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Sequestration Report: Notable Exemptions and Sequester Totals for Treasury, Justice, and State

On Friday (9/14), the White House released its report regarding the impact of potential sequestration at the budget account level for each agency as required by the Sequestration Transparency Act of 2012. Although, the report provides little detail about each budget account, when cross referenced with each agency’s detailed FY2013 budget request we can glean tidbits of the potential impact to some areas involving IT.
In this blog, I will point out notable exemptions as specified in the White House report, as well as notable sequestration amounts for the Department of Treasury, Department of Justice, and the Department of State.
Notable Exemptions:
The Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) as amended, identifies programs exempt from sequestration and subject to special rules. The percentage cuts in OMB’s sequestration report, and the identification of exempt and non-exempt accounts, reflect the requirements set forth in the BBEDCA. The administration cannot choose which programs to exempt, or what percentage cuts to apply.
Notable exemptions (>$200m) to budget accounts for Treasury, Justice, and State are shown below:  

The most notable and highest dollar value exemptions for Department of Justice include Salaries and Expenses for the US Marshals Service and the FBI. With exemptions of $1.6 billion and $1.4 billion respectively in these budget accounts, 58% of the US Marshals and 29% of FBI’s Salary and Expense funding will be protected. 
Department of State shows an exemption of its entire Administration of Foreign Affairs Working Capital Fund of $4.2 billion. The Working Capital Fund finances, on a reimbursable basis, certain administrative services, such as printing and reproduction, editorial material, motor pool operations, inter-agency cooperative administrative support services, acquisition services, information technology desktop support, and aviation services.
Notable Sequester Amounts:
Notable sequestration amounts per budget account (>$200m) for Treasury, Justice, and State are shown below:
The most notable and highest dollar value sequestration amounts for Treasury include the IRS’ Enforcement, and Operations and Support budget accounts. 
The Enforcement account sequester amount of $436 million equates to 8% of the total requested budget authority for this account for FY2013. This budget account provides for necessary expenses for tax enforcement activities of the IRS to determine and collect taxes, to provide legal and litigation support, to conduct criminal investigations, and to enforce criminal statutes related to violations of internal revenue laws and other financial crimes. The Enforcement program also protects federal revenue by identifying fraud and preventing the issuance of erroneous refund payments. Information technology contracts and tools are used by the IRS under this budget account, especially in the area of identifying improper payments. 
The IRS Operations and Support budget account supports taxpayer enforcement and services by providing funds for rent payments, facilities services, printing, postage, physical security, administration activities, telecommunications, and information technology development, enhancement, operations, maintenance, and security. The Operations and Support account sequester amount of $325 million equates to 8% of the total requested budget authority for this account for FY2013. Sequester in this account will likely cause some reductions in IRS IT spending.
The most notable and highest dollar value sequestration amount for Justice includes the Federal Prison System’s Non-Defense Salaries and Expenses budget account with a sequester amount of $537 million. The Federal Prison System employs approximately 37,000 people according to OPM. Only 1.2% of these employees are classified as IT. So, the reduction in the Salaries and Expense area is likely to have minimal impact on the Federal Prisons Systems’ IT employees.
The State Department Administration of Foreign Affairs Diplomatic and Consular Affairs Programs Non-Defense budget account will be hit the hardest by sequestration at $1.1 billion out of a total gross budget of $15.9 billion. The Diplomatic and Consular Affairs Programs budget account provides funding for human resources, including training, human resources management, and salaries. The account also includes funding for overseas programs, diplomatic policy and support, and security programs. The relative amount of IT included in this program is difficult to decipher.
Determining the specific impact to federal IT contracts from sequestration action is difficult at best, given the information in the current report.   How agencies will implement these budget cuts remains to be seen. OMB stated that they will need more time to provide details regarding sequestration impact for each account at the program, project, and activity (PPA) level. In the meantime, contractors are bracing for the worst.



