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Governors focusing on educational performance, corrections, and mental health

2014 finds the governors as committed as ever to their growth agendas launched over the previous two year. Continued budget surpluses open the door to state innovation and experimentation.

Each year Deltek compiles the forward-looking agenda items from each of the governors' state of the state addresses.  This year found some interesting shifts in the areas of emphasis.  States have been out of recession for more than two years now, and governors have been ambitious with their agendas.

Deltek classifies each of the governors' agenda items by vertical (as shown in Figure 1 below).  We also track the popularity of each vertical as compared to the recent trend.  For 2014, Education, Justice/Public Safety, and Social Services are the stand-out verticals.

Figure 1. 2014 Agenda Item Popularity vs. 2012-2014 Average, by Deltek Vertical

Source: Deltek

Deltek also subclassifies each agenda item below the vertical level (not shown above).  In the Education vertical, the governors were specifically interested in improved performance for Pre-K through 12 public education.  They are also keen to blend high school education into the two- and four-year higher educations systems to create a seamless pipeline of educational attainment for workforce development purposes.  Containment of higher education tuition costs is also a significant interest and a key part of performance measurement for these institutions.

Corrections continues to dominate the Justice/Public Safety vertical, where governors want to contain costs by moving non-violent offenders to community supervision.  They also want to develop better processes for reintroducing ex-cons back into society and the workforce.  This year marks the first time government have begun to look at the economic impacts of incarceration as well as the fiscal impacts.

Governor interest in Social Services increased for the first time since the recession.  With little federal direction in this area, the vertical has been adrift.  However, this year found governors interested in addressing public mental health concerns, driven in part by school shootings, veterans, and drug addiction.  Drug addiction and treatment, given recent upswings in crystal meth and heroine usage, has emerged a top level priority.

Learn more at our FREE upcoming webinar (May 8th).

More detailed information for all of the verticals covered in Deltek's recent report "State of the State, 2014." The report is available for immediate download by Deltek State & Local Industry Analysis subscribers.  It can be purchased online by those who are not subscribers.  The report comes with a spreadsheet that includes all of the governors agenda items categorized for easy sorting and reference by market strategists.

 

State of the Union Highlights: Contractor Implications

On January 29, President Obama delivered his sixth State of the Union address, and the themes are familiar. The President urged Congress to work with him to pass much needed legislation to address key administration priorities, such as job creation, healthcare, immigration, national defense, tax reform, pay equality and income security, and education and training.

Although there was not much detail, my team of analysts and I walked away from the speech with a few takeaways with contracting implications:

  • No more budget crises. While Obama lauded the efforts of Congress in passing a two-year budget deal, he encouraged Congress to continue with investments that will both support our future and reduce the deficit. He also reiterated another key way to address the fiscal bleeding, which is to close tax loopholes, like those that give $4 billion to the fossil fuel industry each year, that impact our revenue.

  • Give Americans a raise. Although he does not have the power to enforce a national minimum wage increase, President Obama intends to sign an Executive Order requiring federal contractors to pay their federally-funded employees at least $10.10 an hour.This will be an interesting story to watch unfold, considering the burden this will place on the profitability of govt. contracts, especially for small businesses.  We may see contractors restructuring their rate schedules to build in increased wage requirements, which would indirectly lay the burden of higher wages onto the government and therefore U.S. taxpayers. It may also inadvertently impact the number of vendors in the federal market – and therefore price competitiveness – if businesses decide it just isn’t profitable enough to work with the federal government.

  • Accept Obamacare or propose a new solution. Now that healthcare.gov is functional, there seems to be renewed confidence in the possibilities of Obamacare.  The President challenged Republicans to come up with a better solution that makes financial sense rather than spend time on another 40 votes to repeal the Affordable Care Act.

  • Don’t skimp on R&D.  The President called for Congress to restore cuts to basic research that facilitates the development of leading edge technology and will help America regain global dominance in technology, medical research and manufacturing.  Obama noted two high-tech manufacturing hubs where businesses and research universities are working together, and the launch of six more hubs. More emphasis on federal R&D could give contractors more opportunities in this area. Funding basic research has been mentioned as a priority by officials from both the Pentagon and the Army.  Work done by DARPA, DOE labs, NASA, and other technology-focused parts of the government would also benefit. 

