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Six Things Contractors Should Know About the Federal Shutdown

As industry observers, we've been somewhat trained over the last several budget cycles to expect to be taken to the edge of the fiscal cliff, only to be jerked back at the very last moment. Not this time.  We're in Day 2 of the first shutdown since 1995, and with the debt ceiling debate coming within the next 2 weeks, it seems unlikely that government operations will resume before then.  Contractors are caught in the cross-hairs, so we've assumed some of the most important things to know about government shutdowns, and recommendations for what to do now.

1.    Agencies cannot incur obligations unless it’s otherwise authorized by law; but  they have  permission to incur obligations (but not payments) necessary for  the “orderly termination of an agency’s functions,” and to perform “essential” duties. This includes:
          •   Medical care – Inpatient and emergency outpatient
          •   Activities to ensure continued public health and safety
          •   Continuance of air traffic control and other transportation safety functions
          •   Border and coastal protection and surveillance
          •   Protection of federal lands, buildings, waterways, and other property
          •   Care of prisoners
          •   Law enforcement and criminal investigation
          •   Emergency and disaster assistance
          •   Activities essential to the preservation of the money and banking system
          •   Ensure the production of power
          •   Maintain protection of research property1

2.    Agencies are allowed to spend funds that DO NOT originate from annual appropriations. 
Agencies such as GSA, which funds much of its operations with user fees, have funds to continuing running - at least for now. Obligations made from FY 2013 dollars, and programs funded with multi-year dollars can also continue to operate, however, they may be impacted by the lack of federal employees around to manage them if they are not considered essential services.

3.    A government shutdown impacts everyone, but the scope of the impact depends on who you are. A federal hiatus impacts anyone relying on or providing federal services.

    Non-exempt federal employees:

    •   Depending on the length of the shutdown, they would be furloughed with benefits intact
    •   Based on past shutdowns, Congress often comes back later and provides backpay

    Agencies (depends on the length of the shutdown):
    •   Increased backlogs for transaction and process-heavy agencies like SSA, VA, and State
    •   Ripple effect from delayed programs
    •   Lost revenue from user fees collected for various services across government. Many agencies rely heavily   on user fees and collections. The losses for lost revenue in the 1995 shutdown was the hundreds of millions when accounting for the ripple effect of lost revenue for states and small businesses  that dovetail on some government services.
    •   Administrative costs associated with shutting down and ramping up – this was estimated in the millions for some agencies in 1996.
    •   Additional costs and penalties related to late payments to various entities, including contractors. Contractors can receive reimbursement for some  costs incurred due to the shutdown.
    •   Lost productivity
    •   Loss of disillusioned employees who leave public sector employment

    Federal Contractors:
    •   The ability to continue to work depends on the nature of the contract and where the work is performed.  Information and communications systems that support historically-defined “essential functions” will likely be operational (e.g. supporting defense communication networks, information security, systems related to critical infrastructure protection, etc.)
    •   Implications:
        •   Incrementally funded contracts not funded
        •   Delays in program solicitations and awards
        •   Part of contracts may be essential while others aren’t
        •   Delayed payments - vendors with products paid for in advance are likely unaffected but services not yet rendered will be halted
        •   Direct and indirect expenses due to the shutdown may or may not be recouped
        •   Impact on schedule and milestone-based performance metrics
        •   Potential need for employee layoffs – depends on length of the shutdown

    Citizens:
    •   Services are limited – call centers not staffed; applications for visas, social security and veteran’s benefits are delayed; museums and national parks are closed.

4.    Federal employees supporting essential functions will get paid after appropriations are passed.
However, it’s up to Congress to decide to pay non-essential furloughed employees once the shutdown is over.  In past shutdowns, employees did receive backpay.

5.    The number of essential employees can vary and may be more than you think.
It’s highly likely that more employees will be exempt than furloughed. During the 1996 shutdown:
    •   Roughly 64% of employees of agencies funded through the Commerce, Justice, State and Judiciary appropriations bill were NOT subject to furlough
    •   53% of Interior’s employees were exempt
    •   78% of employees under VA, HUD and the “Independent  Agency” category were exempt.