HHS Sequestration Impacts States

The Office of Management and Budget recently released a report on the impact of potential sequestration for each agency as required by the Sequestration Transparency Act of 2012 (STA). The Department of Health and Human Services had some significant cuts that effect both HHS and state governments.
The STA, signed by Obama on August 7, gave the administration 30 days to identify, for each account to be sequestered, estimates of the “level of sequestrable budgetary resources and resulting reductions at the program, project, and activity (PPA) level based upon the enacted level of appropriations.”   It clearly was impossible for agencies to pull together information down to the activity level within 30 days and the report states that “the sheer volume of data presents administrative challenges that require additional time for OMB to address.”
The OMB report, released a week after Congress’ deadline, provides only a bit of information on the impact of sequestration. The Budget Control Act (BCA) of 2011 established a uniform percentage reduction across accounts, specifically stating that “except as otherwise provided, the same percentage sequestration shall apply to all programs, projects, and activities within a budget account.”  The percentage applied for non-defense mandatory spending is 7.6% and 8.2% for discretionary spending.
HHS Sequestration Exemptions
As a critical social services provider and funder, the Department of Health and Human Services had some significant programs that are exempt from sequestration; but it likewise has some programs that will experience high sequestration. The Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) as amended, identifies programs exempt from sequestration and subject to special rules. The percentage cuts in OMB’s sequestration report, and the identification of exempt and non-exempt accounts, reflect the requirements set forth in the BBEDCA.  The administration cannot choose which programs to exempt, or what percentage cuts to apply. Notable exemptions (>$200m) to budget accounts for HHS are shown below:

State governments will be impacted by sequestration at HHS.  Although some grant accounts are fully or partially exempt, such as State Medicaid Grants, others are sequestrable, such as:

  • HHS Child Care and Development Block Grant
  • HHS Social Services Block Grant
  • HHS Affordable Insurance Exchange Grants
  • HHS State Grants and Demonstrations
Notable sequestration amounts per budget account (>$200m) for HHS are shown below:

Unfortunately for contractors that are trying to prepare for sequestration, this report provided few details into specific program impacts. How and when HHS will make these cuts down to the program, project, and activity (PPA) level is still a mystery and assumedly on-going work of the administration as OMB said it would need more time to produce. Stay tuned …

Contractor Survival Tactics: KEYW Continues To Make Acquisitions, Expands Into Commercial Market

In today’s challenging federal market, contractors of all sizes are evaluating their current strategies to achieve success over the next several years, while bracing for potential budget cuts that could significantly impact the way they do business moving forward.
At FIA, we are always watching the federal marketplace, and I personally have an interest in what’s going on in the mergers and acquisitions (M&A) arena surrounding cybersecurity, a market which is rapidly evolving and always seems to be in the news.
FIA Perspective:
KEYW makes two key acquisitions, which should significantly enhance revenues moving forward. Last week, KEYW said it planned to acquire software maker Poole & Associates Inc. for $126 million in an effort to boost its ability to win more work within the intelligence community.Based in Annapolis Junction, Md., Poole offers a broad range of high-end technical capabilities including systems and software engineering, program management support, and technical training.
For 2012, Poole is expected to generate about $60 million in total revenue, which should significantly enhance KEYW’s projected top-line growth. Poole is also expected to generate about $90 million in revenue for 2013, and had a total backlog of around $225 million at the end of the latest quarter.
In terms of contracts, Poole was recently awarded a five-year $150 million prime contract to provide systems engineering and program management support to an intelligence customer. Looking ahead, KEYW CEO Leonard Moodispaw said the acquisition will expand KEYW's footprint with one of its most important customers, while adding several prime contract vehicles that have significant growth potential with a key customer.
On Thursday (9/13), KEYW also announced that it’s purchasing Sensage Inc., a provider of advanced Security Information and Event Management (SIEM) and event data warehousing software solutions, for $34.5 million. In addition to providing KEYW an expanded commercial market opportunity, this acquisition strategically supports Project G, KEYW’s new cyber awareness and response platform geared towards critical infrastructure.
KEYW expanding its footprint into commercial and adjacent markets. In addition to acquisitions, KEYW has several new initiatives on the horizon in order to expand its addressable markets. KEYW recently said it continues to make strides on its “horizontal path” effort (Project G), which will target security for critical infrastructure. The company noted that Project G includes a national-security derived cyber-defense solution for critical infrastructure, and said the Sensage acquisition will be a key component of a new generation of cyber awareness products and services that KEYW is preparing for commercial launch in early 2013.
Elsewhere, KEYW has also invested (via its Flight Landata acquisition) in building an unclassified geospatial data system that is based on its knowledge of the classified version of a similar capability. This system will provide users in the first responder and national guard communities’ access to intelligence community (IC) quality data on devices, while expanding the company’s footprint beyond cybersecurity. In addition, KEYW said that it’s also pursuing opportunities in cloud computing, mobile device applications, classified and unclassified training programs, and synthetic aperture radar, which should all expand KEYW’s capabilities moving forward.
In the latest second quarter, KEYW saw its revenues jump 25% to $56.2 million, while noting that it’s “continuing to invest in key R&D initiatives, including Project G.” Previously, KEYW said that its “pipeline of new opportunities looks very promising in terms of new proposal activity, growth in existing programs, and opportunistic acquisitions."
Our Take:
Overall, we believe that KEYW will continue to be aggressive in making moves to remain competitive in the ultra-intense cyber market, especially in the wake of proposed defense budget cuts and increased competition from top-tier rivals.
With the cyber market being targeted as one of the few areas slated for growth over the next several years, numerous contractors are currently looking to invest in cybersecurity as an inorganic means of driving revenue growth, which should further fuel competition for cyber-related opportunities, acquisitions and market share in the near-term.
By continuing its aggressive M&A strategy and expanding into new and adjacent markets (and beyond the intelligence community), we believe KEYW is taking the necessary steps to remain competitive and carve out a niche in today’s evolving cyber market, which should ultimately payoff for the company and allow it to achieve success going forward. 


