B2G Blog - Small Business

NASA Releases SEWP V Draft RFP

Tue, 05 Mar 2013 09:44:00 -0400

Originally published for Federal Industry Analysis: Analysts Perspectives Blog. Stay ahead of the competition by discovering more about GovWin IQ. Follow on twitter @FIAGovWin.

Every government agency has made at least one purchase through National Aeronautics and Space Administration‘s (NASA) Solutions for Enterprise-Wide Procurement (SEWP). The current version of SEWP runs through April 2014, and the program office is preparing to release the draft solicitation for SEWP V.

The Government-Wide Enterprise Acquisition Contract (GWAC) draft request for proposals (RFP) for SEWP V is expected to be released before March 2013. Industry comments and inquiries will be due by April 12, 2013. Then, this summer, final solicitation is expected to be issued.

Update: The SEWP V Draft RFP was released March 4, 2013. NASA will host an industry event on March 11, 2013, scheduled from 9:00 AM to 12:00 PM EST. Registration is on a first come first serve basis and may be accessed here.

Based on the previous version of the contract and material that has been released, we can expect that SEWP V will award multiple commercial firm-fixed price, indefinite delivery, indefinite quantity (IDIQ) contracts. Competition in SEWP IV aligned to four groups across two different categories, as shown below:

Each of the groups has specific requirements and functional tasks that must be met by the products (and product-based services). According to the Joanne Woytek, the SEWP Program Manager, of the thirty-eight SEWP IV contract holders, seventeen were small businesses. The 70 federal agencies, boards and organizations using the SEWP GWAC result in around 25,000 orders annually. At around of $90,000 per order, the contract vehicle averages $2 billion in reported spending each year for the past three years. The estimated total, maximum ordering value of SEWP IV was originally valued at $5,600,000 for each contract. Due to the SEWP IV spending trends, the follow-on contract is expected to have a similar or higher value.

Update: According to the released draft, the performance period for SEWP V contracts has been extended and the ceiling value has increased. Interested vendors are encouraged to comment on all aspects of the Draft Solicitation. For more information visit GovWin IQ Opportunity ID: 82396.

As vendors look for opportunities amidst spending cuts and budget pressure, aligning offerings for vehicles like SEWP may be one strategy for maintaining market share.

M&A Activity Dips In 3Q: Deals In Cloud Computing And Cyber Lead Transactions

Wed, 03 Oct 2012 09:33:00 -0400

Mergers and acquisitions activity in the defense and government services sector continued to move along in the latest third quarter, and is expected to remain robust for the remainder of the year as larger contractors continue to seek out smaller firms operating in hot sectors like cloud computing and cybersecurity to help offset expected federal budget cuts.

Among the contractors we track, there were 40 deals announced during the latest third quarter, off slightly from 43 deals announced in the second quarter, and 47 deals in last year’s third quarter.

M&A activity in the third quarter was driven by five transactions which had valuations of over $1 billion, including Dell’s acquisition of IT management software maker Quest Software for $2.4 billion, and Chicago Bridge & Iron Co.’s purchase of AEC firm Shaw Group Inc. for roughly $3 billion.

Other significant purchases in the third quarter included VMWare’s buyout of software-defined networking firm Nicira for $1.26 billion, and IBM’s purchase of HR management software provider Kenexa Inc. for $1.3 billion. Also in the latest quarter, private equity firm Thoma Bravo acquired enterprise software firm Deltek Inc. for $1.1 billion.

FIA Perspective:

Smaller deals in federal growth markets drive M&A activity. During the latest third quarter, there were several M&A transactions announced in the cloud computing and cybersecurity markets, and we expect these trends to continue going forward. M&A activity in the cloud sector was very strong in the latest third quarter, continuing its momentum from earlier in the year.

In one of the larger deals announced in the cloud market (besides IBM/Kenexa above), VMWare agreed to acquire DynamicOps, a Burlington, Mass.-based cloud computing startup that was spun out of banking giant Credit Suisse’s IT department, for between $100 and $150 million. DynamicOps is a leader in the emerging market for cloud automation solutions.

Cisco also continued its foray into the cloud in the latest third quarter, acquiring Virtuata to help secure virtual machine data in multi-tenant data centers. Virtuata helps to isolate each virtual machine from others in the same virtualized data center or cloud environment, and will allow Cisco to address security concerns among enterprises and service providers.

Other notable deals in the cloud sector included Rackspace’s purchase of e-mail application integrator Mailgun, and Citrix’s acquisition of Beetil, which provides cloud-based service desk technology. In addition, Lenovo agreed to buyout Stoneware, which makes cloud products used in the education and government sectors, for an undisclosed amount.

Overall, top-tier IT companies enhancing their presence in the cloud computing space should come as no surprise; the cloud market is slated to be one of the most attractive growth markets for IT firms over the next several years. According to Deltek’s Federal Cloud Computing Services Outlook, 2012-2017 report, the demand for vendor-furnished cloud computing services by the U.S. government will increase from $734 million in FY2012 to $3.2 billion in FY2017, representing at a CAGR of 34%.

For the remainder of the year, we expect top-tier IT firms to continue their expansion into the cloud market, targeting smaller firms providing unique or distinctive solutions to enhance their overall market share, while allowing them to compete for future opportunities.

On the cybersecurity front, there were five deals announced in the latest third quarter which involved firms providing cyber solutions or products, up significantly from the number of cyber-related deals announced in the second quarter.

Notable deals included Apple’s acquisition of AuthenTec for $356 million, and General Dynamics’ purchase of Fidelis Security Systems for an undisclosed sum. AuthenTec designs security products for mobile devices such as fingerprint sensors, while Fidelis provides cyber tools that provide real-time network visibility, analysis and control.

Earlier this month, KEYW Holdings Corp. also made two significant cyber purchases, acquiring Poole & Associates for $126 million and Sensage for $34.5 million. Poole will expand KEYW’s software engineering presence in the Intelligence Community (IC), while Sensage will allow KEYW to expand its addressable market into securing critical infrastructure. Both of these acquisitions should significantly enhance KEYW’s top-line growth moving forward.

