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A do-over for LA-RICS?

As reported in this morning's Los Angeles Times, Los Angeles County announced its estimated $700 million Regional Interoperable Communications System (LA-RICS) project is in jeopardy. Patrick Mallon, the project's executive director, announced yesterday that, to comply with various California codes, the project should have been divided into three separate contracts: one for design and implementation of the system's technical components; one for the design of the signal towers and other structures; and one for the actual building of the towers and structures. As it stands now, the project was only procured for through one, all-encompassing solicitation meant to lead to a single contract.

The goal of the project, which has been in the works for three years, was to create a modern, integrated wireless voice and data communications system to support more than 34,000 first responders and mission-critical personnel within the Los Angeles region. The project was originally designed after September 11, 2001, when it became clear that interoperability among first responders was a vital, yet severely lacking component to emergency response. The county began planning the project to ensure the thousands of first responders and emergency workers could communicate in the event of a large-scale crisis. While the events of 9/11 precipitated dozens of hearings on the issue of interoperability, and hundreds of similar ventures across the county, the LA-RICS project is one of the largest and most well-known of its kind. The county received more than $250 million in federal funding to complete the project, which could be lost if the procurement process has to start over since the majority of funding streams have strict deadlines associated with them. Without federal funding, the entire project could be in jeopardy. Members of the project's oversight board are expected to travel to Washington, D.C. to request extensions of the various deadlines so the money can still be used.

Analyst's Take:

This contract has been marred with numerous problems, including delays and protests, since the early procurement stages. A solicitation released on April 5, 2010, was open until August 4, 2010, and required potential vendors to attend two mandatory conferences. The county began negotiating a contract with Raytheon just last month after resolving an initial protest from Motorola. Given the recent developments, it seems Motorola and other interested parties may still have a chance to secure involvement in at least a portion of the project. The field of participants is likely to open up now that the scope of work is smaller, and more specialized firms will now have a chance to get a piece of the pie.

Los Angeles County has shown its cards, and while the details of the new solicitations remain unknown, the specifications and requirements are likely to be largely the same. This will give vendors already familiar with the project a leg up as they begin to rework their responses. Interested vendors should begin to gear up again and start reviewing previously submitted proposals and pricing requirements. Vendors should also begin determining which solicitation they will respond to in case restrictions limit companies from responding to more than one. With so much up in the air, including whether the project will even survive if federal funding is lost, vendors are likely to have a significant amount of time to prepare their new responses; however, they should begin reaching out to project officials in the near future.

Reboot from the MN shutdown: Important RFP and big changes to state IT and procurement

The history

If you read my previous blogs (here, and here ), you already know that Minnesota has been through the ringer with its government shutdown. In fact, the 20-day stoppage was the longest in U.S. history. The standoff ended on July 20, 2011, when the governor finally signed the budget (I predicted the deal on July 19 in my previous blog – pretty close).

The state needed to solve a budget deficit of $3.4 billion to $5 billion, depending on the source. However, all sources agreed that after the first round of legislative budget wars, there was a $1.4 billion gap between the Republican and Democratic plans that needed to be closed. The Republicans suggested deeper cuts, but also suggested borrowing more from future budgets (K-12 schools) and receipts (tobacco). Governor Dayton wanted to raise taxes on the wealthiest Minnesotans and cut less.

The result was a plan with big compromises from both sides. "I'm not particularly happy with this budget I've just signed into law ... I signed it because otherwise Minnesota wouldn't go back to work," Dayton said.

My recap and analysis below includes the political fallout, important procurement changes, and major IT implications coming out of the turmoil.

The anger

Voters in the state are angry, and the political turmoil will have definitive consequences considering both sides expended precious capital in the battle.

One Democrat voter said, "Let's vote them all out because they just can't even work together." A Republican voter indicated similar distaste: "Their deal is to financially manage the state, which clearly means they didn't do their jobs."

University of Minnesota political science professor Larry Jacobs also had a say in the matter. "The legislators are going to be first exposed to what might be rageful voters looking to punish politicians who contributed to the shutdown," he predicted.

Former Lt. Governor candidate and writer Annette Meeks also believes 2012 "will be the Wild West of elections" for Minnesota.

Former Minnesota Representative Matt Entenza summed up the problem as bitter partisan politics in the state. "In Minnesota politics, we've moved backwards, and now we're to a point where compromise is a dirty word. You hear a lot of politicians say, 'Well, I can't compromise because if I compromise, the voters who I listen to are going to be mad at me.' And that makes for a state in a lot of gridlock."

Despite the rhetoric and potential political backlash, Minnesota is slowly getting back to business. This is good news for all contractors interested in doing business with the state. However, it will not exactly be business as usual, as the new budget changed law governing both procurement and IT. The changes bring good news both for the state and the vendor community.