Efficiency and Innovation: Too Little Too Late?

The Obama Administration is taking baby steps to promote increased efficiency and innovation in an entrenched, complex, bureaucratic cultural environment that was built up over years, is jaded because it has seen initiatives come and go (again and again), which has resulted in it having the inertia of a snail. These stepwise approaches will be ‘too little too late’ to curb out-of-control agency spending and, thus, the looming fiscal crisis that confronts the nation. What are needed are radical approaches commensurate with the magnitude of the crisis.
‘Efficiency’ and ‘innovation’ in the federal government are oxymorons and launching initiative webpages replete with promotional slideware and videos accompanied by competitions and initiatives to address the low hanging fruit, while a good start, doesn’t address the dire fiscal and debt situation the nation faces.   Let’s take a look at the recent initiatives in these areas:
Increase Efficiency: President Obama launched the Campaign to Cut Waste and issued Executive Order 13589, “Promoting Efficient Spending,” which required agencies to seek cost savings in rather low-hanging fruit areas, including:
·         fleet management,
·         underutilized IT end-user devices,
·         travel,
·         printing,
·         agency promotional items.
OBM’s Jeff Zients announced this week that the initiative saved $4 billion during the first two quarters of fiscal 2012, toward a goal of $8 billion in savings by the end of FY2013. He cited examples such as:
·         USDA’s reduction of cell phone lines by 1,700 to save $4.7 million;
·         Interior’s Fish and Wildlife Service reduction of travel costs by using teleconferences, videoconferencing and other real-time communication capabilities;
·         SSA’s reduction of its car fleet and investment in alternative fuel vehicles.
Innovation:  Early innovation promotions included crowd-sourcing initiatives for apps and employee competition and reward programs in agencies such as HHS under now-federal CTO Todd Park. More recently the administration has launched The Presidential Innovation Fellows Program which pairs private sector innovators with top innovators in the federal government to collaborate on solutions that deliver results in 6 months. The five projects that have been started to date include:
·         MyGov – To create a new approach to an online relationship between the government and citizens.
·         Open Data Initiatives – To promote entrepreneurship to use government data to create tools that help citizens.
·         Blue Button for America – To develop applications that help individuals access their personal health records.
·         RFP-EZ – To create an easy platform for small, high-growth businesses to navigate the federal government and enable agencies to quickly source low-cost IT.
·         The 20% Initiative – To create a solution to move from cash disbursements for federal government programs to electronic payment systems.
These effort are laudable and small start initiatives are generally suitable approaches to move a monolithic federal bureaucracy….but very….very slowly and incrementally. Studies show that culture takes an entire generation to change.  
The problem is illustrated by a new report out by the Partnership for Public Service, called "Achieving a Culture of Innovation," which found that 91% of federal employees are actively seeking new ways to do their jobs better. However, 59% said they were encouraged by their agencies and only 39% said creativity and innovation are rewarded at their agencies. The Securities and Exchange Commission the Departments of Homeland Security, Housing and Urban Development, Labor and Transportation scored below the average agency score.  
Change management experts will tell you that for organizational culture change to be real and salient, change has to start at the top and requires an executive change champion who will stay on message until cultural change is achieved with demonstrated results.   That person is backed up by change agent managers that employees see and interact with regularly who are talking and walking the change out.  One problem is that federal mid-level management allegiance to whichever party is in office is sometimes in question and they usually have their own opinions (we hear these in our interviews). 
My prediction is that these high-level, low-hanging fruit, and stepwise initiatives of the federal government won’t bring change fast enough for the coming fiscal crisis. The situation requires something more akin to the high-tech industry’s use of disruptive innovation or creative destruction of one’s own products to create leap frog technology innovation, in order to minimize the dire impact of the coming crisis. Those concepts are even more foreign to the federal government, but as the oncoming wall approaches and pressure mounts for deeper and deeper budget cuts, federal IT managers will become less risk adverse and more open to real efficiency and innovation methods and tools…..let’s just hope it is not too late to make a dent.