6.    Mandatory programs are exempt but will still be affected.
For example, Social Security payments will continue and field offices will be open, but they cannot issue or replace Social Security cards.

What Should Contractors Do?
Regardless of whether this shutdown lasts 10 days or 100 days, contractors should have a shutdown plan, because it’s likely that 2013 will not be last year that this occurs.  Contractors should treat like its shutdown plan like a real project with a project owner, and resources assigned to identify and document how schedules, costs, employee status would be affected.  Contractors should:

    •   Review contracts (funding, period and place of performance, statement of work, etc.)
    •   Classify contracts
        •   Essential
        •   Stop work order
        •   Not essential but can be performed
        •   No stop work order but can’t be performed
    •   Separately document costs incurred specifically due to the shutdown
    •   Analyze the impact of:
        •   Award delays
        •   Task orders/Modifications being delayed
        •   Options not being exercised
        •   Work deadlines NOT being extended
    •   If your contracting officers have not been furloughed, talk to them NOW about the potential impact and solutions to mitigate impact once operations resume
    •   Identify possible reassignments for affected employees
    •   Develop contingency plans for subcontractors
    •   Collect outstanding receivables ASAP (if possible)
    •   Reevaluate/slim down your BD pipeline and Bid & Proposal (B&P) costs

The best thing contractors can do now is arm themselves with information about their customer’s plans and positions, and develop internal strategies to mitigate the impact of a prolonged shutdown.

 

Originally published for Federal Industry Analysis: Analysts Perspectives Blog. Stay ahead of the competition by discovering more about GovWin FIA. Follow me on Twitter @GovWinPeterson.

Big Data and Cloud Computing at the Heart of the Army’s Distributed Common Ground System

In a federal market under tremendous fiscal pressure, the Army’s Distributed Common Ground System (DCGS-A) program stands out for its visionary approach to the use of cutting-edge technology solutions. Over the next few years, the consistently well-funded DCGS-A program will seek to make even more extensive use of big data tools, like advanced analytics and visualization applications, hosted and delivered in a cloud setting. These capabilities will provide a consistent stream of intelligence data to Army intelligence, joint Defense components, and the intelligence community, making the DCGS-A one of the most intriguing and forward-looking programs currently in existence.
At the end of last August, the Project Manager Distributed Common Ground System - Army (PM DCGS-A) and TRADOC Capability Manager for Sensor Processing (TCM-SP) hosted an industry event called the 2013 DCGS-A Innovation Showcase.  Speakers at this showcase outlined the way ahead for the Army’s iteration of Distributed Common Ground System.  The presentations included multiple discussions of upcoming requirements and capabilities.

For those not familiar with it, the DCGS-A is a single system that receives data from multiple types of sensors.  This includes data from aerial and terrestrial platforms (e.g., drones and vehicles), from individual soldiers, and from national level intelligence sources.  The system enables this data to be easily shared across the joint Defense environment and with coalition partners while enabling multi-disciplined analysis that fuses signal data, imagery, and human intelligence into a common data product.  Every branch of the Armed Services has a version of the DCGS, making it the de facto tactical intelligence network for the Department of Defense.

The Army’s portion of the DCGS appears to be the most highly evolved, a status that has attracted the attention of Congress for cost overruns and problems with interoperability.  This said, the DCGS-A continues to be one of the Army’s top priorities and largest investments.  The Army has, for example, requested more than $295 million for DCGS-A in FY 2014.  Best of all from an industry standpoint, 100% of these dollars are slated for Development, Modernization, and Enhancement (DME).  DME dollars tend to flow into contracts so this is good news in an overall shrinking market.  Finally, to illustrate just how important the DCGS is to the Army and the DoD, funding for the system in FY 2012 and FY 2013 totaled $239.3 million and $225.3 million respectively.  Again, all of these dollars were for DME so even in the leanest of fiscal years, large amounts of money have continued to flow into the program.