We believe that M&A activity in the cyber arena will continue to be robust for the remainder of the year, as larger IT firms look to extend their addressable markets while recognizing the vast number of smaller firms with unique cyber-related capabilities.

Elsewhere, there were several notable acquisitions in other markets which were previously hot sectors (health IT, geospatial and wireless). In July, SAIC acquired health IT consulting firm maxIT Healthcare for $493 million, while DigitalGlobe acquired rival satellite imagery firm GeoEye for $900 million. AT&T also made a significant purchase in the latest third quarter, snapping up mobile service provider Nextwave Wireless for $600 million.

Our Take:

Looking ahead, we expect M&A activity in the defense and government services sector to continue to be strong for the remainder of the year, as federal contractors look to acquisitions in new and adjacent markets to make up for lost revenues resulting from expected future budget cuts.

Government 2.0: Government Trends - IT procurement transformation (Part 2)

Thu, 13 Sep 2012 08:10:00 -0400

Continuing from my previous blog on Government 2.0’s effect on the traditional IT procurement process, I wanted to take a look at trends in government’s approach to acquiring Gov 2.0 technology. Part 1 of this blog series highlighted how small Gov 2.0 IT firms have begun to use non-traditional purchasing options to circumvent the traditional procurement process. Gov 2.0 firms are trying to avoid the procurement process because it has historically been more difficult for small IT firms to compete in the government IT market. However, today’s trends in IT procurement hint that times are changing. Since governments continue to face shrinking IT budgets against expanding IT costs and needs, they are now looking for alternative ways to do business as well. For many IT bureaucrats and contracting officers interested in Gov 2.0 technology, that means looking outside of the conventional procurement process, and toward smaller IT firms.

Code for America (CFA), an example of Gov 2.0 realized, is an organization that describes itself as “Peace Corps for geeks.” Established in 2009, CFA assigns programmers on year-long fellowships to work with local governments on in-house IT projects, to provide faster and more affordable alternatives to procuring vendor services and solutions. CFA noticed that new IT products, which it calls “civic startups,” were often created once the fellows had completed their assignments – essentially spawning new businesses. However, these civic startups that had created products for governments were having trouble selling their products. Finding the government procurement process difficult to navigate, many fizzled.

In response to this issue, CFA is setting up its first civic incubator, where a handful of IT entrepreneurs will participate in a five to six-month-long program that will provide funding and mentoring, while bringing their applications and solutions directly to local governments and school districts. This incubator is something CFA’s leadership hopes will turn the traditional procurement process on its head.

Another noticeable trend on the rise is localities across the country sponsoring crowdsourcing events and hackathon competitions as an alternative approach to the traditional solicitation processes for Web development solutions and services. In 2010, after working with CFA, the city of Boston took a one-day hackathon event to the next level by creating a permanent office within local government. The New Urban Mechanics Office was created to hire full-time programmers for in-house IT development projects as well as to conduct outreach to encourage, field, and partner with small IT entrepreneurs.

In another CFA spinoff, White House Chief Technology Officer Todd Park created the Presidential Innovation Fellows (PIF) program to pair “top innovators from the private sector, non-profits, and academia with top innovators in government to collaborate on solutions” using technology. On August 23, 18 innovators from outside of government were selected to work on one of five projects over the course of six months. The PIF program’s goal is to synthesize open data, expand e-government services, and simplify the RFP process by “building a platform that makes it easier for small high-growth businesses to navigate the federal government, and enable agencies to quickly source low-cost, high-impact information technology solutions.”

One of the five projects, RFP-EZ, was born after Sean Green, head of the Small Business Administration’s Investment and Innovation Program, remembered an instance with the Department of Health and Human Services (HHS). The department had a need for an IT project, but the project’s estimated cost was $5 million to implement by a traditional IT vendor. After some research and outreach, HHS partnered with smaller IT companies that were able to complete the project for just more than $400,000.

During the PIF announcement, Green gave an open call to developers, contracting officers, and small Web development firms to join the effort and participate through Github.com, which is an open platform where RFP-EZ will be demoed. If successful, many state and local level governments will likely partner with or imitate the RFP-EZ project. Park took to Twitter after the announcement to confirm that the PIF will also be working with both state and local governments, in addition to the federal government, to create these IT solutions.

Analyst's Take

At all levels of government, innovation and affordability have been contradictory terms. The Code for America debunked the idea that quality Gov 2.0 solutions and services had to come at a premium. CFA seems to have been the catalyst for the future direction of Gov 2.0. Governments willing to take the early leap by circumventing their IT procurement process and engaging with innovators directly can expect some growing pains, but they will likely be dulled by ultimate cost savings.

The traditional format of government procurement has been grounded in the 1950’s-style door-to-door salesman. Governments release a solicitation and wait for the salesman to ring their door bell to peddle goods. Now, government agencies with strict budgets have the option to shop around without going through a lengthy and expensive procurement process. Governments want convenience and efficiency without having to sacrifice quality and they are willing to go outside the traditional procurement process to get it.

Subscribers have access to the full article here, including expanded analysis and recommendations for contractors.

Also, be sure to follow Deltek's General Government Team on Twitter @GovWin_GenGov.

VA's IT Service-Disabled Veteran-Owned Small Businesses Strategy

Thu, 30 Aug 2012 10:11:00 -0400

Of their total FY2013 IT budget of $3.2 billion, the Department of Veterans Affairs plans to spend over $2.5 billion with federal contractors and a large percentage of that will go to Service-Disabled Veteran-Owned Small Businesses, according to VA CIO, Roger Baker, at Deltek’s VA Industry Forum on August 15.

A large percentage of that $2.5 billion will be procured through the VA’s Technology Acquisition Center (TAC) run by Associate Executive Director Wendy McCutcheon. Last week, Baker and McCuthcheon also announced that 50% of all acquisitions through the TAC in FY2013 will be awarded to Service-Disabled Veteran-Owned Small Businesses (SDVOSB). While that sounds like a huge percentage, in FY2012, the TAC’s awards to SDVOSB stands at about 45%.

Baker made it clear that the SDVOSB goal would not come at the expense of the discounts and the quality of service the VA expects and the VA is interested in strategic partnerships that go both ways, where both parties are fully invested and share risks.

