused Mayor Bloomberg to create a nonprofit office to oversee all projects. The NYC Technology Development Corporation will take over the majority of project management and strategic sourcing responsibilities the DoITT used to have.

The Port Authority of New York and New Jersey (PANYNJ) is working to develop a transparency website that would make several different types of procurement documents available to the public. The authority is under pressure from Governor Christie, who is pushing for greater transparency reform efforts.

Government IT spending is on the rise with an estimated $140 billion spent annually on IT needs. As a result, the presence of Gov 2.0, IT firms have been growing and offering IT services and products at little cost.

WSCA assisted Colorado with itse-procurement project by providing expertise on working with various procurement laws and procedures. SciQuest was ultimately awarded the contract. In the future, other states, particularly those with outdated ERP systems, may follow in Colorado’s footsteps.

Notable awards:

The New York/New Jersey Port Authority awarded a contract to Cedarcrestone in the amount of $11.2 million for its enterprise resource planning system.
The Ohio Public Employees Retirement System (OPERS) awarded a contract for a core network upgrade in the amount of $789,895.
The Dallas/Forth Worth International Airport Board awarded a $105,000 contract to Lumenate LP for Hitachi data systems enterprise storage hardware.
The city of Naperville, Ill., awarded a $342,280 contract for a core network replacement to Sentinel Technologies. The city also awarded a $45,000 contract for IT support services to Sentinel Technologies.

CBO: Budget Sequestration or Not, the Department of Defense May Be Scrambling in FY 2013

Mon, 23 Jul 2012 10:48:00 -0400

There is just 166 days remaining in calendar year 2012 and until – barring legislative intervention by Congress and the White House – budget sequestration takes effect under the Budget Control Act of 2011 (BCA). Since the passage of the BCA and the failure of the joint (super) committee to identify the additional reductions as mandated by the Act there has been increasing attention on the potential impacts of sequestration on the Department of Defense (DoD) from a mission as well as an economic perspective. In the midst of this, the Congressional Budget Office (CBO) recently released a report analyzing the budgetary impacts of DoD’s Future Years Defense Plan (FYDP) for 2013 and CBO’s findings suggest that budgetary gymnastics may be only beginning.

Last February, DoD submitted a fiscal year (FY) 2013 budget request totaling nearly $615 billion – about $526 billion for base programs and day-to-day operations and about $88 billion for overseas contingency operations (OCO). Similar to most budget requests that the DoD submits to Congress each fiscal year, the department provided an accompanying five-year plan called the Future Years Defense Program (FYDP). The FYDP describes the DoD’s plan for its standard activities and, therefore, it generally relates to the base budget. Given the impact of current plans and decisions on future budgets the CBO routinely reviews the FYDP to project its budgetary impact over several decades. CBO’s latest report released this week analyzes the budgetary impact of the current 2013-2017 FYDP for its impacts from fiscal year 2013 through 2030.

Key CBO Conclusions

The department would require $535 billion in FY 2013 to execute its FYDP base-budget plans for 2013. This is $9 billion higher than DoD’s budget request. Here, CBO includes the cost of all active-duty personnel instead of the department’s proposed shift of the cost of some personnel out of the base budget to overseas contingency operations (OCO.) (The BCA caps do not apply to OCO and certain other activities.) CBO shifts a total of $15 billion of personnel costs back to the base budget over the 2013–2017 timeframe. This contributes to CBO’s estimate that the overall cost of implementing the FYDP for 2013 through 2017 is about 4.7 percent higher ($123 billion) than DoD’s own estimate.
To follow through on its FYDP base-budget plans after 2013, the department would need to return to near their 2012 level of $543 billion in 2014 and then grow at 2 percent on average annually through 2017. CBO projects that the current FYDP would require defense appropriations to grow at an average annual rate of 0.9 percent from 2017 to 2030.
Under DoD’s current plans, from 2013 to 2030 the primary cause of growth in DoD’s costs would be in the area of operation and support (O&S), in which DoD projects significant increases in the costs of military health care, compensation of the department’s military and civilian employees, and various operation and maintenance activities. Weapon systems replacement and modernization costs would grow from $168 billion in 2013 to $212 billion in 2018 —a 26 percent increase.
In constant dollars, the cost of DoD’s base-budget plans for 2013 through 2021 is $508 billion higher than the BCA’s defense discretionary funding limits before sequestration reductions and $978 billion higher than the available funding after sequestration.

The bottom line is this: Under CBO projections the costs for DoD’s plans would exceed the funding available through 2021 under the caps established by the BCA.

Implications

Aside from the non-trivial implications to national security and defense readiness, there are already current and ongoing implications to the defense industrial base and the larger economy and we are seeing increasing awareness and concern. Just yesterday, in a House Armed Services Committee Hearing entitled Sequestration Implementation Options and the Effects on National Defense: Industry Perspectives, Lockheed Martin CEO Robert Stevens testified that the looming threat of sequestration and ongoing uncertainty is already impacting the defense industry by stalling investments in people, plans and infrastructure. Stevens cited the Worker Adjustment and Retraining Notification (WARN) Act that requires companies to give affected employees 60 days notice (or more) of any plant closings or significant layoffs. But given the “fog of uncertainty" on if/how the Congress and Administration will avert or implement sequestration it is impossible to effectively plan and target notices, resulting in a much wider disruptive impact. Stevens estimated that sequestration “is likely to result in about a 10 percent, across-the-board reduction, at the program, project and activity level for most accounts.”