Why has the DCGS-A program been so well funded?  Simple.  It is critical to the national security of the United States.  The DCGS-A program is also notable for its employment of the most forward-looking technologies, including cloud computing and big data analytics.  For example, according to the presentation given by COL Dave Pendall, the Army G2 Liaison to MIT Lincoln Laboratory, the requirements forecast for the DCGS-A include

- Real‐Time Distributed Cloud Architecture and Analytics
- Sensor Situational Awareness, Sensor Collaboration, and On‐Board Processing
- Collaboration Technology and Data Fusion Visualization Tools
- Identity Intelligence
- Network / Data Security Advancements for the Distributed Enterprise at Network Speed

The way ahead for the system is also anticipated to include work developing an interface between the DCGS-A cloud and the Intelligence Community IT Environment (ICITE) cloud.  This interface will enable data from the DCGS-A to be stored in the hosting infrastructure provided by the National Security Agency (NSA).

This brings us to the question of procurement.  The PM DCGS-A makes use of a large variety of acquisition avenues to buy what it needs.  Covering all of these avenues is beyond the scope of this brief blog post, but there is one contract vehicle worth mentioning that the PM likes to use most frequently - the Army’s Strategic Services Sourcing (S3) multiple award IDIQ contract.  Over the lifetime of S3, spending related to DCGS-A amounts to approximately $1.6 billion.  Much of this earlier spending was for systems integration efforts.  Future spending is likely to be related to data fusion efforts (i.e. data cleansing, interoperability, metadata tagging), additional analytics for full motion video analysis, and enhanced geospatial capabilities.  Therefore, to maximize potential for winning business with the PM DCGS-A, one of the DoD’s best funded programs, competing for the next iteration of S3 is essential.

 

Is There a Downside to Strategic Sourcing?

Under OMB’s direction, GSA is driving hard to implement strategic sourcing initiatives for a number of areas of federal spending.  Many in Washington believe broad implementation of strategic sourcing across federal spending could save the government billions each year.  However, could there be a downside to strategic sourcing in the federal space?

A small contingent of industry experts has expressed their concerns about the initiative’s impact on the small business community.  Stan Soloway, President and CEO of the Professional Services Council, testified at a June hearing of the House Subcommittee on Contracting and Workforce on Small Business stating, “If the objective is solely and specifically to optimize government operations, that will drive one set of responses.  If however, the objective is to optimize government operations without impacting current socio-economic or other acquisition policy goals, then additional considerations must be taken into account.”  Soloway fears that on the acquisition front-lines, strategic sourcing may be simplistically interpreted to mean “bulk buying to gain economies of purchasing scale,” even for complex requirements.  Soloway cautions that until the acquisition workforce is substantially educated, the effectiveness of strategic sourcing will be limited and could be negative. 

Industry expert and former Deltek colleague, Ray Bjorklund, now president of Birchgrove Consulting, wrote that he questioned “the statistical foundation for federal initiated strategic sourcing programs” in a March Washington Business Journal Article.  Bjorklund points out that commodity purchases below $3,000, or “micro-purchases,” are perfect candidates for strategic sourcing, however data on these purchases is limited at best.  Bjorklund goes onto say that it can be inferred that a number of these purchases are being made with small businesses, and that small business should “expect and demand that the government use the most complete and robust data possible in designing strategic sourcing programs.”

Additionally, I’ve had the privilege of becoming acquainted with Sam Bornstein, a professor of accounting and taxation at Kean University in Union, N.J., and a partner with the firm Bornstein and Song CPAs and Consultants, who has been studying the impact of strategic sourcing on small businesses for several years.  According to Bornstein, initial savings presented by agencies for the Federal Strategic Sourcing Initiative (FSSI) as it relates to Office Supplies (OS2) doesn’t present the whole picture.

While federal agencies may experience savings, what is not being taken into account is the broader economic impact, according to Bornstein.  For example, when OS2 was implemented in June of 2010, there were 569 schedule holders.  OS2 BPAs were awarded to only 15 contractors.  Bornstein’s firm has interviewed many of the other contractors and the loss of business and jobs has been devastating.  Bornstein believes the federal government should use cost benefit analysis to take into account the economic impact of strategically sourcing each area of products or services before moving ahead with additional strategic sourcing initiatives.  He also encourages small businesses to fight the passage of two bills, HR 2694 and S 1304, that would make FSSI mandatory and implement it across all federal spending.