  • Refocus on CONUS defense.  There will be an interesting shift to using the Department of Defense here at home, which is a huge historical shift from restrictions on this that date back to the founding.  A major part of that strategy is to shore up cybersecurity defense capabilities and as the President stated, “…keep faith with our men and women in uniform and invest in the capabilities they need to succeed in future missions.” Not surprisingly, cybersecurity remains a critical area with gaps that agencies will need contractor support to fill.

  • Take care of our veterans. Judging by the moving reaction to wounded Army Ranger Sergeant First Class Cory Remsburg, veteran care is a one of those rare, bipartisan issues that draws agreement from both sides of the aisle. President Obama indicated that the administration will “keep slashing that backlog so our veterans receive the benefits they’ve earned and our wounded warriors receive the health care – including the mental health care – that they need.” VA’s Medical IT Support and claims processing budget accounts will continue to have consistent (and growing) funding, at least in the near-term.

  • Create new jobs and train people for jobs of the future. President Obama continues his focus on the national infrastructure – rebuilding roads and upgrading ports.  This could mean opportunities for federal and state and local contractors with Architecture, Engineering and Construction expertise. With a declining federal workforce, training programs are likely to translate into contractor opportunities. Vice President Biden will lead the reform of America’s training programs, which will give employees the skills required to match with company needs. Implications:  Could help contractors looking for specific talents/skills. 
  • Invest in education and the technology to support excellence. The President targeted investment (either grants or contracts) to select providers in his pledge to connect 99 percent of students to high-speed broadband over the next four years. With support from the FCC and companies like Apple, Microsoft, Sprint, and Verizon, more than 15,000 schools and 20 million students will be connected without a negative impact to the deficit. 

  • Invest in energy efficiency and independence. The President restated his commitment to working with industry to support natural gas production and set higher fuel efficiency standards, and with business and communities to reduce energy consumption. This implies additional policy, subsidies and training in “green” professions to help facilitate America’s “shift to a cleaner energy economy.”  

  • Fix the immigration problem. President Obama encouraged the House to follow the Senate’s lead and act on immigration reform, which could result in economic growth (and therefore job creation) and a deficit reduction of almost $1 trillion in the next two decades.

Compared to last year’s State of the Union address, there was much of the same.  The President’s priorities have not significantly shifted.  However, he did raise new issues that will have both positive (defense focus on CONUS and cybersecurity) and negative (higher contractor employee wages) ramifications for companies serving the federal government.  As we typically see in federal contracting, the main issue will be in effectively translating policy into execution.

 

Six Things Contractors Should Know About the Federal Shutdown

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

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

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

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

    Non-exempt federal employees:

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

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

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

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

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

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

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

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

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

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

 

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

Saint Charles, Mo., presents plentiful opportunities for justice and public safety IT vendors

In Saint Charles, Missouri’s fiscal year (FY) 2013-2018 capital improvement plan (CIP), City Mayor Sally Faith establishes: “With limited revenue available, we must really focus on establishing what our priorities will be for the community going forward.”

While this may be a nicer way of saying “do more with less,” the city’s CIP prioritizes funding for 57 IT-related projects with an estimated cost of $10,000 or more. Deltek has captured these projects as Lead Alerts in the GovWin IQ database. Read more about Deltek’s new Lead Alerts below.

With nearly $8.6 million allocated for capital projects for the city’s police and fire departments, nearly half of the 57 projects captured by Deltek will appeal to vendors in the justice/public safety (JPS) marketplace. 

Sample of police and fire department capital projects in Saint Charles, Mo.

While JPS projects take the cake, general government capital projects are plentiful. Top-dollar projects that span the six-year CIP include the provision of IT contract services ($1.1 million), routine city-wide computer replacements ($1.4 million) and software upgrades ($365,000). In total, the city’s CIP allocates nearly $3.65 million for IT projects.

Saint Charles is also investing to improve its geographic information system (GIS). This will be accomplished through updates to street and utility GIS data with street segments, pavement conditions, utilities, streetlights and other information, for which $80,000 is allocated. Similarly, $140,000 is assigned to provide an inventory of all sidewalks to comply with the Americans with Disabilities Act. An additional $200,000 is provided for orthorectification of the city’s aerial photography, which is part of the GIS. 