The future of procurement

The state is looking more toward strategic sourcing as a methodology for procurement, which is a big change. By September 11, 2011, the commissioner of administration will issue a request for proposals (RFP) to promote the use of data analytics for efficiencies in strategic sourcing. Here are the details:

1) RFP basics - RFP may require the vendor to provide recommendations for improvements to methods used by the commissioner to analyze and reduce spending on goods and services including:

  • Spend analysis
  • Product standardization
  • Contract consolidation
  • Negotiations
  • Multiple jurisdiction purchasing alliances
  • Reverse and forward auctions
  • Life-cycle costing
  • Other procurement techniques

2) Proof of concept – The RFP may require the vendor to enter into a proof-of-concept phase demonstrating the cost savings to be achieved through the recommendations. Proof of concept will be at no cost to the state.

3) Vendor selection - Should be selected by January 1, 2012.

4) Progress report – The Commissioner of Administration must provide a report describing progress made to the governor and legislature by January 15, 2012.

In brief, this is a liquid gold opportunity for contractors willing to work proactively, collaboratively, and strategically with the state in determining the direction of future procurement. Come with data about both process and product to win. In lean times, states want to be educated about how to best do business. So, the winning bidder must be willing to not only educate, but also demonstrate how the state can and will save money. Minnesota is serious about saving money, and this RFP makes saving money through procurement a necessity. In the end, strategic positioning with the state and partnerships with other vendors make this a significant opportunity with the potential for many hidden wins moving forward.

Note: GovWin has a tracked opportunity (subscribers only) for a related RFP already released by the state. This legislation may either be clarification and codification of the already existing opportunity or may be expansion of the opportunity. Stay tuned as GovWin further researches this and other related solicitations.

The future of IT

A legislative surprise coming out of the reboot is an overhaul of IT governance and procurement. Included in the new legislation is a consolidation of most IT functions to the Minnesota Office of Enterprise Technology. The details and implications are outlined below.

Office of Geospatial Information

  • Led by the Geospatial Information Officer, who is appointed by the Chief Information Officer (leadership changed from Department of Administration)
  • CIO now has the authority to determine when geospatial resources are more cost effective when shared across agencies
  • CIO now has the authority to determine rates of reimbursement, fees, and payments from other agencies for geospatial services
  • CIO is now responsible for creating an agency advisory board, including appointing officers

IT and the Office of Enterprise Technology (OET)

A. CIO - responsible for providing or entering into managed services contracts for the provision, improvement, and development of the following information technology systems and services to state agencies:

  1. State data center
  2. Mainframes including system software
  3. Servers including system software
  4. Desktops including system software
  5. Laptop computers including system software
  6. Data network including system software
  7. Database, electronic mail, office systems, reporting, and other standard software tools
  8. Business application software and related technical support services
  9. IT Help desk for items 1-8.
  10. Maintenance, problem resolution, and break-fix for the components listed in 1-8
  11. Regular upgrades and replacement for the components listed in 1-8
  12. Network-connected output devices

B. State IT employees - All state agency employees who directly perform the IT functions outlined above (including those who provide administrative, managerial, and support services to those employees) are now considered employees of the OET. The CIO may assign employees of the OET to work exclusively for another agency.

C. Other agencies' IT procurement – Other state agencies may procure goods and services normally under the authority of the OET if the CIO and the agency together determine that such a contract would provide the best value. The CIO can require any contracts secured by outside agencies to be compatible with statewide standards.

D. Other agencies not included - The Minnesota State Retirement System, the Public Employees Retirement Association, the Teachers Retirement Association, the State Board of Investment, the Campaign Finance and Public Disclosure Board, the State Lottery, and the Statewide Radio Board are not state agencies for purposes of the new law. The OET will report to the legislature on the desirability and feasibility of entering into service agreements with the above agencies by January 15, 2014.

E. Technology Advisory Committee - The Technology Advisory Committee is created to advise theCIO. The committee consists of six members appointed by the governor, with one member appointed by the governor as a representative of a union that represents state information technology employees, and one member appointed by the governor to represent private businesses. Advising duties of the committee include:

  • Development and implementation of the state information technology strategic plan
  • Critical information technology initiatives for the state
  • Standards for state information architecture
  • Identification of business and technical needs of state agencies
  • Strategic information technology portfolio management, project prioritization, and investment decisions
  • The office's performance measures and fees for service agreements with executive branch agencies
  • Management of the state enterprise technology revolving fund
  • The efficient and effective operation of the office

F. IT grant review – The OET will now review any requests for grant funding that have an IT component.

G. IT appropriation and spending – The CIO must manage and disperse all IT-related appropriations beginning July 1, 2013. The CIO must control and direct all IT and telecommunications-related spending by July 1, 2013.