Earlier this week, the Aerospace Industries Association released research led by George Mason University economist Stephen Fuller on the broader economic effect of sequestration. In short, Fuller estimates that in 2013 alone, the nation would lose over 2 million jobs, $215 billion in gross domestic product, and more than $100 billion in the personal earnings of the American workforce if sequestration takes effect in January.

With or without sequestration, DoD may need to scramble to manage its 2013 budget situation. CBO estimates that for 2013 DoD’s current plans would cost $14 billion more than the BCA’s limits before sequestration and be $66 billion higher if sequestration occurs. To further squeeze things, DoD would have just 9 months after the January 2013 sequestration taking effect to deal with the mandated cuts.

This immediate and ongoing budget pressure will require the DoD to revamp their plans even more dramatically for fiscal 2014 and beyond and this will likely have further ripple effects through the defense industrial community, the substance of which is even murkier than what is currently faced under the current fog under impending sequestration. Ongoing uncertainty may be the only thing we can know for certain.

Social media business opportunity growth in state and local government: The story in stats

Thu, 12 Jul 2012 21:13:00 -0400

Deltek recently published a report on social media use in state and local government (subscribers click here for free report download; non subscribers download for a fee). In that report, Deltek identifies several trends related to social media use in state and local government:

· Social media and mobile application use are growing in society.

· State and local government had significant growth in social media use from 2010 to present (Mossberger and Wu, 2012)

· 80 percent of State and local government employees see their agencies increasing social media use in the next 12-18 months (Market Connections, 2011)

Most notably, social media-related business opportunities have been increasing since 2008.

· 2012 has a robust number of social media business opportunities

· Initially, it looks like a drop off of 28.6 percent from 2011 to 2012.

· However, we only half way through 2012.

Since we are only half way through 2012, analyzing opportunities through the first 6 months of each year is a better comparison and illustrates a growth trend. For example, there is a 46 percent growth in opportunities in 2012, compared to the same point in 2011.

Comparing current opportunities (blue line) to January through June opportunities (orange line) demonstrates the continued growth of social media opportunities in 2012. Using the existing data to project future growth (green line) demonstrates the future projected strength of the market.

· Through the first half of 2012, more social media opportunities than first half of 2008, 2009, 2010, or 2011.

· 2012 is projected to have the most state and local government social media opportunities than any previous year.

Analyst’s Take

· Social media related business opportunities are projected to continue upward growth for the next several years prior to market saturation.

· Even after initial market saturation with current social media applications and technologies, implementation will open the door to innovation of new technologies and applications that will make social media functionality an essential component of most IT solutions.

· The paradigm shift presented by social media use in state and local government (see the Deltek report, here), will drive further innovation and social media integration.

· The combination of technology and government innovation will drive social media functionality in IT systems moving well beyond the initial market saturation and well into the foreseeable future.

Recommendations

· Get in on the ground floor now with developing social media technologies, functionality, and integration that government can use.

· Collaborate and partner with government to develop social media solutions.

· Integrate social media functionality into your current solutions.

· Integrate social media functionality into existing government enterprise systems.

· Develop mobile applications with social media features as an integrated part of current solutions.

· Look to integrate social media functionality.

· Make plans to grow your state and local government-related business.

Subscribers have access to the full article, here, including more detailed graphs and figures.

If you haven’t done so already, download the Deltek report on social media in state and local government, here

Read the previous blog on social media, here.

Read the previous blog on crowdsourcing data,here.

Follow me on Twitter @GovWinCCotner.

Deltek releases state and local government social media report

Fri, 29 Jun 2012 16:18:00 -0400

Social media is one of the hottest topics in both government and the government contracting community today. Since 2008, overall social media (SM) use and state and local adoption rates have been astronomical. SM is also presenting a new paradigm for service delivery and innovation in state and local government. SM platforms (including mobile applications) can be used for direct government/citizen engagements that are profoundly changing society.

Beyond the influence of direct engagement, these SM platforms and related mobile devices can aggregate crowdsourced data to inform decisions. In turn, these informed decisions can be used to innovate and improve government by delivering more efficient services (either directly or by augmentation). SM interactions (including data gathered to inform decisions and services) can lead to greater innovation, improved government accountability, and broader civic engagement.

For the government contractor community, this change presents a myriad of business opportunities:

· Working collaboratively with state and local government now to build short and long-term policy and related solutions; these solutions will be the foundation for future implementations.

· Creating new solutions that were previously unimagined.

· Adding value to existing vendor solutions through IT integration.

· Adding social media integration to existing state and local government IT systems, including at the enterprise level.

· Aggregating the big data of social media for government innovation.

· Creating purpose-built mobile solutions that integrate social media to improve government service delivery

Deltek has researched and tracked these state and local government opportunities with SM components since 2008, when they first appeared in solicitations. As expected, while initially slow, the number of opportunities has grown and remains relatively steady (Figure 1, below). Opportunities are also spread across each state and local government type. While the majority of opportunities reside with the states, some of the more cutting edge and interesting opportunities are in the localities. Looking forward, opportunities are projected to grow along with state and local government’s increased use and integration of SM technology.

Figure 1: Deltek Opportunity Analysis – Social Media

For more insight on the implications of social media on state and local business opportunities, read Deltek’s recently released report, here.

Subscribers also have access to this article in Analyst's Perspectives, here.

Read our recent blog on crowdsourcing, here.

Read our recent blog on social media, here.

Follow me on Twitter, here.