The CIP also allocates more than $100 million for capital projects over the six-year CIP term, demonstrating that there is no shortage of opportunities awaiting the hands of government contractors. While many of these capital project values do not reach six figures, winning just one small-dollar project may be the stepping stone to a strong, lucrative relationship between a single locality and a single vendor.

Deltek’s GovWin IQ Lead Alerts

Deltek’s new GovWin IQ State and Local Lead Alerts give government contractors an edge when it comes to identifying new pre-RFP opportunities. Lead Alerts include the necessary information government contractors can use to make quicker decisions about pursuing an opportunity and act as the first alert that a state or local government has a need for a new product or service. 

Lead Alerts highlight opportunities not captured through GovWin IQ’s traditional Tracked Opportunities, therefore expanding coverage and highlighting smaller-dollar projects and many more opportunities at the city, county, independent school district (ISD) and public university level. Read more about Lead Alerts here.

North Carolina’s road to long-term success

This year, North Carolina Governor Pat McCrory made it clear that the state’s reliance on quick fixes is over and that his goal is to begin focusing on long-term reparations to ensure the state’s ability to provide for its citizens.

The below graph provides a visual representation of North Carolina’s budget from FY 2010 through FY 2015.

                                   

Governor McCrory’s major focus areas include increasing the State Repair and Renovation Fund to launch a 25-year plan to replace and upgrade aging infrastructure. He is also looking to increase the Information Technology Systems Reserve in an effort to fund high-priority IT projects taking place throughout government agencies. These are quite ambitious projects given the state is only increasing the overall budget by 3.6 percent in the first year, and while the governor has indeed asked for a significant increase in the IT Systems Reserve, it comes at the cost of the Office of Information Technology. While the IT Initiative Reserve is set to increase by nearly $35 million between FY 2013 and FY 2014, the Office of Information Technology is losing more than $39 million. Therefore, technology dollars are more so reshuffling existing resources, and there will actually be less money available in the next few years for IT projects.

Overall, the structure of the state’s departments has remained unchanged over the past few years. The one significant exception is the dissolution of the states’ Departments of Correction and Crime Control and Public Safety, and the advent of the new Department of Public Safety. Funding for the new department remained consistent with the funding levels of its predecessors, and no major initiatives, IT or otherwise, are planned for the next two years.

Unfortunately, not all budget changes involved a simple reshuffling; some departments lost significant amounts of money. The biggest loser was the state’s Department of Commerce, which lost more than $3 billion, followed by the Department of Transportation’s $1.5 billion loss, though it is likely that at least some of that loss was transferred to the Repair and Renovation Fund. 

Analyst’s Take

The small increase in the state’s overall budget means that most departments will maintain the status quo for the next two years. Few costly initiatives are planned, and as the governor stated, the next few years will be used to set the stage for long-term growth.

While the overall budget remains fairly steady over the next two years, the IT budget has dropped significantly, which will likely have an impact on spending for the next few years at least, especially for those interested in the community development, general government and natural resources verticals. As expected, health care continues to be a growth area as well as economic development and regulation, which will likely be heavily focused on regulation and compliance.

Vendors interested in finding out more about North Carolina should check out Deltek’s state profile application.

Idaho's FY2013-2014 Budget

Governor “Butch” Otter introduced the 2014 Idaho budget earlier this year, which will see a nearly $300 million increase from FY 2013. Of the $162 million in increased state revenues, nearly half will be transferred to the Budget Stabilization Fund, which will rebid the state’s savings accounts depleted during the recession. Figure 1 below shows total state spending starting in FY 2010.

 

 

Medical Assistance Services saw an increase of $77 million to a total FY 2014 budget of $2 billion. Health and human services spending for the state comprises 39.3 percent of the total state budget, with education spending following at 35.2 percent. The Department of Labor saw a $66 million increase, and Public School Support rounded out the top three with an increase of $57 million. Very few departments saw decreases in spending from FY 2013-2014, with the highest drop of $37 million in the Idaho Transportation Department.