H. Transfer and transition to centralized services – All powers, duties, responsibilities, personnel, and assets relating to function assigned to the CIO are transferred to the OET from all other state agencies by October 1, 2011. Agency CIOs will transfer 30 days after final enactment.

I. Service-level agreements with other agencies and the OET – The CIO and OET must enter into service-level agreements with all other agencies for all IT services, assets, and personnel by July 1, 2012.

J. OET sunset clause – The OET will undergo sunset review by June 30, 2022.

Final Analysis

Minnesota made history in its 20-day shutdown. Through the turmoil, governance of state IT and procurement changed. I believe these changes benefit both the state and vendors. In the current economic climate, the state needs to save money. By relying more heavily upon data-driven procurement, the state can do just that. Vendors who have done their research and understand the analytics behind demonstrating real cost savings stand to make huge inroads in doing business with Minnesota. For some vendors who have not relied on detailed analytics and data to show value, this may provide a pain point. However, these same vendors now have the opportunity to grow the data and analytics that accompany their solutions. Improving the ability to quantify the value of a solution through doing business with Minnesota will increase the marketability of similar solutions to other states.

IT governance and its related power structure have certainly shifted in the state. Again, I believe this is a benefit for both the state and contractors. With virtually all IT planning and procurement being handled through the OET, vendors now have a focal point for strategic and collaborative efforts. Vendors with enterprise capabilities now have a captive audience for solutions. Other vendors able to enter into cooperative or term contracts will now have the opportunity for larger-scale procurements as the OET manages yearly purchases of commodities like IT hardware. As I indicated previously, I would also look for future consolidation efforts to be headed up by the OET. While large in scale, as demonstrated through this legislation, any such consolidation projects must demonstrate cost savings.

Will the 2012 legislative session truly be the Wild West? Will current elected officials find themselves quickly shown the door? That remains to be seen. However, with Minnesota's fast-changing IT and procurement climate, vendors have immediate opportunities to make inroads.

Sources: GovWin, Minnesota S.F. No. 12, as introduced - 2011 1st Special Session [11-3590], and Minnesota Public Radio.

For a more detailed analysis, including the IT and procurement impact of each component of the new legislation, read my Analyst's Perspective, here (subscription required).

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Guardians of the cloud

Cloud computing applications and solutions continue to be one of the hottest trends in the public and private sector today. This should come as no surprise to anyone who has paid even marginal attention to the government contracting market over the past two years. Going to the cloud is often cheaper, more efficient and easier to maintain than traditional software, email and storage options. At a time of shrinking budgets and drastically reduced prospects of federal aid, state and local governments are clamoring to implement cloud solutions where practical in order to start reaping financial benefits as soon as possible.

"Where practical" are the operative words in this equation. Information technology departments and their CIOs are anxious to utilize the cloud, but not if it means exposing their records and data to lower security standards. According to a November 2010 survey of 460 government officials by the 1105 Government Information Group, more than half (55 percent) of those surveyed believe cloud solutions are not secure enough, while nearly three-fifths (59 percent) believe traditional IT solutions are safer. A 2011 survey of U.S. business and IT professionals by the Information System Audit and Control Association found that almost half (46 percent) of respondents reported not using cloud computing at all or only for non-mission-critical functions. The number of respondents who believed the risks of cloud computing outweighed the benefits (41 percent) was twice as large as the group that believed the reverse (20 percent).

While concerns about security have diminished as stakeholders learn more about the technology, and industry leaders begin to address those worries, "is it safe" continues to be the number one question asked by governments after "how much money will this save us?" Vendors have to be able to provide satisfactory answers for that first question before they try to hook governments on the potential of the second.

Dr. Nir Kshetri, associate professor of business administration at the University of North Carolina at Greensboro and author of "The Global Cybercrime Industry: Economic, Institutional and Strategic Initiatives," believes the problem lies in a combination of factors. First and foremost, cloud computing is still a nascent technology. Businesses are shy about implementing services they don't fully understand, and governments are even more cautious. For many government IT managers, "going to the cloud" stops at email and instant messaging. Furthermore, the IT industry as a whole has yet to provide the kind of support infrastructure that protects older technologies.

"The cloud is not a familiar terrain for most IT security companies," said Kshetri in a recent interview.

Storing data in the cloud as opposed to your own personal facilities (where security strategies are more straightforward) has a "wild West" component that makes IT managers nervous. As a Global Knowledge white paper on cloud security puts it, cloud computing "blurs the natural perimeter between the protected inside and the hostile outside."

This brings us to our second problem: lack of industry standards. It's not that the market hasn't made an effort to address these issues; there is no shortage of organizations, IT security firms, industry associations and formal certifications dedicated to establishing best practices when it comes to cloud safety. So far though, the market has yet to coalesce around a universally-accepted definition of what constitutes "safe."