GSA maintains its commitment to small business through the FSSI and believes that strategic sourcing success and small business success are not mutually exclusive, according to statements made by Jeffrey Koses, GSA FAS Director of Acquisition Operations, before the House Subcommittee on Contracting and Workforce on Small Business in June.

Personally, I’m remaining neutral on the pros and cons of strategic sourcing, while trying to present both sides of the issue.  But I do advocate that small business federal schedule holders educate themselves on the subject and determine the potential impact on their business prior to implementation of an FSSI program in their business area.

 

2013: Year of the Cloud

Those who sell IT solutions to the federal government can be forgiven if they find themselves confused about the appetite of government agencies for cloud services.  After all, there is a lot of contradictory information floating around out there.  Surf the trade publications on a certain day and one might run across headlines claiming that the federal government’s transition to the cloud has stalled.  Visit those same websites the next day and one might see announcements of huge cloud contract awards, like the Department of Interior’s Foundation Cloud Hosting Services IDIQ contract vehicle with a $10 billion ceiling, or the CIA’s award of a single cloud infrastructure contract to Amazon Web Services for $600 million.  With all of this anecdotal information around, what is one to believe about the actual state of the market?
 
My own frustration with this situation hit a breaking point about this time last year.  At that time I decided that squishy, data-free conjecture about trends in federal cloud computing just didn’t cut it any longer.  I needed to get to the reality of the situation and establish a baseline of facts from which I could draw my own conclusions about the use of cloud solutions at federal agencies.  So I began the arduous process of collecting data on cloud procurements to understand what feds were buying, how much of it, and from whom.
 
The results of that research have been appearing in this blog ever since, doled out in dribs and drabs as the limitations of time and space have permitted.  The posts have confirmed to those who read them that feds did not respond to the OMB’s Cloud First mandate just to comply with moving 3 services to the cloud and be done with it.  Instead, federal customers began embracing cloud solutions in 2010 to the tune of awarding nearly $670 million in contracts; and this is only the value of the awarded contracts that I have been able to verify.  As the table below shows, that number grew to just shy of $1 billion in 2011, dipped a tad to $815 million in 2012, and then exploded to almost $16.5 billion in 2013.


 
Now, we need to keep in mind that we are discussing awarded contract value here, not actual spending on cloud solutions.  Remove Interior’s FCHS award with its $10 billion ceiling value and we are left with a ‘paltry’ $6.5 billion awarded so far in 2013 for cloud solutions.  Even $6.5 billion, however, represents compound annual growth of 182% from 2012 to 2013 in an overall declining federal IT market.  That’s real growth at a time when growth is hard to come by.
 
But don’t just take my word for it.  Verizon Enterprise Solutions, themselves a big player in the cloud market, just released a report that provides more data to reinforce what I’ve been writing for many moons.  Here are a few data points from their report, which covers the period from January 2012 to June 2013:
  • The use of cloud-based storage increased 90% and cloud-based memory 100%
  • The number of Virtual Machines deployed grew by 35%
  • Enterprises increased their average monthly spend on cloud by 45%
  • Growth in big data will drive cloud adoption
You see, there need not be any lingering confusion about the strength and direction of the federal cloud market.  The public sector’s appetite for cloud solutions has never been greater and I’m betting the house it will continue to grow.  Federal customers are bellying up to the table to consume industry-provided cloud solutions.  Be sure your offerings are on the menu.
 

 

DoD Targets Rapid Mobile Technology Review and Approval Process

The Defense Department (DoD) supports approximately 600,000 smartphone users, and they are pursuing a strategy to support a broader ranges of devices. Recently, at the annual Forecast to Industry from the Defense Information System Agency (DISA), mobility played a dominant role in discussion.  In particular, goals stressed streamlining the review process for commercial products.
 
DISA presentations depicted a comprehensive mobility concept including capabilities for Voice/VoIP, email, texting, calendar, automation capabilities, unified communications, telecom expense management, mission partner applications, secure access to the Department of Defense Information Network (DODIN, formerly the Defense Information Systems Network, or DISN), and device security. The vision also includes a mobile app store and enterprise Mobile Device Management.
 