Contractor Survival Tactics: SAIC Splits Company In Two; Investing In Health IT Via Acquisitions

In today’s evolving federal marketplace, contractors of all sizes are evaluating their current strategies to achieve success going forward, while bracing for potential budget cuts that could significantly impact the way they do business over the next several years.
Over the past few months, one company which has been making noticeable moves is federal contracting giant SAIC, which recently announced plans to split into two separate companies, while also boosting its presence in the health IT sector with the acquisition of maxIT Healthcare. In addition to the split, SAIC also recently said it would divest its operational test and evaluation unit, which generates roughly $75 million in annual revenue.
FIA Perspective:
SAIC seeks to unlock long-term value/growth potential via business spin-off.  Last week, SAIC said it plans to spin-off its government services business, separating it from the unit that provides IT for the national security, health and engineering markets. Under the proposed plan, the government services unit is expected to generate about $4 billion in revenue for fiscal 2013, while the national security business will book around $7 billion in revenue.
SAIC said the move is intended to reduce potential operational conflicts of interest (OCI), especially for the government services unit, while allowing the two companies to be "more differentiated and more competitive in their own space." It will also provide SAIC more business opportunities – the company noted that it has already identified over 150 new opportunities within the Department of Defense alone worth around $25 billion. SAIC said it expects the spin-off to occur in the latter half of next fiscal year.
Over the past few years, a number of larger contractors in the defense and government services market have looked at spin-offs as a way to maximize value, while allowing the separate businesses to more narrowly focus on the markets they service. Recent examples include L-3 Communication’s spinoff of Engility, which encompassed the majority of L-3’s government services business, and ITT Corp.’s spin-off of its ITT Exelis and Xylem Inc. businesses.
Northrop Grumman has also been divesting units over the past several years. In 2009, the company sold its TASC advisory services unit to an investor group led by General Atlantic LLC and Kohlberg Kravis Roberts & Co. for $1.65 billion. In 2011, Northrop also spun-off its Huntington Ingalls shipbuilding business to shareholders after failing to find a suitable buyer.
SAIC expanding in Health IT sector via acquisitions. In July, SAIC agreed to acquire healthcare IT consulting firm maxIT Healthcare for $473 million. The acquisition expands SAIC’s capabilities in providing EHR implementation and integration services to its large base of federal healthcare customers, as they move toward the use of commercial-off-the-shelf (COTS) EHR applications.
maxIT, which is the largest private independent healthcare IT consulting firm in North America, provides a wide range of health IT services and solutions primarily to commercial hospital groups and other medical delivery organizations. These include IT strategy and planning, electronic health record (EHR) implementation and optimization, and management consulting across a broad range of activities such as accountable care transformation.
Last year, SAIC also acquired Vitalize Consulting Solutions (VCS), a provider of clinical, business and IT services for healthcare enterprises, for an undisclosed sum. Combined, these two acquisitions will allow SAIC to compete for new opportunities in the growing health IT market, an area where the company previously had little experience.
Besides acquisitions, SAIC has also been making divestitures to become more streamlined and efficient, including recent plans to sell its operational test and evaluation business (mentioned above). In April 2011, SAIC also sold certain assets that provided IT services to international oil and gas companies. These assets, which were sold to Wipro Ltd. for an undisclosed sum, included SAIC's U.S. oil and gas IT services business along with units SAIC Ltd., of the U.K.; Science Applications International, Europe S.A.R.L., of France; SAIC India Private Ltd., of India; and its Middle East operation, SAIC Gulf LLC.
At the time, SAIC said the sale of the oil and gas assets would enable the company to better focus on its strategic growth areas, including market segments in the energy sector, such as smart grid, renewable energy implementation, and energy efficiency, where it has successfully built its business through organic growth and acquisitions.
Previous spinoffs could set the stage for further divestitures within the government sector. Looking to the future, the SAIC, L-3 and ITT spin-offs could serve as a model for other large and mid-sized conglomerates looking to reorganize themselves by breaking-off units to survive in today’s challenging federal marketplace.
It’s also worth noting that investors prefer to invest in publicly-traded companies that are “pure plays,” or single-industry enterprises, which could further drive the trend towards spinning-off or divesting various units going forward. Companies which could potentially spin-off units in the future include mid-tier defense contractors like Textron and Kratos Defense & Security Solutions, and tech giants such as Hewlett-Packard or VMWare.
Our Take:
Overall, we believe that SAIC will continue to be aggressive in making moves to remain competitive while streamlining operations, especially in the wake of proposed defense budget cuts and a challenging federal marketplace which is constantly evolving. We believe SAIC sees the writing on the wall with regard to the slowdown in the federal IT sector, and will be making investments in areas that are slated for growth over the next several years.
Moving forward, companies which will succeed in this challenging landscape will need to be flexible and make strategic adjustments where needed, and we believe SAIC is taking the right steps to remain competitive in these uncertain times.