Kshetri believes that despite the clamor for safer cloud solutions, IT vendors haven't done enough to assuage the fears expressed by the public and private sectors when it comes to security.

"Surprisingly, IT companies individually do not seem to take serious measures to address their clients' concerns related to security and privacy. They are investing too little in improving security practices," he said.

Finally, the ambiguous nature of storing data in the cloud can carry a host of jurisdictional legal issues that governments are not eager to explore. An American business or government that entrusts its data to a cloud vendor with servers in Germany may be walking into a murky legal situation in the event of a security breach.

"The cloud-related legal system and enforcement mechanisms are evolving more slowly compared to the technology development," said Kshetri. "Privacy, security and ownership issues related to data stored on cloud currently fall into legally gray areas."

Analyst's Take

It's easy to make the case that cloud computing's potential is so promising, governments will be forced to come around to the concept of implementing large-scale, comprehensive cloud solutions in the near future. Indeed, a perfect storm of problems may push many uncertain state and local governments into the cloud over the next few years. The 2011 fiscal year was marked by massive budget cuts and workforce layoffs, with more to come in 2012. No matter how the current federal debt-limit drama plays out, state and local governments will feel the crunch. Either huge slashes in spending will leave states and municipalities fighting over an ever-shrinking piece of federal-aid pie, or the collateral impact of U.S. default will lead to a collective downgrade in thousands of municipal credits and municipal debt. In addition, 2011 marked the last trickles of federal stimulus aid that has kept many state and local governments from considering even more drastic measures.

Nonetheless, even if the future does lie in the clouds, there is real evidence that the inability to seriously address security questions is slowing this transition and turning what should be a no-brainer into an exercise of risk and tradeoffs for CIOs. The real market for cloud computing lies not in the governments that have already dipped their toes into the water, but rather the vast number of towns, cities, counties and states that are lined up to dive in once they're convinced it's safe to do so.

With that in mind, here are five tips to incorporate into requests for proposals (RFP) responses:

1.) Eliminate or reduce worries about control

Most of the specific concerns government officials express about implementing cloud solutions (How safe is information if it's just floating out there? What happens if there's a disaster?) can be traced back to a simple emotional thought: I don't have control over my data and that makes me uncomfortable. Find ways to eliminate or reduce those concerns by tailoring solutions that provide governments with compartmentalization options, detailed backup recovery plans and sole access to data encryption keys. This can sometimes be tricky, but a state/city IT department will be much more willing to jump from the plane if it gets to pull the parachute cord.

2.) Clearly define the geographic location of your data centers

IT managers want to know where the other side of the rainbow ends with cloud storage systems. The last thing a CIO needs to worry about is whether his or her state's tax information falls under American or Chinese jurisprudence because the cloud vendor was unclear about where they ultimately store client data. "I don't think that there are clear regulatory frameworks developed for these issues right now," said Kshetri. "Government organizations may minimize the risks by specifying in the contract as to where the data needs to be stored. If the contract doesn't explicitly mention that – under the current regulatory environment – it could be a very complicated issue."

3.) Get a stamp of approval

As stated before, there are currently no universally-accepted industry standards for cloud security. That does not mean vendors shouldn't seek some form of accreditation to present to procurement offices. Undergoing one or more certification procedures can help a cloud provider stand out from the crowd while waiting for governments and businesses to settle on industry norms.

4.) Set up a viable customer service infrastructure

Surveys have shown that a poor understanding of cloud computing is directly related to increased security fears. Cloud solutions should have a built-in component that provides support as well as education to government clients. This typically has not been an area of strength for cloud providers in the past, and it has not gone unnoticed. As Yankee Group Analyst Camille Mendler said in an interview with DefenseSystems.com: "Cloud vendors offer poor service guarantees and limited financial redress if their service fails. Get-out clauses are rife, and robust privacy policies are rare, potentially exposing organizations to litigation."

That perception of unaccountability in the face of disaster is what scares most governments out of experimenting with cloud computing on a larger scale.

5.) Stay in your niche!

Government agencies handle different types of information. Storing state tax information carries a different set of regulatory obligations than Medicare and Medicaid patient records. Casting a wide net may increase your pool of business opportunities, but ultimately, health departments are going to contract with vendors that have an established background of providing cloud solutions specific to their field.

Cloud computing technology is still so new that no matter what your company chooses to specialize in, there will continue to be a vast, untapped market of state and local governments looking to make the leap over the next five years.

FCC proposes new rules for network and handheld providers

On July 12, 2011, the Federal Communications Commission (FCC) established new rules to enable public safety answering points (PSAPs) to obtain more accurate information regarding the location of someone who calls an enhanced 911-capable PSAP. The new requirements were established in the FCC's Notice of Proposed Rulemaking, Third Report and Order, and Second Further Notice of Proposed Rulemaking.