 
            Source: DISA                   

 

Historically, it has taken anywhere from nine months to a year for new mobile devices, mobile applications and operating systems to complete the DoD review process. Often, those technologies are outdated by the time they achieve approval. Jennifer Carter, the component acquisition executive at DISA, described one of the process challenges, saying, “The traditional DoD cycle times do not meet what is needed to get these capabilities out to the warfighter, and we don’t want to be where by the time we issue the device it’s obsolete and … you have to buy it on eBay.” The address this lag, DoD is partnering with industry to achieve more rapid deployment of commercial technologies by streamlining review and approval cycles. These goals will include 30 day turn around cycles for new hardware, new applications, and new operating systems.

 
Of the 600,000 smartphone users in the DoD, 470, 000 use BlackBerry handsets and 130,000 are piloting iPhone and Android devices for security trials. Back in May, DoD approved the use of Samsung’s hardened version of Android (Knox) in smartphones and BlackBerry 10 devices. The Knox took a noteworthy approach to the Security Technical Implementation Guides (STIG) by proactively considered the DoD’s security requirements.
 
The discussion also called out support needed from industry to close a number of gaps. Moving forward, DISA will be looking for
·          security built into products,
·          alignment with NSA protection profiles,
·          enterprise license agreements for commercial applications,
·          enterprise based cost models, and
·          continued advancement of enabled secure mobile applications.
 
Mobility contracts opportunities on the horizon include gateway procurement and enterprise solutions for mobile applications. The gateway request for proposals (RFP) is anticipated during the first quarter of FY 2014. This will be a single award for a firm-fixed price contract. The request for information (RFI) for mobile applications solutions is also expected during the first quarter of FY 2014.
 
Originally published for Federal Industry Analysis: Analysts Perspectives Blog. Stay ahead of the competition by discovering more about GovWinIQ. Follow me on twitter @FIAGovWin.

The Convergence of Cloud Computing and Cyber Security

At the Defense Information Systems Agency’s recent Forecast to Industry event, Mark Orndorff, the head of Program Executive Office Mission Assurance and Network Operations, described DISA’s effort to develop an analytics cloud that will provide the DoD with enterprise cyber security capabilities.  Based on a similar cloud-based approach to security used by the National Security Agency, DISA’s analytics cloud will be called ‘Acropolis,’ after the temple to Athena, the Greek goddess of wisdom and war.  Once it is complete, Acropolis will provide continuous monitoring, cyber-attack analysis, insider threat analysis, and operations situational awareness for the entire Department of Defense, including the Military Departments and Combatant Commands (COCOMs).  Mr. Orndorff’s public statement comes at roughly the same time as the Department of Homeland Security and General Services Administration’s announcement that awards have been made for a $6 billion Continuous Diagnostics and Mitigation, Tools, and Continuous Monitoring-as-a-Service contract that will enable all federal agencies to procure the latest in cyber security technology.

The fact that cyber security and cloud computing are being mentioned in the same breath more and more these days is no coincidence.  Federal agencies are finding that they can easily leverage cloud-based solutions to address many of their cyber security requirements; from continuous monitoring and identity verification to digital certificate security.  This is a trend that has been developing over the last few years, with the total contract value of awards in this area recently rising to more than $6 billion, thanks to the latest announcement from DHS/GSA.

To get a sense of what kinds of projects have been underway, the following table illustrates as best I’ve been able to determine when and to whom cloud contracts have been awarded for cyber security related requirements.


This data reflects the fact that 2011 was the breakout year for cloud computing in the federal and government.  Not only did the total value of awarded contracts begin climbing that year, the variety of uses for cloud-based solutions also began to diversify.  For example, the use of cloud solutions for cyber security requirements was one of those areas where that growth began to appear.  This trend continued to gather speed in 2012 and 2013.  As a result, I expect to see a lot more contract awards for cloud-based cyber security solutions in the years to come.

 

 

Federal CIO Council Restructures

The federal Chief Information Officer (CIO) council is reorganizing to support federal IT priorities: Innovate, Deliver, and Protect. Specific projects will be managed by committees aligned to technology focus areas like program governance, technology adoption, and security.
 
 

 
 
Each of the three committees targets a priority area for federal information technology.
 