The VA’s overall goal is to contract 10% of their total spending (not just IT) with Service-Disabled Veteran-Owned Small Businesses (SDVOSB). Given that, it appears that an inordinate share of the SDVOSB goal will be borne in the area of IT procurement.

When questioned about the potential impact of the 50% SDVOSB goal on large businesses, McCutchen implied that there would be no major impact beyond what vendors are already experiencing and there would be no work stoppages with large business. However, at least one vendor from the audience challenged McCutchen based on with their own experience.

The Technology Acquisition Center successfully awarded $2 billion in contracts in FY2011, plus the $12 billion multivendor Transformation Twenty-One Total Technology contract that seeks to modernize IT systems across the department. Half of the 14 vendors chosen for that program are small, veteran-owned businesses. It stands to reason that VA will strive to funnel a good deal of spending through that vehicle to those small, veteran-owned businesses.

Given the strong reiteration of these goals by VA last week, partnering for business at VA will continue to be a key strategy for large businesses well into the future.

STG Inc.: A Mid-Tier Technology Firm On the Rise In Government Sector

Wed, 08 Aug 2012 10:43:00 -0400

As part of the FIA team, I am always keeping tabs on what’s happening in the federal IT market, and am always on the lookout for smaller, high-growth companies that operate in the federal government sector.

I recently took a look at STG Inc., which provides performance-oriented solutions in the following six key areas: enterprise network operations, cybersecurity, financial services, systems engineering and integration, software engineering, and linguistics and intelligence solutions.

Based in Reston, Va., STG is a mid-tier government contractor which partners with more than 50 federal agencies, as well as Fortune 100 companies and overseas organizations. Established in 1986, STG has grown its core competencies over the years, and is now on target to reach $1 billion in revenue by 2016. STG’s primary federal customers include the Army, Department of Homeland Security (DHS), Department of Transportation, Veterans Affairs and Health and Human Services.

FIA Perspective:

STG having success in securing large federal prime contracts. As an IT solutions provider in the federal sector, STG holds prime positions on several key GWAC, DWAC and IDIQ contract vehicles. As part of the contracting process, STG says it often assists its customers in creating their contract vehicle strategy, helping them find the best service at the best price to maximize return on investment, while easing the burden on the government.

For a smaller contractor, STG holds several prime positions on major contract vehicles, including the GSA’s $65 billion Alliant program, the Army’s $20 billion ITES-2S CHESS and $2.3 billion TEIS 2 programs, the DHS’s $45 billion EAGLE program, and NIH’s $19.5 billion CIO-SP2 program, among others.

In late June, STG was also named as an awardee on the National Institutes of Health’s (NIH) $20 billion CIO-SP3 contract vehicle, a follow-on to the CIO-SP2 contract. This 10-year, multiple-award IDIQ contract supports the Federal Enterprise Architecture, the Department of Defense Enterprise Architecture, and the Federal Health Architecture.

Elsewhere, STG also recently won a $10.9 million federal contract from the U.S. Army Contracting Command (Adelphi, Md.) for information technology services in support of the Army Research Laboratory. In addition, STG recently won a Blanket Purchase Agreement (BPA) with the Department of State to provide development, modernization, and enhancement support. The value of this 5-year BPA, which includes 1 base year and 4 option years, wasn’t disclosed.

STG names new President to further growth. Earlier this week, STG announced that Chief Operating Officer Paul Fernandes has been named the new President of the company. Simon Lee, who previously held the title of President and Chief Executive, will assume the role of Chairman and CEO and focus on global growth strategies and philanthropic endeavors for the firm.

“Paul is the right person to build our next generation leadership team and evolve STG into a billion dollar company,” said Mr. Lee. “Over the past 8 years, Paul has been intimately involved in every facet of STG’s business growth, and has an unparalleled understanding of STG’s capabilities and business philosophy.”

When Fernandes joined STG in January of 2004, he brought with him 20 years of senior management experience in growth-oriented IT organizations focused on defense and Federal agencies.

Other Company Details:

For the fourth consecutive year, STG has experienced record growth in profit and revenue. The company has also been able to continue to diversify its customer base, while opening new operating locations.

Looking ahead, STG’s strategy is to continue its steady growth, while focusing on delivering excellence to its customers and strengthening its core competencies. As part of its strategy, STG is also aiming to diversify its business base, expand its facilities, and provide training and advancement opportunities to its current employees.

With its steady growth, STG has continued to rise (for the 5^th consecutive year) on Washington Technology’s list of the Top 100 Federal Prime Contractors. For 2012, STG jumped 12 spots to find itself at number 76 on the list.

“STG had the biggest spike in its history,” said STG Chairman Lee. “Last year we rose 8 places. This year, 12. We continue to outpace our competitors and have sent a clear message to industry that the Government truly is turning to STG.”

In a press release, STG noted that it again set records in terms of total revenue and revenue from prime contracts - its fifth consecutive year of double-digit growth, and the 11th time in the past 10 years that revenue has increased. Washington Technology listed STG’s revenues at $215.6 million in compiling the 2012 list, compared with $193.9 million in revenues the previous year. These figures only take into account money collected under prime contracts, and don’t factor in revenues from subcontracting opportunities.

Our Take:

Overall, with its strong track record in winning large prime contract vehicles and proven experience as a reliable and dependable government contractor, we feel that STG has a bright future in the federal marketplace, and that it will continue to make waves as a mid-tier provider of technology-related solutions over the next several years.

California not slowed down by Supreme Court Ruling

Wed, 27 Jun 2012 12:17:00 -0400

California is one state that refuses to let the Supreme Court ruling slow it down from implementing a health benefit exchange. The state recently contracted with Accenture to build the California Healthcare Eligibility, Enrollment and Retention System (CalHEERS). Initial development and implementation of the system is expected to be approximately $183 million. Moreover, a total of $176 million has been allotted for the continued development and initial operating costs over approximately three-and-a-half years.