At present, there are two ways for an enhanced or next generation 911-enabled PSAP to determine the location of a caller. One is through the network; the other is through the handset itself. A "network-based" locating system means the network provider (T-mobile, Verizon, etc.) determines the location by triangulating the call, determining what three cell towers are close to the phone, and seeing where those areas overlap. In handset location, a global positioning system chip or other component embedded in the cell phone alerts the PSAP to the caller's location. At a July 12 meeting, the FCC directed a new set of initiatives requiring mobile phone producers and network providers to decrease the location range provided to the PSAPs over the next eight years. The given location must be within 50–150 meters for handhelds, and between 100-300 meters for networks. The FCC also established a long-term goal of eliminating the less precise, network-based locating altogether, though no specific deadline was established.

The second topic looked at by the commission dealt with the increased use of Voice over Internet Protocol (VoIP) services to make emergency phone calls. A request for comment was released for several issues regarding VoIP, most notably about whether 911 rules should apply only to "outbound-only" VoIP services or to those that allowed calls to be received as well. The greatest problem with people using VoIP services to dial 911 is that the ability for 911 dispatchers to obtain the location of the call is entirely determined by whether or not the person using the system registered their location accurately, if at all. Even if a provider has registered their VoIP device with their specific location, the increasing mobility means that the location may not always be accurate, like when someone uses Skype or another VoIP network on their device at a coffee shop. Therefore, much of the discussion revolved around whether or not the FCC should mandate all VoIP providers supply automatic location information (ALI) for calls and provide a framework for doing so.

Analyst's Take:

These new, more stringent requirements offer significant opportunities for vendors working to develop locating technologies that will help both cell phone providers and manufacturers utilize handheld locating technology. Vendors should focus on increasing the precision of these devices, since there will likely be an increased intolerance of obfuscation over the specific location of an emergency when lives are in danger. In the long term, cell phone manufacturers will have an increased burden as all handhelds will be required to provide information on the phone's location. This will likely require the development of locating technologies, which is an expensive endeavor unlikely to yield significant profit. Likewise, this will decrease the burden on network providers who will no longer be required to triangulate the signal to determine the location of phones, which will allow the providers to focus on other things such as providing better coverage or increased bandwidth.

Back to the future: data center consolidation in the states

Data center consolidation continues to be a top priority for many state chief information officers (CIOs) who hope to reduce cost, optimize IT infrastructure, and pursue green IT methods. While most states strive for the same outcomes consolidation efforts can produce, not every state has taken the same path to get there.

Deltek's latest report reviews data center consolidation initiatives in 14 states over a span of 10 years. The report, released last week, looks specifically at common data center consolidation solicitation requirements and examines existing data center backgrounds. The most common consolidation paths focus on facilities, hardware/software, and services, each of which offers a different opportunity to the vendor community.

Data center facility consolidation aims to reduce operating expenses associated with maintaining several data centers statewide while trying to ensure a centralized location does not increase risk. This approach increases performance by streamlining IT services and lowering energy usage. The biggest concerns with data center facility consolidation are security, capacity, and power consumption.

  • Past Opportunity 46168: Georgia; Status- Awarded; Year- 2008
  • Future Opportunity 66506: Minnesota; Status- Acquisitioning; Year- 2010

Data center hardware/software consolidation seeks to optimize the physical IT infrastructure of data centers by standardizing equipment and software. This allows more state agencies and departments to share server space and maximize the use of equipment and software. The most common requirements for hardware/software solicitations are the call for accessibility and scalability, which makes virtualization and cloud approaches popular.

  • Past Opportunity 16409: Oregon; Status- Awarded; Year- 2006
  • Future Opportunity 70414: Idaho; Status- Acquisitioning; Year- 2011

Data center IT services consolidation tries to standardize IT operations and improve performance in an environment where many individual state agencies and departments may pursue autonomous IT services. This approach maximizes the state's buying power for commodity technologies and services while eliminating redundant operations and procurements. The most frequent concern seen in data center solicitations has been reducing cost and increasing statewide operations efficiency.

  • Past Opportunity 33878: Virginia; Status- Awarded; Year- 2005
  • Future Opportunity 58303: Michigan; Status- Planning; Year- 2010

Analyst's Take

As the economic landscape improves for state governments, many data center consolidation efforts that were put on hold or canceled due to the high initial price tag could get a fresh look in 2012 and beyond. However, it's expected these data center consolidation plans may be procured differently from years before, such as using a phased or modular scheme and exploring creative funding options like public-private partnerships. Though slow over the past few years, this state IT initiative has not reached the end of the road just yet. Expect state data center consolidation projects to significantly pick up in the near future.