 
·            The Information Security and Identity Management Committee (ISIMC) provides a collaborative forum for agency CIOs and Chief Information Security Officers (CISOs) to identify and develop policy recommendations for high-priority security and identity management initiatives.  This committee will be led by Rob Carey, the deputy CIO for the Defense Department, and Luke McCormack, the Justice Department CIO.
 
·            The Innovation Committee will work to enable a 21st century government through the use of new technologies for delivering digital services, deploying mobile technology, exploring modular IT development strategies, and leveraging federal data as a strategic resource. Reportedly, this group will support open data initiatives. This committee will be led by Casey Coleman, the General Services Administration's CIO, and Margie Graves, the Homeland Security Department's acting CIO.
 
·            The Portfolio Management Committee will focus on agency-wide best practices for governance and management processes, optimization of commodity IT resources, adoption of shared services platforms, and enterprise architecture. This committee will be led by Interior Department CIO Bernie Mazer and Bob Brese, the Energy Department's CIO.
 
Along with these committees, the council will work with task forces for data center consolidation and shared services. These task forces will support the sharing and disseminating of best practices and lessons learned across agencies from the two government-wide initiatives. Comprised of data center program managers, facilities managers, and sustainability officers, the Data Center Consolidation Task Force will work to progress towards the government’s consolidation goals. To support these goals, the task force will be working on data center metrics to incorporate into PortfolioStat conversations. The Shared Services Task Force will bring together agency shared service representatives to promote the use of inter-agency shared services for commodity IT, support and mission services.
 
This restructuring is the first of this extent in several years. And the move comes as the council is positioning itself to be more engaged with other CXO councils and across the federal community.
 
Originally published for Federal Idustry Analysis: Analysts Perspectives Blog. Stay ahead of the competition by discovering more about GovWinIQ. Follow me on twitter @FIAGovWin.

The five council committees will consolidate into three main ones, which will work with two task forces and support information exchange activities for several self-organizing communities of practice.

Federal IT Busy Season, Pt. 2 – September Rules!

Traditionally, August is a slower time in Washington with the summer temperatures at their highest and many people taking vacations. But for some, August is when they get busy ramping up for the close-out of the federal fiscal year (FY) at the end of September. This is especially true for IT procurements where in the overall game of yearly spending, September brings the lion’s share.

In my previous entry, I noted the historical trend of a growing percentage of IT obligations being reported in the fourth quarter of the fiscal year, resulting in what we have come to reguard as the federal IT busy season. That could shape up to be around $28 billion in IT spend in Q4 of FY 2013, even if we see a 5% reduction in spending from last year.

This week I want to drill down into Q4 a bit more.  I took the total IT contract obligations for the past five completed fiscal years, 2008-2012, and looked at the average percentage of these obligations that were reported in Q4. I then broke out the average percentaged of these obligations that came in September.

The data is telling.  Of the $380 billion in reported IT obligation over the last 5 years from FY 2008 through FY 2012, nearly 40% has come in Q4 and 23% has come in September alone. That translates into an average of over $29 billion in IT in each Q4 and and average of more than $17 billion in IT obligations in each September. (See table below.)


To get a sense of which departments are the top prospects for IT buying in Q4 I looked at the top 20 departments by aggregate 5-year obligations and broke down the percentages of their spending that fell in Q4 and in September in particular. This too was interesting. The data shows that several departments obligate more than 40% of their IT dollars in Q4, on average. These include the State Department, SSA, HHS, Energy, Interior, DHS and Justice. In addition, several departments obligate more than 25% of their IT spend in September, on average, including State, SSA, HHS, Interior, DHS and Justice. (See chart below.)



So what do these average percentages mean for potential contracts in last few weeks of the fiscal year? Looking at the departments with the highest average level of obligations for September and the overall quarter gives us a sense of who has spent how much in recent history. These departments account for nearly $17 billion in September obligations. (See table below.)  The remaining 35 reporting agencies account for less than $500 million in September obligations by comparison. 



All of this underscores what many in the industry have experienced for many years. The fourth quarter is huge in federal IT and when it comes to closing business in Q4 it all comes down to September.