The total IT spending for the state decreased by approximately $9 million in FY 2014, bringing total spending to $72.9 million. Some notable projects in the budget included $1.6 million for a benefit and tax system upgrade in the Department of Labor; $5.2 million for a GenTax upgrade for the Department of Revenue and Taxation; $1.7 million for Phase III interoperable communications for the Idaho State Police; and nearly $21 million for the Electronic Health Record (EHR) Incentive Program.

 

Despite tough times that followed the economic recession, Idaho has rebounded with increased revenues that are being used to restart its savings program for the long haul. Vendors working in the education and health and human services space should check out Deltek’s analysis on Idaho’s budget here, and brush up on the Deltek’s state profile application. For a free trial, please click here.

Hawaii's FY 2013-2015 Biennium Budget

In his FY 2013-2015 Executive Biennium Budget, Hawaii Governor Neil Abercrombie highlighted the daunting challenges that faced his administration during the last biennium, including a $1.3 billion potential budget shortfall that threatened deep programmatic cuts to department operations statewide. The governor utilized a fiscal strategy to only address pressing needs while investing in the state’s future, with goals to improve government efficiency and transparency. For this biennium, Hawaii’s gross domestic product (GDP) is expected to increase by 2.4 percent in 2013, while unemployment rates continue to decrease.

The new biennium budget (seen above in Figure 1) has several areas of investment, including:

  • Early learning and early childhood health
  • Education IT and digital curriculums
  • Increased resources for Hawaii’s aging population
  • Environmental sustainability and protection

The biggest gains by department from FY 2013-2014 include the Department of Human Services ($309 million), Department of Budget and Finance ($251 million), and Department of Transportation ($52 million). The Department of Hawaiian Home Lands saw a budget decrease of $140 million. Investments for FY 2014-2015 include $151 million for the Department of Human Services and $91 million for the Department of Budget and Finance.

Although the numbers in Figure 2 look as if Hawaii has invested millions in information technology, the numbers actually represent more transparency into Hawaii’s IT reporting. Deltek was able to gather more data on the total value of IT projects in the state for the biennium budget. Health IT was a major investment, including $2 million for its health information exchange (HIE), $45 million for Medicaid IT initiatives, and $15 million for an electronic medical record (EMR) system. The Department of Taxation is also investing nearly $32 million into its tax system modernization project for FY 2013-2015.

Despite tough times that followed the economic recession, Hawaii has laid the groundwork for a stable foundation and is continuing to increase both its GDP and IT spending. Vendors working in the education, health, and environmental space should check out Deltek’s analysis on Hawaii’s budget here, and brush up on the Aloha State in our state profile application. For a free trial, please click here.

House passes FY 2014 Budget Resolution; Senate Kicks Off Its Own

On March 13, the House Budget Committee passed the FY 2014 budget blueprint from Chairman Paul Ryan (R-Wis.). The structure of the plan drives a $7 billion surplus by 2023. According to The Hill, the plan is based largely on $600 billion in new tax revenue established in the American Taxpayer Relief Act (the legislative hook that kept the government from going over the “fiscal cliff” in January), as well as $716 billion in Medicare cuts originally established in the Affordable Care Act (“Obamacare”). Although Ryan opposed those cuts during his stint as Vice Presidential candidate last year, they figure prominently into his approach to deficit reduction.
Meanwhile, the Senate Budget Committee will begin its markup sessions on its own budget plan on March 14. What is interesting to note is that, while the House plan is mum on the subject of sequestration, the Senate version very clearly states an intention to “Fully replace the harmful cuts from sequestration with smart, balanced, and responsible deficit reduction.”
In the grand scheme of things (and on paper), the House and Senate versions don’t vary significantly from each other. The Senate proposal for Discretionary Budget Authority is $80 billion more than the House version, but the difference shrinks down to $16 billion by 2023. While $80 billion is a whole lot of money to me, it’s a rounding error when it comes to federal spending. 
Source: Summary tables, “The Path to Prosperity: A Responsible, Balanced Budget” (House), “Foundation for Growth” (Senate)
While the topline numbers suggest a chance at compromise, the two diverge significantly on the path to those numbers. As noted earlier, the Senate version replaces sequestration which won’t be an easy sell. And Ryan’s version basically relies on the elimination of Obamacare (but also relies on the additional revenue that Obamacare would bring in).
Source: Summary tables, “The Path to Prosperity: A Responsible, Balanced Budget” (House
 
That’s not going to go over well in the Senate, the House will not be a fan of repealing sequestration, so ultimately both versions are likely dead in the water.