The system is expected to start enrolling Californians in the fall of 2013 for coverage that will begin in January 2014. There will be two releases: One, for CalHEERS to go live on July 1, 2013, as a Web portal to provide initial ability for consumers and small employers to shop and compare plans; and two, for enrollment that will take place on October 1, 2013. At this time, CalHEERS should be able to add functions that allow people to assess their eligibility for Medi-Cal, Health Families or subsidized coverage of the exchange.

The impact of Ariz. immigration law ruling on state and local E-Verify

Tue, 26 Jun 2012 13:08:00 -0400

The Supreme Court ruled against three of the four provisions of the controversial Arizona immigration law on Monday. In a 5-3 vote, the majority of the justices concluded that the Arizona law unconstitutionally invaded the federal government's exclusive prerogative to set immigration policy. Many states looking to get a better handle on the presence of unauthorized immigrants in their state were watching closely, especially Alabama, Georgia, Indiana, South Carolina, and Utah, which all currently have pending Arizona-style legislation. With this Supreme Court decision, states and localities may begin looking at the E-Verify program more seriously.

For those not familiar, E-Verify was created in 1997 as a free and voluntary Web-based program targeting federal agencies and contractors. The program evaluates an employee’s Employment Eligibility Verification Form, known as the I-9 Form, against U.S. government records to determine if they are legally eligible to work in the U.S.

If a disparity is found, the employer is alerted and the employee is given eight federal government work days to resolve the issue while retaining employment. The program, operated by the U.S. Department of Homeland Security (DHS) and the Social Security Administration (SSA), was mandated for all federal agencies and contractors in 2007. Soon after, a handful of state governments began requiring their state agencies to participate in the E-Verify program as well.

There are currently 17 states that require public and/or private employers to participate in the E-Verify program: Alabama, Arizona, Colorado, Florida, Georgia, Idaho, Indiana, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Utah and Virginia. While E-Verify mandates vary from state to state, all of the previously mentioned states require government contractors and subcontractors providing direct services to the state to enroll in the E-Verify program.

The E-Verify program is not without its flaws. In 2010, DHS released an outside study on the accuracy of E-Verify’s ability to identify unauthorized workers. The study found that 54% of unauthorized workers were able to slip past the system and gain authorization to work. The study attributed this high number to identity fraud. An unauthorized worker could cheat the system, by submitting documents from a person who was authorized to work. Since that time, DHS has worked diligently to increase E-Verify’s reliability and accuracy.

In most cases government contractors who knowingly employ unauthorized workers risk having their contract terminated. Penalties range in severity from one government entity to the next. For example government contractors that are found to be some of the most egregious E-Verify violators can face heavy fines, upwards of $2,500 per worker (Louisiana) or even five years in jail (Mississippi). However, in most instances, employers using E-Verify are presumed by the government entity to be in good faith and not subject to penalties should an unauthorized worker mistakenly or fraudulently be given authorization. So, it is in the best interest of the contractor to enroll.

So, how might the Supreme Court decision affect government contractors? Likely, state and local government mandates for E-Verify will pick-up steam. For most large government contractors who do federal and multistate government business, E-Verify is something of an old issue. Smaller and more regional government contractors may have recently ran into E-Verify hurdles, especially as the program becomes more popular among states and localities.

The main obstacles government contractors are experiencing are mostly logistical. Navigating though E-Verify’s enrollment and compliance process can be daunting and confusing to smaller firms with limited resources. Also, arranging to have all new and most existing employees verified within 30 days of a contract award can be a nightmare to medium-sized firms with decentralized staff. If a government contractor does not know where to start and wants to avoid potential fines, they can seek out third-party assistance from E-Verify employer agents who use E-Verify to confirm the employment eligibility of another company's employees. The agents audit all I-9 forms and identify errors to be corrected before submitting them to the government entity.

In light of the Supreme Court decision, and as illegal immigration becomes a bigger issue on the agenda for states, E-Verify will no doubt be a hot topic. Government contractors who are not currently enrolled in E-Verify and do most of their business with states and local government should start investigating the enrollment process now. In the future, E-Verify will become a standard tool and more prominent fixture in the state and local government contracting market.

If you are interested in guest blogging for Deltek’s general government services team, reach out to Jason Sajko at jasonsajko@deltek.com for more information! Meanwhile, be sure to follow us on @GovWin_GenGov!

Sourcefire Outperforming In Cyber Market; Could Serve As Model For Smaller Contractors To Follow

Thu, 14 Jun 2012 13:16:00 -0400

At FIA, we believe Sourcefire Inc., a cybersecurity provider with a comprehensive portfolio of solutions, will continue to increase its federal business while expanding its capabilities in the growing cyber market. The information security market continues to be one of the most attractive growth segments within the federal IT space, and is expected to grow from $9.2 billion in 2011 to $14 billion in 2016, representing a CAGR of 8.8%, according to Deltek’s Federal Information Security Market, 2011-2016 report.

In 2011, Sourcefire generated approximately $34.8 million (21%) of its total revenue from the U.S. government, including the Department of Defense and various intelligence agencies. This compares with $32.7 million in revenues from the U.S. government in 2010, and $30 million in revenues in 2009.

FIA Perspective:

Sourcefire seeing dramatic top-line growth with diversified portfolio. In the latest first quarter, Sourcefire’s revenue shot up 50% to $46.3 million, compared with $30.8 million in last year’s first quarter, reflecting 60% growth in revenue from the company’s federal government sector. In addition, Sourcefire saw its commercial business revenue rise 28% to $20.8 million, while international revenues skyrocketed 87% to $15.7 million.

Sourcefire said its federal government business generated $9.8 million of revenue in the latest quarter, up 60% over the year ago quarter. The company noted that earlier funding of federal agencies versus what the firm experienced last year seemed to stabilize the procurement process, and as a result, Sourcefire saw greater deal flow over last year’s comparable quarter.

Looking ahead, Sourcefire believes it can grow its business by 25% on the top line in 2012, reflecting a growing awareness and demand for cyber security solutions like its Next-Generation IPS, the expanding size of the firm’s total addressable market, and a more stabilized federal spending environment through at least the remainder of the current federal fiscal year. Sourcefire noted that it now expects its federal business to show a 500 basis point to 600 basis point improvement for 2012.