New York City hands over significant IT procurement authority to new, independent agency

Obtaining procurement information from the New York City Department of Information Technology and Telecommunications (DoITT) has never been easy. The sheer size and sophistication of the agency (between $750 million and $1 billion in IT spend per year), combined with the global recognition that comes from operating in one of the United States’ flagship cities, makes procurement a strong buyer’s market.
The DoITT does not have an overwhelming need to advertise bids because every technology vendor who does business in New York is already lined up at the door waiting for the chance to provide their services. There is rarely a need to engage vendors in conversations about upcoming projects because DoITT is large enough and specialized enough to identity, plan and build the technical requirements for most IT solicitations. Perhaps the most emblematic example of Gotham City’s attitude toward procurement transparency can be found in its FOIA policies, where there is a year-long backlog of requests clogging the system. In a competitive procurement context, such a backlog virtually guarantees that by the time a vendor receives the information they’ve requested, it is far too late to put it to use.
You would think all this opaqueness and refusal to provide information to vendors would lead to a clean, corruption and scandal-free procurement environment. However, DoITT procurement has become a routine embarrassment to New York City Mayor Michael Bloomberg’s administration over the past year, with major cost overruns and improper spending plaguing the city’s 911 dispatch system (more than $1 billion over budget), payroll system ($650 million over budget), and personnel system ($300 million over budget). Yes, that’s $2 billion in cost overruns alone for these three projects over the past 12 months.
Frustrated by mismanagement and corruption, Bloomberg’s office announced last month that it was creating a nonprofit corporation to oversee all technology projects that exceed a certain dollar threshold – $25 million for single-agency projects, and $5 million for multi-agency projects.
For the complete version of this Analyst Perspective, click here (subscription required).