Do big contracts mean big failure?

Procurements and contracts don’t always go as planned. While this is not exclusive to any one type of contract or industry, it is often the very large contracts that have complications, to put it mildly. Mega statewide or citywide contracts have lots of requirements that often apply to several systems. These sizeable projects include revamping radio infrastructure, building out 911, upgrading Medicaid management information systems (MMIS), and major financial system overhauls, all of which require significant time, money and sometimes a bit luck.
 
Large projects often require longer-than-normal procurement processes due to several factors. First, large projects require lengthy solicitations (request for proposals), which in turn require more time for vendors to develop their response. Second, the comprehensive bids submitted take longer for agencies to review and determine a successful bidder. Additionally, the approval process can often be an uphill climb. Oversized projects carry significant price tags and therefore the buy in from governors, mayors or commissioners isn’t always a quick process. Add all of these pieces together and you have the makings for a drawn-out procurement. 
 
There are a number of projects we can look to in various industries to see how these types of initiatives are often unsuccessful. In the health care industry, the Medicaid management information system procurement field has been plagued with an innovation-squashing procurement cycle – they are typically over budget, deadlines are missed, and systems are outdated by the time they are installed. A study in 2012 found that three out of seven states undergoing an MMIS procurement resulted in canceled projects. Five out of 10 states in the MMIS design, development, and implementation phase experienced significant delays. Some notable MMIS delays include the state of New Hampshire, which recently convened a budget conference committee in the legislature due to concerns with the length of its MMIS implementation. The state’s $61 million MMIS contract with Xerox was the largest computer contract in state history in 2005, and the state now estimates the system will be running by April 1, 2013, which is five years behind schedule, prompting a $15.8 million contract extension.
 
West Virginia awarded a $248 million contract to Molina, which is now under protest after the original RFP was twice canceled. South Dakota canceled its MMIS contract with CNSI due to cost overruns and being sued by the vendor. The state has now reached a settlement and is in the process of renegotiating a contract for a new MMIS.
 
Although states recognize that changes need to be made to the costly, burdensome MMIS procurement process (with its few titans), the right answer doesn’t seem to have been discovered yet. With a new set of individuals gearing up to enroll in Medicaid in the coming years, can states afford new systems burdened with the same problems?
 
The public safety industry is also not immune to procurement failings. The state of New York began planning its statewide wireless network in 2000. After a draft proposal in 2001, it issued an RFP in June 2002 and eventually awarded a contract to M/A-COM two years later in April 2004. The project was expected to cost just less than $2 billion over the 20-year contract. However, the project immediately began to experience delays, and after several years, many failed system tests and the inability of M/A-COM to fix the issues, the state canceled the contract in 2009. The failed and subsequently canceled contract had a major impact on M/A-COM, as it would any company losing a $2 billion contract during a tough economy. Soon after this project hit the fan, Harris Corporation purchased Tyco Electronics Wireless Systems (M/A-COM). It’s unclear whether this sale was a direct result of the failed New York contract, but certainly makes for a curious coincidence.
 
The state of California has had several run-ins with large procurements that have been delayed or canceled. The Los Angeles Regional Interoperable Communications System (LA-RICS) has been delayed due to a large procurement that was canceled after being deemed illegal. More specifically, the LA-RICS contract was illegal because of its large scope of services. After months of reviews and the eventual cancelation, the project was broken up into various pieces, each procured separately, with a combined estimated price tag of $600 million. The California Administrative Office of the Courts also had major delays leading to the cancellation of its half-billion dollar court case management system (CCMS), which was riddled with issues. The state is now moving forward with a new system.
 
Finally, on the financial side of the state and local market, New York City will forever be remembered for CityTime. The city sought to upgrade its payroll system; however, the selected vendor, Science Applications International Corporation (SAIC), has since been removed from the project and is required to pay the city $500 million after a judge ruled in the city’s favor. The project included SAIC employees accepting bribes and stolen or completely wasted money as part of the project implementation. Issues with the system led to numerous scams and scandals, all of which caused the project to go from a $63 million project to a more than $650 million project. The irony is that the upgraded system was supposed to prevent employees from cheating on their time cheats; instead, the city was cheated out of millions of dollars.
 