Sourcefire could serve as model for smaller contractors looking to branch out. With Sourcefire sporting a nicely-diversified list of capabilities and solutions across the commercial, government and international markets, the firm’s success could serve as a blueprint for other small contractors in the federal cyber sector to emulate moving forward. In the latest quarter, Sourcefire’s commercial business accounted for 44.9% of the company’s overall revenues, while international and government business checked in at 33.9% and 21.2%, respectively. In addition, Sourcefire also has a nice blend of product and service revenues, which stood at 59% and 41% of total revenues, respectively.

Over the past few years, Sourcefire has continued to develop new security products and services, while adopting an “Agile Security” vision in order to evolve with today’s rapidly changing market. In 2011, Sourcefire launched two innovative solutions into two adjacent markets - next generation firewalls and advanced malware protection. This effort is expected to increase Sourcefire’s addressable market from $1.7 billion to more than $10 billion over the next four years, the company noted.

Sourcefire also continues to grow its international presence, while expanding its relationships with partners, resellers, distributors, and government integrators. In 2011, Sourcefire launched its first North American distribution partnerships with recognized channel leaders, Synnex and Computerlinks, and is now making investments in these partners with the objective of increasing its percentage of channel-influenced revenue. The company also continues to add members to its distribution network. At the end of 2011, Sourcefire had agreements with 576 third parties for the distribution of its products, compared with 339 at the end of 2010.

Overall, we believe Sourcefire’s strategy to broaden in reach while expanding its current capabilities could be a nice model for smaller federal contractor’s to emulate moving forward. With shrinking budgets government-wide and increasing competition from larger players, smaller contractors may need to look outside-the-box, and seek cyber opportunities in commercial and international markets to continue their growth over the next few years.

Also helping smaller contractors is a renewed emphasis on supporting and expanding the role of small businesses in government contracting, as Deltek discloses in its recent Small Business Federal Contracting: Trends and Drivers? report. The report discusses how federal agencies are participating in interagency groups to focus on communicating best practices and proven strategies for increasing small business utilization across multiple agencies, and how small business can achieve success going forward.

Cybersecurity is getting attention at the highest levels, as contractors jockey for market share. According to Deltek’s Federal Information Security Market, 2011-2016 report, cyber attacks are up 650% since 2006, as attackers continue to go after targets to disrupt government operations and U.S. critical infrastructure. However, while agencies continue to make incremental progress toward securing systems and data, environmental complexity, technical challenges, and workforce shortages have inhibited the federal government’s pace in implementing a comprehensive and cohesive national cybersecurity strategy.

While the strategic direction for cybersecurity seems to be hazy at the moment, the Obama Administration has clearly sated that cybersecurity a top-priority. As a result, almost every major IT firm is jockeying to contend for current and upcoming cyber-related opportunities, and we expect these opportunities to multiply over the next several years.

Sourcefire could be seen as an attractive takeover target. Since Sourcefire is a proven supplier with numerous government customers, it could be an attractive takeover target for a top-tier IT firm looking to expand its cybersecurity footprint. IT contractors typically use strategic acquisitions to gain a foothold in growing markets, while broadening their offerings, and supporting organic growth.

Overall, mergers and acquisitions activity in the cyber arena has continued to be robust this year, and we expect this trend to continue throughout 2012. Notable deals in the cyber arena include Dell’s purchase of SonicWall, and ManTech’s acquisition of HBGary. Juniper Solutions has also been active on the cybersecurity front, acquiring Mykonos Software, while Salient Solutions has purchased ATS Corp. to enhance its cyber-related capabilities. We believe that M&A activity in the cyber arena will continue to be strong for the remainder of the year, as larger contractors look to expand their expertise in this growing sector while recognizing the vast number of smaller firms already working on the next cyber threat.

Our Take:

We think that Sourcefire has done a great job over the years in building its comprehensive portfolio of security solutions, while expanding into new and adjacent markets. We also like that Sourcefire has a well-diversified cyber portfolio split among the commercial, international and government markets, and close to an even split between its product and service revenues. Despite a tightening budget environment and competition from larger and better-funded rivals, we believe Sourcefire has what it takes to be successful in the ultra-competitive cyber market, and will continue to gain market share within this high-growth industry over the next several years.

Cities overlook potential of business one-stops

Fri, 11 May 2012 13:44:00 -0400

While nearly every state has some sort of business one-stop in operation, major cities have overlooked their potential value. The U.S. Small Business Administration’s (SBA) Office of Advocacy has found that “(s)mall firm establishment births have a larger impact than any other factor examined on GSP (gross state product), SPI (state personal income), and total state employment.” So, it’s no surprise that governors have been touting the value of one-stops in both good times and bad. Kentucky is the latest state to carry out a major one-stop implementation as detailed in Deltek’s latest report, “State & Local Business One-Stops, 2012.”

In fact, what Deltek calls “Economic Development/Regulation issues” are the second most prominent item in the governors’ annual addresses, second only to education. Anecdotal evidence indicates that these same issues are second only to public safety at the local level. So, why is the market for one-stops so under-developed? Most likely major vendors are not wowed by the small price tag of one-stop implementations, which are often awarded to smaller, local integrators and web-interface developers. Some one-stops are deployed using only in-house resources.

However, timely research funded by the Kaufmann Foundation, which is devoted to promoting entrepreneurship, ranked the states and numerous localities on the “friendliness” of their licensing and regulation. Nearly half the states earned a “C” grade or worse with more than a few getting “D’s” and “F’s.” Results for the cities were equally troubling. These insights can be valuable to vendors looking to seed one-stop opportunities and make a name for themselves with senior decision makers in government.

Analyst’s Take:

While this data does not indicate business one-stop satisfaction for any given state or locality, it certainly appears that one-stop implementations have much potential as opportunities to help streamline business practices and provide more user-friendly interfaces.
Business one-stops have some relatively attractive “soft” (but convincing) return on investment (ROI) for a limited population of end-user business applicants. However, governors and mayors are very tuned in to this constituency. So, despite the modest price tag of business one-stops, they provide vendors with tremendous opportunity to build their reputations as solutions providers at the highest levels of the state and local marketplace.