White House Announces Innovation Fellows

Last week, Federal CTO Todd Park announced the first class of Presidential Innovation Fellows who will spend six months working on five high-impact federal IT projects. The class of 18 fellows, selected from over 700 applicants, will be working on projects aimed at supporting entrepreneurs, small businesses and the economy, while helping the federal government improve services to citizens.
The Presidential Fellows Program has existed since 1965, however, this is the first class of Innovation Fellows. The program intends to allow the federal government to tap into leading public, private, and education innovators to solve government IT issues and improve federal effectiveness.
The Presidential Innovation Fellows program leverages the ingenuity of leading problem solvers from across America together with federal innovators to tackle projects that aim to fuel job creation, save taxpayers money and improve the lives of Americans in tangible ways,” Park said via a recent blog post.
The five, high-impact IT projects were chosen because of their immediate benefits and cost-savings to taxpayers, as well as their level of difficulty and results traceability.   The five projects, and the Fellows who will be working on each, are listed below.
Blue Button for America will spread the ability for millions of Americans to easily and securely download their own health information electronically, while fueling the emergence of time and money-saving products and businesses.
  • Henry Wei, MD – Practicing doctor and informatics expert, New York, NY
  • Ryan Panchadsaram – Founder of Pipette, San Francisco, CA
  • Matt McCall – Information systems expert, Baltimore, MD
RFP-EZ aims to develop an online marketplace that will make it easier for the government to do business with small high-growth tech companies, and enable the government to buy better, lower-cost tech solutions from the full range of American businesses. 
  • Clay Johnson – Best-selling author, open government technologist and entrepreneur, Washington, DC
  • Jed Wood – Interaction designer, web developer, and entrepreneur, Chicago, IL
  • Adam Becker – Web developer and co-founder of civic engagement startup GovHub, Oakland, CA
MyGov will create a prototype of a streamlined online system enabling citizens to easily access the information and services from across the federal government.
  • Kara DeFrias – User experience writer from TurboTax San Diego, CA
  • Phil Ashlock – Open government program manager and co-founder of Civic Commons, Brooklyn, NY
  • Danny Chapman – Award-winning website designer, Riverside, RI
  • Greg Gershman – Software engineer and serial entrepreneur Baltimore, MD
  • Ben Balter – Software engineer, Washington, DC
The 20% Initiative will work to transition “the last mile” of international development assistance payments from cash to electronic methods – lowering administrative costs, promoting financial inclusion, and reducing theft, fraud, and violence.
  • Karl Mehta – Serial entrepreneur and founder of PlaySpan, Fremont, CA
Open Data Initiatives will accelerate and expand Administration efforts to make government data more publicly accessible in “computer-readable” form and spur the use of those data by entrepreneurs as fuel for the creation of new products, services, and jobs.
  • Ian Kalin – Navy veteran and managing director of an energy sector startup, San Francisco, CA
  • Marina Martin – Web developer and business efficiency expert, Seattle, WA
  • Raphael Majma – Open data researcher, Brooklyn, NY
  • Nick Bramble – Director, Law & Media Program, Information Society Project at Yale Law School, New Haven, CT
  • Dmitry Kachaev – Software engineer, Arlington, VA
  • Nathaniel Manning – Robotics entrepreneur and member of the World Economic Forum’s Personal Data team and Google’s Data Colloquium team, San Francisco, CA


Deltek Pulse: Health Care and Social Services August Review

While the lazy days of summer came to an end, August remained a busy month in the health care arena. Most notably, the U.S. Department of Health and Human Services (HHS) shelled out additional grant funding, totaling more than $765 million, for the establishment of health insurance exchanges (HIXs). This brings the grand funding total to about $1.6 billion. In this round, four states – California, New York, Iowa and Hawaii – received Level I grants, while another four states -- Connecticut, Maryland, Nevada and Vermont -- were awarded Level II grants.
As funding rolled in, these and other states continued to release solicitations for all things HIX-related. Highlights included:
  • Vermont released a request for information (RFI) for health benefit exchange premium bill processing. Among a myriad of services, the state is particularly interested in collecting information related to premium billing, payment collection and payment reconciliation. 
  • Nevada, which was awarded approximately $50 million in Level II grant funding, issued a request for proposals (RFP) for consulting services related to the Affordable Care Act (ACA). Nevada’s Board of Examiners approved the state’s HIX, which will be implemented by Xerox through an approximately $72 million contract, on August 14, 2012.
  • California awarded its HIX project management and technical supporting services contract to First Data Government Solutions.
  • Colorado’s HIX board was given approval to apply for $43 million in federal grant funding to build its HIX infrastructure. CGI was awarded an HIX services and technology solution contract earlier this summer.
  • Hawaii plans to use the $62.8 million grant funding it received to contract for the design and development of the IT infrastructure and user experience for individuals and small businesses.
Other notable procurement activities included:
  • The South Carolina Department of Health and Human Services (SCDHHS) moved forward with its Dual Eligible Demonstration Project (SC DuE) with the release of an RFI to collect information from coordinated and integrated care organizations (CICOs).
  • SCDHHS issued a statement of no award for its replacement MMIS procurement, initially released in December 2011. The statement proclaimed:
Since the time this solicitation was issued, SCDHHS has continued to move beneficiaries from fee-for-service to managed care models and has gained greater understanding of organizational and system requirements for running a Medicaid program that is nearly 100% managed care. Given these changes, SCDHHS will require some time to evaluate the business processes and systems required to carry out the needs of a primarily managed care Medicaid program and issue a solicitation that is consistent with those needs and is in the best interest of SCDHHS and the State." 
  • The Alabama Medicaid Agency (AMA) released an RFI for health care consultative services to assist in the evaluation of the existing Medicaid program and to make recommendations regarding the option to expand Medicaid eligibility as a result of the ACA.
  • The Utah Department of Health issued an award to CNSI for its Medicaid management information system (MMIS) contract.
August also saw Aetna’s purchase of Coventry Health Care, in a deal valued at $7.3 billion. The acquisition expands Aetna’s footprint in the government-based health plan space, and adds to its well-known position in the commercial health care market. With states’ options to expand Medicaid eligibility, the timing of the acquisition is well suited for Aetna as states increase their Medicaid populations and, subsequently, their need for contracted plan providers.
Deltek also attended two significant industry events in August: the Medicaid Enterprise Systems Conference (MESC) held in Boston, Mass., and the IT Solutions Management (ISM) for Human Services Conference held in Baltimore, Md. Deltek subscribers should be on the lookout for recaps of these events in the coming days. 
Lastly, September 10 kicks off of this year’s National Health IT Week! Be on the lookout for daily blog posts from the Health Care and Human Services team! 