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Motorola wins again: county piggybacks off state contract

As the FCC's narrowbanding mandate approaches, states and localities are scrambling to raise funds to upgrade their outdated radio systems. The FCC sent warning letters earlier this month to those localities not yet in compliance with the mandate. Many counties and municipalities have not only been pooling together to share resources, but have also decided to piggyback off their current provider to avoid the bid process altogether. Recently, Westcom Emergency Communications decided to save time and money in this process by purchasing a $14 million contract directly from Motorola, the current statewide provider.

There has been much criticism surrounding Westcom's decision, since many feel that municipalities should be bidding out these projects. Similar arguments arose after the Illinois state contract for the STARCOM21 public safety radio system was sole sourced to Motorola for $114 million. WestCom's argument is that it should not waste time and valuable resources soliciting bids for a project that the state has already accomplished for similar services. However, objectors have pointed the finger to favoritism and believe fair competition has been abandoned.

Analyst's Take

Is all this fuss simply a result of another multimillion dollar contract going to Motorola, or can we step back and look at the bigger picture? Although Westcom has a valid point in implementing cost-saving measures, avoiding the bid process is not an unfamiliar tactic. As budgetary constraints plague many localities, we may see an increased trend in skipping the bid process, especially with deadlines looming overhead. In the event that a contract is believed to be unfair and is disputed, it is advisable that vendors learn various protest procedures on how to appeal an award and become familiar with protest regulations and procurement best practices.

Failure to Raise Debt Ceiling May Result in Stopped Funding for Federally Funded Projects

As the federal government nears the brink of missing its self-imposed deadline for raising the debt ceiling, it's a good time to assess the potential impact on state and local governments and their contractors. (You can find a great assessment on the potential impact on federal contractors here.) Given that the federal government has never failed to raise the debt limit before, we have very little concrete information at hand.

  • Moody's Investors Service has warned that it would downgrade the Aaa credit ratings for Maryland, Virginia, South Carolina, Tennessee and New Mexico within 10 days of a missed deadline. Maryland, New Mexico, and Virginia are the most reliant on federal spending and employment. All of the states have particular issues with Medicaid and other credit issues. However, despite some gubernatorial grandstanding, none of them faces a major fiscal impact from slightly higher interest rates.
  • The Tax Policy Center has pointed out that state and local debt that is refinanced using regular U.S. treasuries (as opposed to special state and local government treasuries, or "SLUGs"), represents "only $130 billion out of a $2.95 trillion market" (4.4%). So, no big impact on refinancing.
  • The PEW Center on the States has produced a brief with the most credible speculation as to what a federal shutdown (as a result of missing the debt ceiling) could mean for states and localities, and even they can't pin down a likely scenario with any sort of specifics. I commented previously on the likely minimal impact of a federal shutdown as a result of failing to pass a continuing budget resolution.

Analyst's Take
In the end, missing the debt ceiling deadline will mean only one thing: We will have moved from pre-deadline gamesmanship to post-deadline gamesmanship. Still a very dangerous business environment. Once the deadline passes, the initiative will move from the U.S. House of Representatives, which originates budgets, to the White House, which executes them. Without legislation to direct him, President Obama, will be free to implement cuts to discretionary spending and entitlements in any way the law is not expressly understood to prohibit--and even that might be up for debate. In the event of a missed deadline, state and local government vendors fulfilling contracts that rely on any sort of federal funding that is not currently in the bank of the customer should have contingency plans to deal with an immediate cessation of project funding for an indefinite period.

The reinvention of MMIS procurements

In any realm of government contracting, some states come out on top of others. South Dakota recently found itself on the losing side after pumping an estimated $49.7 million since 2008 into a Medicaid management information system (MMIS) that still remains inoperable. After two years of disputes with CNSI, the Department of Social Services canceled the contract last October and is now facing a new system that could cost in excess of $80 million to complete. South Dakota should probably take a cue from states across the country that are no longer procuring MMISs in the traditional sense – one contract hinging on one vendor worth tens to hundreds of millions of dollars. GovWin recognized this growing trend last August and released a report detailing the new wave of Medicaid systems. Due to policy implications of the Affordable Care Act (ACA), Medicaid can no longer stand alone as a system. States are planning for integrated eligibility systems, health information exchanges, health insurance exchanges, ICD-10 upgrades, etc., all in an extremely short period of time. States need their new MMISs to be modular, interoperable, and easily adaptable to any future health care reform requirements thrown their way.