Hawaii, living up to New Day Plan

Tue, 01 May 2012 13:00:00 -0400

Governor Neil Abercrombie identified three major priorities for the 2012 legislative session under the New Day Plan, with an ultimate goal to change Hawaii’s path by moving away from economic and social policies of the status quo. The governor’s three main priorities are:

1. Immediate job growth to a sustainable foundation – Creating jobs for people so they are able to do more than just make ends meet. This is also expected to improve the business climate for entrepreneurs and small businesses.

2. Invest in education, skills, and the well-being of Hawaii’s people – Building private-public partnerships in early childhood, health care technology, housing, preventative social sciences, and other previously indentified long-term priorities.

3. Transform state government into an efficient and effective enterprise – Rehabilitating the state’s fiscal health, carefully managing cash flow, and professionalizing human resources management to bring out the best of Hawaii’s outstanding public workforce.

Governor Abercrombie achieved many high points during his first year in office under the New Day Plan. The state was initially up against a $1.2 billion deficit between December 2010 and June 2013; however, by the end of June 2011, the state entered the new fiscal year with positive general funding for the first time in three years. Abercrombie’s administration tackled the deficit by reducing the impact on public services. Figure 1, below, shows the state’s all-funds budget’s steady increase year after year.

Technology and innovation are a large component of Hawaii’s New Day Plan. For that, vendors should pay attention to each and every agency within the state. The interest in expanding technology shows the state’s confidence in using technology to increase efficiencies across agencies statewide. Much of the state’s FY 2011-2013 budget is devoted to this area, which suggests statewide opportunity for IT-related contracts.

For a complete analysis on Hawaii’s New Day Plan and upcoming technology initiatives, go here!

Opportunities beyond the portal: The importance of call centers in the insurance exchange initiative

Tue, 17 Apr 2012 12:25:00 -0400

States such as Oregon, Washington, and Nevada, that have either completed or are currently engaged in contracting for their health insurance exchange portal, will have opportunities for vendors to get involved in, particularly with call centers and consumer assistance. These types of contracts are an integral component to the insurance exchange initiative. Customers must be able to navigate through the portals and painlessly seek assistance if problems occur in their purchasing process. Under the Affordable Care Act (ACA), states are required to have toll-free telephone numbers to assist consumers and small employers in all phases of the exchange portal. If consumers are unable to compare and purchase plans with ease, meaningful use (a term coined by David Blumenthal) will be at stake. For that, states realize the importance of consumer assistance in their exchange initiatives.

Numerous states have expressed interest in contracting for insurance exchange call centers, including the following: Missouri, West Virginia, Nevada, Kentucky, Ohio, Illinois, Washington, California, Idaho, Maryland, Tennessee, Arkansas, Arizona, District of Columbia, Oregon, Pennsylvania, Rhode Island, and Delaware.

To learn more about insurance exchanges, download a copy of Deltek’s recent report, “Evolving Health Insurance Exchanges,” here. As always, be sure to follow Deltek’s Health Care and Social Services team on Twitter @GovWin_HHS and LinkedIn to get expert analysis of health IT initiatives across state and local government entities

Purchasing preferences for veteran-owned businesses on the rise

Mon, 16 Jan 2012 12:31:00 -0400

As the unemployment rate for Iraq- and Afghanistan-era veterans continues to climb, more states and localities are establishing purchasing preferences for veteran-owned businesses (VOBs). Current-war veteran unemployment is more than four percentage points higher than the national average of 8.5 percent. According to the Bureau of Labor Statistics, 13.1 percent (248,000) of current-war veterans were without a job as of December 2011. This figure is up from November’s 12.1 percent, and sharp rise from 2007 (6.1 percent), 2009 (10.2 percent), and 2010 (11.5 percent).

Results of the 2007 Survey of Business Owners (SBO), as part of the U.S. Census Bureau, show that 9 percent of businesses were owned by U.S. military veterans. These 2.4 million businesses employed approximately 5.8 million people and accounted for 4.1 percent of all business receipts nationwide, totaling $1.2 trillion. California, Texas and Florida reported having the most veteran-owned businesses across the states, and Los Angeles County, Calif., had more VOBs than any other county (62,667). Additionally, survey figures reported 32.5 percent, or one-third, of VOBs fell under the professional, scientific, technical services and construction fields.

Eleven states currently have legislation in place that gives some sort of preference to VOBs or service-disabled veteran-owned businesses (SDVOBs) in state procurement, according the National Veteran-Owned Business Association. These states include:

Alaska
Louisiana
Michigan
Minnesota
Missouri
Nevada
New Jersey
Oregon
Washington
West Virginia
Wisconsin

Furthermore, four states have laws that set aside at least 3 percent of spending for SDVOBs and VOBs: Arkansas, California, Illinois and Maryland.

Last month, New Jersey became the latest state to establish purchasing preferences for veteran-owned businesses. As part of the new Veteran-Owned Business Assistance Act, the New Jersey Department of Treasury will take special consideration of VOBs when awarding state contracts. The department is also required consult with the Economic Development Authority and the Department of Military Veterans Affairs (DMAVA) in an effort to rally more VOB participation in bidding processes.

Originally, the bill introduced by Ocean County, N.J., legislators proposed a mandated 3-percent set-aside for awarding contracts to VOBs. However, Gov. Christie vetoed the proposition, citing concerns regarding the overall needs of VOBs and the state’s ability to hire contractors.

Christie has been knee-deep in reviewing New Jersey’s procurement activity as of late. He just ordered a comprehensive review of all state purchasing laws and public contracting processes after a report revealed one in five multimillion dollar contracts, or 126 out of 553 purchases, violated state procurement laws. He attributes negligence to a majority of the infringements, though admits corruption probably plays a small part. Christie said he aims to simplify purchasing processes and better educate departments on best practices. He anticipates much of the procurement overhaul will be tackled by year’s end.

Lastly, it looks like Hawaii will be the next state aboard the VOB-preference train. The state’s House Republican Caucus recently introduced a bill requesting that 3 percent of all state contacts – approximately $33 million a year – be awarded to Hawaii-based VOBs. If passed, the bill would authorize a 4.5 percent preference for VOBs and a 5 preference for SDVOBs. The state currently has an estimated 10,300 VOBs and would become only the fifth state to establish a procurement-percentage mandate for VOBs.