Since this disaster, SAIC split in two – the government services business separated from the division that provides technology for national security (now called Leidos), health care and engineering. Is it possible that this large scandal, like the radio project involving M/A-COM, led to the SAIC division? While we may never know the answer, Marjorie Censer, reporter for the Capital Business section of the Washington Post, alluded to the CityTime scandal as well as declining revenues causing the split.
 
Analyst’s Take
 
Large contracts that follow large procurements are often doomed from the start. While it is not unheard of for massive projects to move forward without a hitch, they are huge undertakings that often lead to issues down the road. When agencies solicit bids for these projects, vendors must ensure that they are prepared for the extensive planning and negotiations that will occur prior to implementation. Agencies have become aware of the inherent issues that may present themselves with these types of projects, and like Los Angeles learned, splitting up a project into smaller pieces may be the way to go.
 
It would be easy to advise hiring a consultant to assist with planning and procurement processes, but many of the projects mentioned did in fact utilize a consultant. Agencies that commit to large-scale, high-cost projects must establish working committees and regular meetings throughout in order to safeguard themselves, the project, and the tax and grant dollars that make it happen. As part of this, assigning a clear-cut chain of command can help minimize problems and ensure everyone is properly designated to specific tasks if issues arise. When every stakeholder is part of the process from the start, there is less likely to be problems with a new agency added to the mix.
 
Additionally, when working in the health care and general government IT sphere, a solid quality assurance and independent verification and validation team can clearly define project goals and establish target dates for those goals. Vendors and the government are then held accountable throughout the implementation process.
 
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Sunshine Week: Transparency of Texas, FY 2012 IT expenditures

Sunshine Week, which coincides with National Freedom of Information Day (March 16), is a national initiative organized by the American Society of News Editors to highlight the importance of open government to the public. In recognition of Sunshine Week, Deltek’s analysts will be taking transparency and contract data collected from state transparency websites and our own GovWin IQ database to highlight IT expenditure trends and procurement analysis in the state and local market.

 
Today, we take a look at total IT spending for the state of Texas for FY 2012, which was gathered from a top-ranked Texas transparency website. The cumulative spending data collected represents a variety of purchasing vehicles, including purchase orders (PO), statements of work (SOW), procurement cards, and statewide and agency-specific contracts used to purchase IT commodities and services.
 
Texas spent $132 billion in FY 2012; at $693 million, IT spending only made up .524 percent of that total. In FY 2012, Texas spent 89.2 percent of its total IT expenditure on services over commodities, most of which was spent by the same 10 to 12 state agencies, commissions, and institutions. Health and human services, higher education, justice and public safety, and transportation verticals represented roughly 71 percent of all commodities purchased. Health and human services, justice and public safety, social services, and public finance verticals encompassed approximately 62 percent of all services spending.
 
 
 
Each IT line item (software, hardware, maintenance services, etc.) was grouped under one the following categories: IT and telecom commodities; telecommunications services; IT professional services; and IT and telecom repair and maintenance services.
 
 
 Analyst’s Take
 
With such a concentrated spending pattern, qualified IT vendors looking to do business with the state of Texas are best focusing their efforts on agencies and departments within these top verticals. IT vendors looking to get a share of that $693 million should know more about the state’s procurement process. For instance, Texas has bottle-necked most of its standard IT procurement needs through statewide cooperative contracts, which are handled by the Department of Information Resources (DIR). Most statewide contracts come up for renewal every four to five years, and Deltek’s state and local team monitors these contracts as well as any other more specialized IT procurements not supported by DIR.
 
A few statewide contracts currently being monitored in Deltek’s GovWin IQ database include:
Deltek will publish a full length report,“State Government Transparency Report 2013,” providing detailed itemized IT expenditures for the state of Texas and many other states in the coming weeks.
 
GovWin IQ subscribers can learn more about these statewide contracts in the provided links. Non-subscribers can gain access with a GovWin IQ free trial

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