The firm-fixed-price, indefinite delivery/indefinite quantity contracts will have a 10-year ordering period, including the five-year base period from May 2015 through April 2020 and an option to extend the performance period five years (through April 2025). The extended duration of the contract performance period and increased per contract maximum (up to $20 billion) are two elements of this vehicle that have contributed to the interest around the next set of awards. In addition to the scale, the widespread use of SEWP contracts has made this next iteration one to watch.
Every state and local government agency is distinct, with its own rules related to procurement. Some have strict guidelines for vendors submitting a proposal, while others require state registration prior to even bidding. Regardless of the rules, one commonality routinely causes problems: drawn out procurement processes.
What constitutes a long procurement process? It depends on who you ask and also the technology being purchased. A simple request for quotes (RFQ) for 100 radios likely constitutes a straightforward procurement, while a customized jail management system for a statewide agency is more complex. For example, Connecticut issued a request for proposals (RFP) in September 2009 for an offender management system that still hasn’t been awarded. Details on the contract delay are sparse.
While the Connecticut procurement may be an outlier, it is not uncommon for bidding processes to take several months for multimillion dollar projects, which then lead to even longer timelines to award and negotiate a contract. Understandably, agencies want to ensure they select the best possible product for the best possible price, but at some point, this can be a detriment to both the vendor and the agency.
How the vendor loses
- Anticipated revenue following a win takes a hit during lengthy contract negotiations
- Hefty legal costs associated with negotiations
- Travel and other expenses related to contract meetings
How the agency loses
- Costly man hours spent reviewing bids and negotiating contract terms
- Technology advancements made during procurement timelines often result in negotiating a solution that could be antiquated
- Agency budgets, needs and wants can change drastically over the course of a long procurement
No single solution
Unfortunately, there is no silver bullet for long contracting and procurement processes. Agencies must be fully aware of what is required when reviewing a large, complex bid. They must also ensure budgets are secured prior to bidding to avoid dragging out awards due to limited funds. Vendors, on the other hand, must be patient and understand agencies may require more time for costly technology. Well-established timelines, budgets and game plans on both parts are required to achieve a swift and seamless procurement.
Federal Information Technology Task Order Vehicle Trends report, which explores Indefinite Delivery, Indefinite Quantity (IDIQ) vehicles used to procure IT goods and services.
Officials from the Defense Information Systems Agency confirmed at their recent Forecast to Industry that the competition for the Encore III contract vehicle will begin in fiscal year 2015. Encore III’s predecessor, Encore II, has been heavily used by defense customers, with about $5.8 in contract dollars going through it since fiscal year 2008. Encore III is expected to receive even heavier use, particularly since DISA officials have emphasized the coming consolidation of services contracts that are deemed duplicative. Given the agency’s shrinking budget, it is not beyond the realm of possibility that in the years to come the overwhelming majority of contract spending on information technology services at DISA will go through Encore III. This implies that the available pool of competitive opportunities at DISA will be much smaller in the future, necessitating that interested vendors win a spot on Encore III. Laying the groundwork for bids includes understanding the customer base using Encore II and the top vendors on the vehicle, as all of these will probably be bidding on the follow-on.
Looking first at the top customers using Encore II we can see, not surprisingly, that DISA spends the most contract dollars through the vehicle.
This said there are a number of other defense community users putting millions of dollars through Encore II. Of these, the Army comes in second with $233 million in obligations. This is a trend I would expect to continue as the Army also narrows the number of contracts it uses for IT services and as it continues to look to “DISA-first.” With $87 million in obligations, the Bureau of Alcohol, Tobacco, and Firearms stands out as the lone civilian customer among those listed.
Top DISA Customers
Narrowing the analysis to DISA customers only, we arrive at the following results.
Readers will notice right off the bat that the total amount of dollars represented here does not equal the total amount listed as “DISA” in the first chart above. This is because of vagaries in the reporting. Often “DISA” is listed as the major spending agency in the available data, but when one gets down to the level of the office requesting the funding there will not be a customer given, or the customer will actually belong to one of the Services (e.g., Navy’s Space and Naval Warfare Systems Command). Where the DISA-specific customer is available I have listed them here.