Granted, it is difficult to conclude with absolute certainty that the spending patterns we have seen over the last 5 years will hold true this year as well – especially at the same levels.  Delays and reductions related to sequestration and operational risks introduced by the furlough of acquisition staff introduce some of the greatest unknowns into the picture that we have seen.  Further, ongoing budget pressures and appropriations delays may be taking their toll. In FY 2012, total IT obligations were $3.5 billion less than in FY 2011 and Q4 obligations were down about 10% over Q4 FY 2011. 

So while Q4 of FY 2013 will be big – barring a total change in the “use it or lose it” mentality that has permeated the federal culture for so long – we’ll just have to wait and see just how big it really is.

---
Originally published for Federal Industry Analysis: Analysts Perspectives Blog. Stay ahead of the competition by discovering more about 
GovWin FIA. Follow me on Twitter @GovWinSlye.

 

The Federal Aviation Administration Turns to the Cloud for NextGen Solutions

It has been 14 months since the Federal Aviation Administration (FAA) published its cloud computing strategy.  In that time, the agency has made progress toward using cloud solutions on a large-scale.  The going so far has been slow, just as the agency promised it would be in its strategy document, and as former acting DOT CIO Tim Schmidt reiterated at an industry event in January of this year.  Recent events suggest, however, that the FAA is poised to enter the cloud market in a big way, providing business opportunities for infrastructure providers and systems engineering firms alike.

FAA Cloud Services

In terms of infrastructure, the FAA has settled on a strategy that leverages an industry partner capable of hosting government owned computing and storage hardware in a commercial facility.  The selected partner will also provide additional cloud infrastructure as required, as well as platform-as-a-service (PaaS) and software-as-a-service (SaaS) cloud services.  These services are all required as part of a large acquisition the FAA is conducting for FAA Cloud Services (FCS).  After releasing a Request for Information for FCS in July 2012, there had been little activity associated with the procurement.  Then, in April of this year, the agency released a draft procurement package outlining the requirements in greater detail.  This package makes it clear that much like the Intelligence Community and the Department of Defense, the FAA will spend a majority of its cloud dollars in the near-term on industry provided infrastructure.  Additional cloud services, e.g., the migration of applications, will be required as the model proves itself.  The industry partner will also be required to ensure that the facility and services provided operate smoothly with the FAA’s Telecommunications Infrastructure (FTI) and other networks and systems.  The solicitation for FCS is currently anticipated to be released in August 2013.

Systems Engineering Efforts

This brings me to the other cloud-related efforts underway at the FAA.  The most important of these is the System Wide Information Management, or SWIM, program.  SWIM was developed on a service-oriented architecture to be a data sharing hub between the various elements of the Next Generation Airspace Transportation System (NextGen).  The effort to cloud-enable SWIM has been underway since 2011, with work being performed by Noblis (Order #18 on contract #DTFAWA11D00051) and the North Star Group (Order #2004 on contract #DTFAWA10C00032).  The SWIM program has been well over budget and it is years behind schedule.  Currently, the SWIM program office anticipates Segment 1 of this system will be fully operational in FY 2015.  Presumably work on Segment 2a, introducing an enterprise messaging system via nodes in the National Airspace System, will also have begun by this time.  My expectation is that SWIM will be hosted in the FCS cloud facility.

Another system that appears destined for the cloud is the Common Support Services-Weather (CSS-Wx) program.  CSS-Wx is intended to be the single source of aviation weather information for the FAA and the data will be distributed via the SWIM system.  So, work will be required to engineer CSS-Wx for interoperability with SWIM.  CSS-Wx also will be hosted in the facility provided by the FCS vendor.

Finally, there is the Aeronautical Information Management Modernization (AIMMS2) effort to consider.  AIMMS2 provides an automated interface through which “Management of Airspace for Special Use Special Activity Airspace (SAA) assignments, schedules, coordination, and status changes” are communicated.  Like CSS-Wx, AIMMS2 is supposed “to take advantage of FAA-provided cloud infrastructure for its implementation,” and it leverages the SWIM program for data sharing, meaning that it too will require development, testing, and engineering to be interoperable.