Illinois is one of those states looking to scrap its 30-year-old legacy system for a new MMIS implemented under a modular approach. The first phase is to automate federal Medicaid reporting for reimbursement of federal funds, with the second phase leading to the implementation of a pharmacy benefit management (PBM) system. Last will be the core MMIS that will provide infrastructure to all modules and process all other claims. The Illinois Department of Healthcare and Family Services anticipates receiving a 90 percent federal match rate, so its $19.6 million state dollars will equate to $196.5 million through FY 2018. Illinois will need its new MMIS to link to its health insurance exchange, integrated eligibility system (linking Medicaid, the health insurance exchange, Supplemental Nutrition Assistance Program, and Temporary Assistance for Needy Families), and health information exchange. The total value of each system needing to be implemented between now and 2014 totals an estimated $360 million, leaving little room for vendor failure.

Indiana seems to be following Illinois' lead. The Indiana Family and Social Services Administration (FSSA) reevaluated its plan for a total MMIS replacement and opted to address two key initial elements of its support structure: the data warehouse system and the PBM system. Originally, Arkansas was looking to break up its MMIS replacement into 23 requests for proposals (RFPs), but ended up with three: Arkansas Medicaid Enterprise (AME) core system, AME enterprise products, and AME professional services, each with separate areas vendors can bid on.

This reinvention needed to occur since stand-alone, legacy Medicaid systems cannot adapt to fulfill all of the regulations and integration needed to be compliant with the ACA. This shift in MMIS procurement ultimately opens up vendor competition from the four major players in the space, whether through priming or subcontracting. Vendors need to be able to deliver innovative solutions in short time frames with interoperable platforms and components, and be ready to handle any new policy changes down the road. I'll be attending the MMIS conference in two weeks in Austin and hope to hear more information on these changing systems.

Make sure to follow GovWin's Health Care and Social Services Team on Twitter @GovWin_HHS or connect with us through LinkedIn.

Videoconferencing a “game changer” in economic growth

The National Association of Counties (NACo) held its 76th Annual Conference and Exposition in Multnomah County, Ore. July 15-19, 2011. Several county officials, vendors and IT professionals attended the event to discuss policies and issues affecting counties nationwide and collaborate on ideas for shaping a bright future despite tough economic times.

In a session on how IT can prepare counties for future success, Dr. Norman Jacknis, director of Cisco's Internet Business Solutions Public Sector Group, touted the benefits of Internet videoconferencing. Jacknis proclaimed videoconferencing as a "game changer" that's only at the start of its global impact. In a recent forecast from the Cisco Visual Networking Index, business videoconferencing is reported to grow sixfold from 2010 to 2015 at a compound annual growth rate of 41 percent. Additional highlights from the report include:

  • Global Internet video traffic surpassed global peer-to-peer (P2P) traffic in 2010, and by 2012, Internet video will account for more 50 percent of consumer Internet traffic
  • 1 million minutes of video content will cross the global IP network every second in 2015
  • Internet video is now 40 percent of consumer Internet traffic, and will reach 62 percent by the end of 2015, not including the amount of video exchanged through P2P file sharing
  • Internet video to TV tripled in 2010. Internet video-to-TV will continue to grow at a rapid pace, increasing 17-fold by 2015. Internet video-to-TV will be over 16 percent of consumer Internet video traffic in 2015, up from 7 percent in 2010
  • Video-on-demand traffic will triple by 2015. The amount of VoD traffic in 2015 will be equivalent to 3 billion DVDs per month
  • High-definition video-on-demand will surpass standard definition by the end of 2011. By 2015, high-definition Internet video will comprise 77 percent of VoD

Jacknis stressed the need for Internet video and noted that 93 percent of daily communication is nonverbal. He reported that by 2030, the world will achieve a ubiquitous video communication standard. According to a study conducted by Nielsen and the International Data Corporation, the number of Internet video users in the U.S. will grow from nearly 150 million to approximately 180.5 million by 2015.

As videoconferencing continues its rise, physical proximity will no longer dominate communication. This also aligns with the ever-shifting shape of corporate America. As harsh economic realities make their mark, businesses are turning to technology to do more with less. Large organizations can no longer be relied on for significant job and economic growth. Instead, they are turning to global supply chains, outsourcing, contractors instead of employees, and global presence as opposed to one main location.

With the high cost of office space, many companies are implementing remote work environments with Internet video as a main source of communication. This not only cuts costs of office space, it reduces travel costs, eases interview processes, boosts employee retention rates, and allows businesses to recruit talent nationwide without a barrier of physical location. Increased productivity is also a benefit reported in many studies.

State and local governments are now starting to utilize video tools in procurement processes through virtual pre-proposal conferences. By not requiring interested vendors to attend an in-person conference to bid on a project, agency's can increase proposal submission rates and vendor participation. Vendors are more likely to partake in a recorded virtual meeting to avoid travel costs, and are less likely to protest a bid or send agencies repetitive email or phone inquiries.