It is most informative when looking at this chart to zero in on the specific customers rather than the general categories, like “DISA” which sits at the top of the chart. Similarly, the spending listed under the various entities of the Defense IT Contracting Organization (DITCO) doesn’t reveal much. Digging deeper we find that several organizations now under Chief Technology Officer Dave Bennett’s Enterprise Information Services business unit use Encore II the most. These organizations include the former Computing Services Directorate, the Systems Management Centers, and the Infrastructure Services Center San Antonio. I would anticipate this trend to continue in the years ahead as DISA consolidates core data center support contracts and funnels more contract dollars through Encore III.
One other thing worth observing is the relative absence of spending related to the Defense Information Systems Network (DISN), now known as the Defense Information Network (DoDIN). I suspect there is spending here related to DISA’s transport services, but it cannot be parsed out due to the lack of granularity in the data.
Lastly, let’s examine the top earning vendors on Encore II. The chart below shows the top ten highest earning companies by obligations from DISA alone.
The gap between companies number 2 (Raytheon - $402M) through 5 (HP Enterprise Services - $359M) is relatively slim. The earnings by Northrop Grumman, however, tower above them all, with $1.4 billion representing almost 4x the next closest competitor. Noteworthy too is DSA, which the data says has been awarded $271 million in contracts as a small business (partial). Presumably, DSA will not be able to compete for Encore III as a small business, which should make the competition for large business slots that much more competitive.
In a budget-constrained federal IT market the competition for cybersecurity work is bound to become increasingly competitive, even cut-throat. And when things get this way a certain amount of drama is sure to follow. Such is the case with a Department of Homeland Security’s Continuous Diagnostics and Mitigation (CDM) Dashboard tools competition where a premature award announcement has combined with accusations of acquisition rule-breaking to add controversy to the process.
DHS announced last summer the creation of its $6 billion Continuous Diagnostics & Mitigation (CDM) program BPA with awards to 17 primes and more than 20 subcontractors. The government-wide effort is in partnership with the General Services Administration (GSA) which is acting as the procurement agency and has established a portalto facilitate CDM program purchases. Last March, GSA awarded a contract for the CDM Dashboard design and implementation effort to Metrica Team Venture. So far, so good.
The drama started when an official with RSA announced in a blog post that DHS has selected RSA Archer's GRC solution for its CDM Dashboard effort. FCW first reported on the unofficial award announcement before the story was later clarified that RSA’s product is a finalist for the contract, but the selection process is not yet complete. (The RSA official’s blog post has since been deleted.)
The story gained further drama when it came to light that the firm that had won the Alliant Small Business contract to evaluate the CDM Dashboard tools bid, Metrica Team Venture, is being accused of allowing one of its team members, InfoReliance, to market the RSA products (another team member) during the period between GSA's awarding the Alliant Small Business contract to Metrica and the agency's decision on the Dashboard vendor. Agiliance, the firm that has brought the complaint to GSA, is asserting organizational conflict of interest (OCI) and marketing practices that are forbidden under federal acquisition rules, according to a subsequent article in which FCW appears to have seen their letter to GSA.
To make things even more colorful, Agiliance’s letter to GSA is not a formal protest. It is unclear whether the move was made to preempt the need for Agiliance to protest the forthcoming DHS Dashboard tool award or if it was because Agiliance is not an Alliant Small Business contract holder, or both. Either way, it’s clear that they are trying to get GSA to take a closer look at the process that is unfolding and to take action.
These events underscore how competitive the market has become and will continue to be in the close-knit world of cybersecurity. In an era where winning or losing a contract can mean life of death for your company it is crucial that vendors know the acquisition rules and keep solid documentation of your processes out of self-protection. Further, any appearance of possible impropriety – even if none exists – will raise hackles in an increasingly competitive market where awards are often “winner takes all.”
Also, Agiliance’s letter to GSA could be considered a form of “protest by another name” where a company sees anomalies that raise their concern enough to look for ways to raise a flag in a formal way. Such methods may grow in frequency as federal agencies look for efficiencies in their acquisition processes like turning to GSA or another agency to facilitate procurements.