Military preference in state contracting is sure to rise as more veterans return home amid an economic downfall. In November, President Obama signed the Veterans Opportunity to Work (VOW) to Hire Heroes Act into law. The act establishes tax incentives for businesses that hire veterans who have been unemployed for at least a month, with even greater tax credits granted to businesses who hire veterans out of work for at least six months. Additionally, the tax break doubles for disabled-veteran hiring.

The VOW act is yet another example in the nationwide effort to acknowledge and protect veterans after they’ve completed their service. From a national, state, and local level, more government entities are reviewing current practices in an attempt to better recognize veteran workers and their businesses. While it may draw criticism from those who oppose preference policies, it is anticipated that more veterans will see an uptick in contracting and employment as states try to bridge the gap between military service and getting back to work. Therefore, vendors outside of the preferential base should consider teaming or partnering with veteran-owned businesses to give their solutions a leg up in the market.

Local purchasing preference in state and local contracts

Tue, 15 Nov 2011 15:45:00 -0400

In order to grow local economies and tax revenue, many state and local governments now take the location of a vendor into account when making procurement decisions. Law and ordinances called purchasing preferences are being implemented across the county in order to give local vendors a leg up in contracting and thus assist states and localities in generating jobs and revenue.

In 2010, the Virginia Department of General Services compiled a table of 38 states’ purchasing preferences. Preferences vary widely across governments, from general needs to specific good and services. Some apply to all bids, while others apply only to contracts worth more than $50,000 or construction projects.

The city of Los Angeles, Calif. recently passed an ordinance that gives Los Angeles-based vendors an 8 percent advantage for bids on city projects worth more than $150,000. For example, a $1 million bid from a local vendor would be evaluated at $920,000. To qualify, businesses must have an address in Los Angeles County and have either 50 full-time employees or half of their full-time employees working 60 percent of the time in the county. The ordinance will go into effect on November 24, 2011. Sponsors of the ordinance believe the new policy will bring in more revenue through sales, property and other taxes from local business employees. GovWin is currently tracking an estimated $14.2 million worth of Los Angeles contracting opportunities that will be affected by this ordinance.

New Mexico also recently passed a law that revised its purchasing preference policy. The state extended its 5 percent bidding preference for in-state vendors to include state contracts for accounting, architecture, law, and information technology. The revision also eliminated a $5 million bid cap included in the original preference. According to bill co-sponsor Senator Timothy Keller, this law will create at least 3,000 jobs each year. The law also stiffens the requirements to qualify as a resident vendor by requiring companies to prove they have leased or owned property in New Mexico for at least five years, paid taxes to the state, and have at least three full-time employees who live in the state. GovWin is currently tracking more than $1 billion worth of New Mexico contracting opportunities that could be affected by this law.

In response to local preference purchasing polices, governments have created reciprocal preference policies that require public contracting agencies to add a percent increase to each out-of-state bidder's price that is equal to the percent of preference given to local bidders in the bidder's home state. That is, if the low bidder is from a state that grants a 10 percent preference to its own in-state bidders, the contracting agency must add 10 percent to that bidder's price when evaluating the bid.

Analyst’s Take:

State and local governments have not sat idle on the sideline while the federal government and big corporations garner most of the job creation and economy-related headlines. They were hit extremely hard by the Great Recession and continue to struggle to keep their books in order as federal aid dries up. State and local governments’ tax revenues are largely tied to economic performance, and right now they cannot afford to wait around for other entities to spur economic growth. Purchasing preferences are tools utilized in an attempt to create jobs and boost local economies. States and local entities need to be efficient and receive the best bang for their buck, as one wrong deal can have devastating effects (see Jefferson County, Alabama).

When bidding on a contract, it is imperative that vendors know the contracting government’s preference laws in order to truly know how a bid will be evaluated. Knowing a bid will be evaluated at 10 percent less or more can completely alter a proposal. Though governments are looking for the best value, it is also important to recognize that it’s not always about the lowest bid. Vendors who know all the rules and laws at hand will have a commanding advantage and be more likely to succeed in the current competitive landscape.

STARCOM 21 Resurfaces

Fri, 16 Sep 2011 11:21:00 -0400

The state of Illinois' STARCOM 21 project that roared with controversy earlier this year has resurfaced once again. A lot of backlash resulted from STARCOM 21's $114 million soul-source contract to Motorola, awarded in May, but that hasn't stopped the project from expanding. Illinois recently decided to contract out radio equipment compatible with the STARCOM 21 network through a new invitation for bid (IFB) released on September 13, 2011. Initially, Harris Corporation filed a formal protest alleging the awarded Motorola contract was a monopoly and bypassed open competition between vendors. The STARCOM 21 network services more than 18,000 subscribers and is owned and operated by Motorola. The intention of the past state procurement was to allow continued use of the existing STARCOM 21 network in order to maintain infrastructure and leverage the original investment. The new solicitation is looking to establish a statewide indefinite quantity master contract(s) for the purchase of STARCOM 21 compatible subscriber radio equipment (P25) along with associated installation, extended warranty, parts, and accessories for various state agencies, officials, boards and commissions. All radios must be FCC type-accepted and PC programmable. Proposals are due October 4, 2011. Vendors with equipment not currently approved for the STARCOM 21 network are eligible to bid, but must have the equipment approved to operate on the network after the award is posted. Analyst's Take With this contract being more equipment-based as opposed to infrastructure-related, this may be an opportunity for new vendors to gain the upper hand. It is likely that big-name corporations such as Motorola or Harris Corporation may not even bid on this contract. Although much controversy may not arise this time around, it is still important for vendors to thoroughly research before bid proceedings. Vendors should find out what most satisfies the customer and then properly gauge their pricing accordingly. Also, it is always important to be aware of protest procedures in the event a contract is deemed unfair.

Obama American Jobs Act: Contractor Implications

Fri, 09 Sep 2011 16:28:00 -0400

On Thursday night, President Barack Obama revealed the American Jobs Act, an ambitious $447 billion package of spending plans and tax cuts designed to stimulate the U.S. economy and create badly needed jobs. And according to Obama, the plan will be paid for in full by rolling it into the list of spending to be offset by the Joint Committee focused on a deficit reduction plan.