Outside of business and economic advantages, more and more communities are looking to video tools to stimulate health care efforts. Jacknis highlighted Burlington, VT's Telecare for Rural Health Project, which provides a two-way interactive video and audio tai chi exercise class for seniors. Additionally, video technology is reshaping the medical field as diagnoses, consultations, and even surgery are being conducted remotely. With remote health care, patients can access specialists from around the globe, physicians can easily exchange expertise, and the number of patients seen can increase.

Further, there's no denying the obvious green appeal of video IT, with environmental benefits ranging from fuel and greenhouse gas reduction to decreasing cost-of-living expenses.

As videoconferencing continues to shape the future, more and more state and local entities are looking to implement video tools to aid in daily operations. Here is a look at a few videoconferencing opportunities in the GovWin: Deltek Information Solutions database.

  • Opportunity 60774: On May 3, 2011, Alaska released a request for proposals (RFP) for professional services for a video technology interoperability systems study. This study will look at the practicality of rolling out video technology through the Criminal Justice and Law Enforcement business processes.
  • Opportunity 71894: The county of Los Angeles released a request for information (RFI) for a consolidated video conferencing purchase program on June 9, 2011, in which responses were due by on June 28, 2011. The county is currently reviewing responses in preparation for a formal RFP release.
  • Opportunity 66798: The state of Idaho's current contracts for video teleconferencing equipment and services are set to expire September 2011, and if all options are exercised, could extend to September 2013. GovWin is monitoring this project for any rebids or contract extensions, and will update upon release of new information.

Analyst's Take

Video technology is not only heating up in states and localities, it is on the rise worldwide. This growing effort results in a fiercely competitive vendor landscape. With this comes a decrease in product cost; therefore, it is essential vendors work to provide a solution that appeals to agency budget straps while offering a breadth of features. In closing his presentation, Jacknis said "local collaborations among business, academia, and government, and global collaborations with innovators around the world" are the keys to IT shaping a thriving future economy.

Agencies are looking for solutions with a wide range of benefits, including simultaneous webcam feeds, instant messaging, file sharing, VoIP, multiple live video streams, website sharing, and electronic whiteboard capabilities. Cloud-based solutions are also a plus as many government entities explore branching to cloud services. Lastly, the ability to interoperate with other vendor solutions will give your product a leg up in today's market, as will a solution that allows for significant on-screen movement without a declining frame rate.

"It's all in the presentation"- using analytics to transform health care

The 2011 ehealth National Forum on Health Information Exchange (HIE) was held July 14, 2011 at the Omni Shoreham Hotel in Washington, D.C. The conference consisted of numerous panel discussions and brought together an array of nationwide health care leaders. The goal of this year's conference was to discuss challenges and best practices needed to achieve sustainable national health information exchange. Areas of discussion included the following:

  • How HIEs can work with the Direct Project
  • Coordinating efforts for success with insurance exchanges and HIE
  • Meaningful use through HIEs
  • Different revenue models for sustainability
  • IT infrastructure required to support accountable care organizations

A major theme throughout the conference was the importance of presentation of data produced by information exchanges. During a panel discussion on using analytics to transform health care, much attention was given to exploring ways in which HIEs can present data in a way that provides the most value to the delivery of care. With all of the initiatives resulting from health care reform, hospitals are being forced to reorganize their departments, services to customers, and overall capabilities. President and CEO of Cal eConnect Carladenise Edwards, PhD, described health officials as a "verb" - enablers of the exchange of information - and that we need to not move away from this reality. She emphasized the importance of creating a pipe-to-the-tube to enable data flow so it can be used in a meaningful way. Unsurprisingly, the issue of privacy and security continues to pose a tremendous challenge in the effectiveness of the data exchange and workflow. Edwards explained how there is fear in what to do with the information from the exchanges once it is received, and the security of its transfer.

The Direct Project, launched in March 2010, was designed to improve the transport of health information by making it faster and more secure. According to Edwards, the project has received many praise and criticism. She said there is still not a succinct way of getting information from point A to point B. For that, doctors continue to have trouble figuring out patients' previous encounters, which is detrimental to their service of care. Todd Perry, partner with Accenture, noted that the breadth of information obtained from the exchanges is growing exponentially; however, there are still many challenges with where one starts and how the information is consumed. Though Edwards shared her confidence in the Direct Project allowing patients to get better access to information, she stressed that it must be taken to the next level. The information must be visually transformed in a way that allows quick and swift analyzing. With that said, at the end of the day, the role of analytics is to make patient data computable.

Analyst's Take

More than ever, now is the time for vendors to really start thinking about innovative ways patient data can be transformed to enhance the delivery and speed of care. Health officials are still searching for more ways in which HIEs can demonstrate meaningful use. Capturing data alone is not enough. There is far more value in physicians being able to see and use the data in a way they can analyze and make the best decisions for their patients.

For a more in-depth summary of this year's Forum, download a copy of GovWin's latest Analyst Recap, here.

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