Originally published in the Analysts Perspectives Blog. Follow me on Twitter @GovWinSlye.
Army customers have put more than $3 billion worth of procurements through the Army’s Information Technology Enterprise Solutions 2 – Services contract vehicle. Now that competition for the follow-on is expected to begin in fiscal 2015 it is worth looking at how that spending data shakes out by customer, product service code, and competitor. This post provides a brief analysis of all three spending areas to help industry prepare for the coming competition.
The Army’s Information Technology Enterprise Solutions 3 – Services (ITES-3S) is one of the most hotly anticipated contract competitions coming in fiscal year 2015. For this reason I thought it would be worthwhile to provide readers with a brief analysis of spending by Army customers on the current iteration of the contract vehicle – ITES-2S. In the process of this analysis I’ll also provide some insight into the performance of incumbent contractors as measured by their earnings with Army customers on this list. The data shown here comes from all contract actions that have been reported through the end of May 2014.
Top 10 Army Customers
The table below shows the ten Army customers that have obligated the highest amount of contract dollars on ITES-2S since the inception of the contract vehicle. Altogether, these customers alone have put $3 billion through ITES-2S. It is not surprising, perhaps, to see the Program Executive Office Enterprise Services at the head of this list. PEO EIS is the organization responsible for the administration of ITES-2S and its sister vehicle for commodity IT products – ITES-2H (now 3H). PEO EIS thus keeps much of its spending close to home, a reality that every vendor seeking to do work at EIS needs to know.
Top 10 Product Service Codes
Having identified the top spending entities using ITES-2S, let’s take a look at what they are buying. The government data does not provide sufficient detail in all cases to make an apples to apples comparison by customer so the analysis will have to be limited to the Product Service Codes assigned to each purchase.
The table above shows that by far and away the most money obligated is for “D399: Other ADP & Telecommunications Services.” D399 is a default code or general catch-all category for IT services, so the designation of work under D399 doesn’t tell us much.
Looking at the numbers and categories that follow D399 we can get a little better idea of what the ten customers above are spending on. Using these categories we can determine that they are buying equipment maintenance and repair services ($195 million), systems development services ($118 million), and engineering/technical services ($95 million), among others. Interesting here is the amount spent in commodity IT categories - $179 million under PSC 7022 for computers and $39 million for software (PSC 7030) – totaling less than 1% of spending represented. Assuming that there is minimal equipment represented under D399, we can tentatively conclude that these customers aren’t buying much new IT equipment as part of the services they are procuring through ITES-2S. These purchases probably all went through ITES-2H.
Top 10 Vendors
Lastly, let’s take a look at the competitive landscape. All of the current players on ITES-2S can be expected to compete for places on the follow-on vehicle, so a comparison of earnings on 2S can provide a slight indication of potential strength in the follow-on competition. The chart below shows that Northrop Grumman and Lockheed Martin have both earned the most on ITES-2S, followed by a number of other companies. Curiously, Dell Federal is missing from this list despite having acquired Perot Systems, which was an original awardee on ITES-2S. Perot Systems had in turn acquired QSS Group, which was also originally on ITES-2S. Dell therefore receives credit in the data for three companies on ITES-2S and still it failed to crack the top ten shown on this graphic.
ITES-3S is expected to be even more heavily utilized than its predecessor due to the Army’s desire to push more of its IT acquisition dollars through a smaller number of contract vehicles. Therefore, in terms of customer spending, PEO EIS is likely to put an even greater percentage of its acquisition dollars through 3S. This makes it absolutely critical for competitors to know what EIS is working on and which kinds of solutions it wants to buy. One important consideration here is that EIS, like customers across the DoD as a whole, will be seeking solutions that can be implemented using commercial-off-the-shelf equipment and software. The more COTS products that bidders are able to put into their proposed solution sets, the more likely it is that EIS will give them the nod. More importantly, if bids can be based on a COTS baseline with readily identifiable commodity IT costs, bidders will have gone a long way toward giving EIS proposal evaluators the clarity they need when evaluating responses.
For more detailed analysis of task order contract vehicles used in the federal IT market, see Federal Industry Analysis’ new report Federal Information Technology Task Order Vehicle Trends.