Overall, Obama pushed for more federal spending to help jump-start the economy, although he avoided the word "stimulus," which has become an issue with Republicans. Clearly, the GOP will continue to oppose anything resembling the last stimulus, and is quite weary of the threat of continued out-of-control spending.

Below are some key points from Obama's speech which could affect the government contracting community:

Helping Small Businesses ? As part of his infrastructure revitalization plan, Obama called for significant investments in schools, roads, rail and airports while helping small business contractors compete for infrastructure projects. He also called for tax cuts, reforms and regulatory reductions to help entrepreneurs and small businesses access capital and grow, which could benefit smaller contractors just getting started and those looking to expand their operations.
Contractor Impact: Obama's plan includes changing the way the government does business with smaller firms. The Administration will soon announce a plan to accelerate government payments to small contractors to help put money in their hands faster. The President is also charging his CIO and CTO to, within 90 days; stand up a one-stop, online portal for small businesses to easily access government services.

Transportation Infrastructure - Transportation infrastructure presents a double opportunity for Obama - a chance to get Americans working, while modernizing the U.S.'s deteriorating infrastructure. In total, Obama called for $50 billion to be spent on immediate investments for highways, transit, rail and aviation. The President's plan includes investments to improve America's airports, support NextGen Air Traffic Modernization efforts, and resources for the TIGER and TIFIA programs, which target competitive dollars to innovative multi-modal infrastructure programs. Another $10 billion will be spent on an infrastructure bank to help get private funding to support infrastructure-related projects.
Contractor Impact: Infrastructure work would benefit AEC contractors over the next several years. According to Deltek's "Federal Architecture and Engineering Market Outlook, 2011-2016" report, demand for architecture and engineering (A/E) services by the U.S. government will increase from $8.1 billion in 2011 to $9.5 billion in 2016 at a compound annual growth rate (CAGR) of 3.2%. As transportation infrastructure modernization progresses, so does the embedded technology, which could mean additional opportunity for technology contractors.

School Infrastructure - Obama also wants to create jobs to work on construction projects at thousands of deteriorating schools, with rural and Bureau of Indian Education funded schools having top priority. Obama aims to invest $25 billion in school infrastructure, including Internet-ready classrooms. He also emphasized the need to rehire teachers who have been laid off, and will look to spend $35 billion to help protect those teachers.
Contractor Impact: Infrastructure work would benefit AEC contractors and firms that could provide IT enhancements and upgrades. Projects would include energy efficiency upgrades, modernization of science and computer labs and technology upgrades.

Expanding access to high-speed wireless - The President is calling for a deficit reducing plan to deploy high-speed wireless services to at least 98% of Americans, including those in more remote rural communities, while freeing up spectrum through incentive auctions, spurring innovation, and creating a nationwide, interoperable wireless network for public safety.
Contractor Impact: There is opportunity for not only companies that provide wireless network capabilities, but also adjacent technology areas that would be facilitated by broader access, such as telehealth and telework.

Supporting the Unemployed ? The President proposes an overhaul of the Unemployment Insurance program, extending benefits and giving states more responsibility and flexibility to design better programs for reemployment, particularly for the long-term unemployed. There are some 6.2 million Americans who have been out of work for more than six months. States would also have the flexibility to help long-term unemployed workers create their own jobs by starting their own small businesses.
Contractor Impact: Depending on the scale and nature of the overhaul, states may need assistance in developing, implementing and monitoring new programs and information.

Creating Tax Benefits: The Act has several tax incentives for businesses to spur hiring:
- Payroll taxes - Topping the President's jobs initiative is the cutting of payroll taxes. The plan is to expand cuts worth $240 billion so that workers could expect to see their share halved through 2012. This provision would also cut the payroll tax in half to 3.1% for employers on the first $5 million in wages.
- Tax Credits for Hiring the Long-Term Unemployed - President Obama's plan would also give companies a $4,000 tax credit for hiring from the 5 million, long-term unemployed Americans.
- Tax Credits for Hiring Veterans - The unemployment rate for U.S. veterans below the age of 30 hovers around 24%, and that rate could expand. Currently, there are 2 million veterans of the Afghanistan and Iraq campaigns back home. But once those missions fully draw down, that number could easily double, reports say. The "Returning Heroes tax credit" will set aside $5,600 to $9,600 to encourage the hiring of unemployed veterans.
Contractor Impact: Tax incentives are useful to any company struggling with cashflow issues.

Spending Summary

Source: White House Office of the Press Secretary

The biggest criticism of the plan that seems to be leading the online debate is the tax credit element, the argument being that businesses only hire when the demand for their product or service is there, not simply to take advantage of tax credits. I tend to believe this will be true, except for those specific areas of investment that will drive demand and therefore the need to hire (e.g. transportation, education, wireless). Driving demand for struggling businesses in flattened industries outside of these will be an issue.

In the current environment, the first question might be "how will the government pay for all of this?"To pay for the plan, President Obama is calling on the Joint Committee that is currently working on a deficit reduction plan (required as part of the debt ceiling agreement) to find additional cuts. Obama noted that in the coming weeks, he would further outline his deficit reduction plans.

So what are the chances of this act passing Congress? Considering the level of contentious debate that has occurred since the 111th Congress was formed, particularly around budget-related legislation (e.g. FY11 budget, debt ceiling), this bill will likely face the same level of scrutiny. However, there are no less than 26 other job bills that were introduced and stalled in Congress in 2011 (some of them with very interesting names such as the "Keep American Jobs from Going Down the Drain Act of 2011," and "Don't Default on America's Debts and Destroy American Jobs Act of 2011").

I'm sure President Obama is hoping for the "Can We Please Just Pass This Bill Without Drawn Out and Stubborn Debate Act of 2011." And he may get his wish. Spurred by plummeting Congressional approval ratings, negative public perception and plain old weariness of continuous head-butting over numerous issues, Congress may be more willing to compromise than we've seen on any other issue in 2011 - as long as Obama's plan to pay for it comes to fruition.