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

Of their total FY2013 IT budget of $3.2 billion, the Department of Veterans Affairs plans to spend over $2.5 billion with federal contractors and a large percentage of that will go to Service-Disabled Veteran-Owned Small Businesses, according to VA CIO, Roger Baker, at Deltek’s VA Industry Forum on August 15.
A large percentage of that $2.5 billion will be procured through the VA’s Technology Acquisition Center (TAC) run by Associate Executive Director Wendy McCutcheon. Last week, Baker and McCuthcheon also announced that 50% of all acquisitions through the TAC in FY2013 will be awarded to Service-Disabled Veteran-Owned Small Businesses (SDVOSB).  While that sounds like a huge percentage, in FY2012, the TAC’s awards to SDVOSB stands at about 45%.
Baker made it clear that the SDVOSB goal would not come at the expense of the discounts and the quality of service the VA expects and the VA is interested in strategic partnerships that go both ways, where both parties are fully invested and share risks.
The VA’s overall goal is to contract 10% of their total spending (not just IT) with Service-Disabled Veteran-Owned Small Businesses (SDVOSB).  Given that, it appears that an inordinate share of the SDVOSB goal will be borne in the area of IT procurement.
When questioned about the potential impact of the 50% SDVOSB goal on large businesses, McCutchen implied that there would be no major impact beyond what vendors are already experiencing and there would be no work stoppages with large business. However, at least one vendor from the audience challenged McCutchen based on with their own experience.  
The Technology Acquisition Center successfully awarded $2 billion in contracts in FY2011, plus the $12 billion multivendor Transformation Twenty-One Total Technology contract that seeks to modernize IT systems across the department. Half of the 14 vendors chosen for that program are small, veteran-owned businesses. It stands to reason that VA will strive to funnel a good deal of spending through that vehicle to those small, veteran-owned businesses. 
Given the strong reiteration of these goals by VA last week, partnering for business at VA will continue to be a key strategy for large businesses well into the future.


Day 2 of the 2012 ISM Conference

We continue the 2012 ISM Conference blog series today by covering a session given this morning by CGI, titled “Eligibility or Exchange – Chicken or Egg?” The session spent a great deal of time discussing the functionalities of the federally-facilitated exchange (FFE). The representative from CGI who led the discussion ensured audience members that CGI is doing its best to make sure that the federal exchange is sustainable enough to support all states that may have to vouch for this option.
There was great emphasis on plan management and its role in the exchange initiative. As for CGI, the company is working on this element in addition to enrollment, eligibility and different risk assessment models that will be incorporated into the exchange. Even states that will be running their own exchanges can choose to employ federal risk assessment models in determining eligibility. States will be responsible for building the software for the exchange, in which the account is then transferred over to the FFE. The feds would then determine the eligibility of a given candidate and send the information back to the state. At that point, it will be up to the state to determine whether or not the person is accepted for enrollment into the program. For that, CGI stressed the need for states to make the decision as to whether they will accept the information as an “initial assessment” or a “determination.” If a state chooses to take the results as an initial assessment, then its eligibility system will have to do the final determination. If the state takes the results from the FFE as final determination, then the state must enroll the applicant into the appropriate program.
Tomorrow marks the last day of the 2012 ISM Conference, so be on the lookout for Deltek’s wrap-up blog!

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