These efforts illustrate that work related to both NextGen and cloud computing is beginning to appear in FAA procurements.  Industry should expect more projects to appear in the years to come, as the FAA gets its cloud infrastructure established and gains experience with a cloud-based approach.  This is a welcome surprise in a market where finding business opportunities can be challenging, particularly because as of last year it appeared that the FAA was going to use its own internal cloud infrastructure to host NextGen components.  One other thing to note about these efforts is that the FAA is not thinking short-term for them.  The potential duration of the FCS, CSS-Wx, and AIMMS2 awards is in the range of 10 years apiece, so vendors who lock up this work will have it for a long time.

 

Could We See $230 Billion in Fourth Quarter Federal Spending?

As we enter the second half of July federal agencies and contractors alike are preparing for the close out of fiscal year (FY) 2013, ending September 30th. This is commonly referred to as the “federal busy season,” when agencies work to finish up whatever procurements they need to award within the fiscal year, and is often characterized by a flurry of last-minute spending in a “use it or lose it” mentality. So will we see such a spending spree in the age of sequestration and widely-reported budget constraints?  Even with these uncertain factors, recent spending data suggests that we still could see more than $230 billion in contracted spending in the fourth quarter (Q4) of the fiscal year.

Previously, I tried to beat back some of the fear and uncertainty with some data analysis. In a previous blog post I looked at the reported Q1-Q2 obligations among the top spending 20 federal agencies for FY 2012 to try to estimate what we might possibly see for FY 2013, even if we experience a 10% across-the-board reduction in contracted spending.  Given that the Department of Defense (DoD) and several other departments tend to lag by 90 days in some of their contracts reporting I thought an update and comparison might be informative.

The results for these lagging agencies are not insignificant, especially for the defense branches. (See table below.) The Q1-Q2 data reported by the beginning of July (green) included some sizeable increases compared to the same quarters reported at the beginning of April (blue). The differences are noted in both dollars and percentage (red).  Note that all the FY ’13 percentages and remaining dollars are based on an assumption of 10% reduction from FY ’12 levels.

 

The data reporting lag among these 20 agencies resulted in $60 billion in obligations being reported in the 3 months after the close of Q2. So when it came to assessing where we are at the end of Q3 and what is potentially left to spend in Q4 I wanted to factor in this data lag to get as accurate a picture as possible, given the available data.

FY 2013 Q1-Q3 Obligations and What’s Left for Q4

Completing a similar FY 2012-2013 comparison for Q1-Q3 reveals that the top 20 agencies could have over $225 billion left to spend in Q4, even with a 10% cut from FY 2012. (See table below.) The remaining federal agencies that report to FPDS account for an additional $5 billion under this framework.

In an attempt to account for the delayed reporting by DoD and select other agencies, the Q3 data, which is the lagging quarter, is adjusted according to the percentage difference between April and July Q1-Q2 data in the table above. While this is not perfectly precise, I believe it is a reasonable approach to mitigate for the data lag and give us a little better shot at seeing what Q4 might look like. (The 90% assumption still applies.)

 

 

Comparing the historical Q1-Q3 percentage of total yearly obligations for FY 2012 and a projection for the same for FY 2013 shows that many of the departments have a hefty chunk left to spend and that has been their historical norm, at least for FY 2012.

To put this into the total federal context, all reported federal contract obligations for Q4 of FY 2012 were $161 billion and total FY 2012 contract obligations topped $517 billion. Total FY 2013 obligations for Q1-Q3 total $240 billion, when accounting for data reporting lags by the Defense Department and other agencies.

So if my 90% assumption were to play out and my data lag adjustment is anywhere in the ballpark we could see total FY 2013 obligations top out at $465 billion with nearly half of FY 2013 obligations coming in the Q4. That sounds like folks will be pretty busy to me.

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Originally published for Federal Industry Analysis: Analysts Perspectives Blog. Stay ahead of the competition by discovering more about GovWin FIA. Follow me on Twitter @GovWinSlye.
 

Want more?  Get additional perspectives and a deeper dive into the potential for a big Q4 with our free July 30, 2013 webinar: Pent Up Demand: Prepare for the Fourth Quarter Super-Sized Spending Spree

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