Like all of the Department of Defense, the U.S. Army has struggled in recent years to adapt to declining funding. In response to the tightening fiscal situation, Army leadership has introduced measures that are intended to reduce spending on information technology products and services. As these measures evolve they are reshaping the Army’s IT acquisition environment in dramatic ways. The number of acquisition vehicles that contracting offices can use has been limited, the type of IT hardware and software Army customers can buy has been restricted, and the number of service contracts competed has been reduced. The result is an increasingly challenging business environment that presents considerable difficulties for IT vendors.
Background
Cost reduction efforts introduced in 2011 centered on an initiative called the “Army Request for IT.” ARFIT introduced measures intended to drive down IT costs, including:
- Stricter administrative oversight to capture the amount of money being spent on software, hardware, and IT services
- Reducing the amount of funds flowing through higher cost, non-enterprise contracts for IT SW, HW, services, and maintenance agreements
- Maximizing cost-effectiveness by increasing use of the Army’s Computer Hardware, Enterprise Software and Solutions (CHESS) Program
- Improving the security of the Army’s LandWarNet Network
Administrative responsibility for ensuring that ARFIT measures were implemented was initially assigned to four Gatekeepers – the Office of the Assistant Secretary of the Army for Acquisition, Logistics and Technology (ASA-ALT); the Office of the Assistant Secretary of the Army for Financial Management and Comptroller (ASA-FM&C); Army Materiel Command (AMC); and Army Cyber Command (ARCYBER).
One year later, in June 2012, John McHugh, the Secretary of the Army, published a memorandum outlining the responsibilities of three organizations designated as gatekeepers (AMC was dropped from the list at this point). In this memo the SECARM sharpened the stick of Army IT acquisition reform into a point.
- The ASA-ALT was directed to enforce the spending of funds through the appropriate authorized contracting vehicles, especially the contracts provided by the Army’s CHESS program and the DoD’s Enterprise Software Initiative Blanket Purchase Agreements
- The ASA-FM&C was made responsible for ensuring that Army commands execute IT purchasing in compliance with stated policy (i.e., Commands use CHESS and ESI to the greatest extent possible)
- ARCYBER was made responsible for ensuring that IT products and services properly align with the Army’s efforts to secure and defend its networks
Finally, so far in FY 2013 two critical developments have appeared in relation to ARFIT. First, in February 2013, the Army CIO/G6 released detailed guidance concerning IT Management Reform. ITMR calls for ARFIT to be fully implemented no later than the end of FY 2013. Second, in June, the SECARM issued a memo removing the authority of Product Director CHESS to issue waivers for Army customers seeking to purchase commercial-off-the-shelf (COTS) IT. Starting on 1 July 2013, most Army customers (except the U.S Military Academy and those responsible for non-Program Executive Officer/Project Manager managed Military Intelligence Program (MIP) systems) will be required to submit COTS IT waiver requests to Army Headquarters directly for approval.
Implications and Opportunities
The implication of AFRIT for vendors, especially those who sell COTS IT, is stark – either your company wins a spot on CHESS commodity IT contracts or you can forget doing business with most Army customers. This is of course unless your company sells its products through resellers who hold a CHESS contract. Services vendors retain a wider variety of possibilities because of the Army’s size and ongoing struggle getting a handle on services procurement. This said, even Army IT services spending over the next few years is expected to decline.
One possibility in this environment is to compete for the next iteration of the Common Hardware Systems 5 (CHS 5) contract. The current CHS 4 contract held by General Dynamics is due to expire in August 2016, meaning vendors should see procurement activity begin in FY 2014. Then there is the upcoming competition for the follow-on to CHESS’ IT Enterprise Solutions 2 Services (ITES 2S) contract vehicle. ITES 2S is one of the Army’s most used IT services contracts so winning a spot on ITES 3S would be a key victory. GovWin expects the competition for ITES 3S to begin in Q2 FY 2014.
