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Western States Contracting Alliance (WSCA) replacing its $18.6 billion PC contracts

With state budgets growing tighter by the day, cooperative purchasing will be an increasingly popular option for saving money. Eligible vendors should not overlook the WSCA schedule.

The state of Minnesota, on behalf of the Western States Contracting Alliance (WSCA) and the National Association of State Procurement Officers (NASPO), released an RFP on September 29 seeking to establish agreements with pc, server, and peripheral manufacturers to replace incumbent contracts expiring in 2009.

Minnesota is again acting as the lead state on these contracts for which 31 states have at this point submitted an Intent to Particpate. In the almost 10 year existence of the WSCA PC contracts, participating states and localities have spent more than $18.6 billion through the contracts.

The new RFP is directed to manufacturers of:

  • Servers
  • Desktops
  • Laptops
  • Tablet PCs
  • PDAs
  • Printers
  • Multifunctional printing devices
  • Storage solutions
  • Monitors
  • Local area network devices
  • Instructional bundles

The RFP also includes EPEAT requirements and has preferences for manufacturers with verification of third-party certifications. Responder questions are due October 23 and proposals are due January 23, 2009.

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Michigan Gets 'Real': Digital Driver's License System ITB Released

On September 29, 2008, Michigan released an Invitation to Bid (ITB No. 071I8200300) for a Digital Driver's License/Identification Card Production System and becomes the latest in a series of states to begin the implementation of REAL ID technology and standards. The purpose of this DL/ID RFP is to procure the services needed for driver's license/identification card production system that would comply with all minimum standards requirements as determined by the March 2005 Personal Identification-American Association of Motor Vehicle Administrators (AAMVA) International Specifications-DL/ID Card Design standards.

This DL/ID project (Member Login Required) will fall under the REAL ID Act of 2005 and Michigan will also be a participant in the Western Hemisphere Travel Initiative (WHTI). Digimarc currently provides the state with a Digital Imaging Based Drivers Licensing System. Digimarc's current $4.9 million contract is set to expire December 31, 2008. GovWin estimates the value of this contract to be around $10 million.

The state of Michigan introduced the Business Application Modernization (BAM), a project to help them prepare for future business demands by re-engineering existing business processes and associated business IT applications. This initiative impacts business transactions conducted by the Michigan Department of State which handles state DL/IDs. The State requires that the chosen contractor must deliver a fully functional card production system that will be integrated with the BAM project in 2009.

Interested vendors must submit proposals that include, but are not limited to, the following requirement areas:

  • Individual DL/ID card features
  • Hardware
  • Software
  • Network/Connectivity
  • Development
  • Security
  • Reports
  • Project Management
  • Delivery, Installation, and Setup
  • Support and Maintenance

The State may also chose to include the following components in the resulting contract, or chose to exercise these components during the term of the contract:

  • Base Michigan license
  • HWHTI compliant license
  • REAL ID compliant license
  • AAMVA security feature
  • Mailing the cards from the Vendor's Facility
  • Image verification
  • Technology Refresh
  • Magnetic Strip

Questions pertaining to this opportunity will be accepted until October 20, 2008 and proposals will be due November 25, 2008. Evaluations will include oral presentations to be completed at the start of the new year, and an award is expected by the end of January 2009.

GovWin is tracking other current Statewide DL/ID projects including those in Connecticut and New Jersey (Member Login Required) and expects to see many more as the REAL ID Act of 2005 starts to have its effects on other Statewide ID systems. As State License contracts start to expire and re-bids are released, states will be forced to comply with new rules and regulations.

City Fiscal Conditions 2008: Turning for the Worse

The National League of Cities recently released their 2008 City Fiscal Conditions report. Confronted with ever declining economic conditions driven in part with housing market meltdown, as well as downturns in consumer spending and income, 64% of city finance officers report that their cities are less able to meet fiscal needs in 2008 than in previous years.

Percent of Cities that are Better Able/Less Able to meet Financial Needs in FY 2008

Similar percentages this low were seen in the early 1990 (1990-1993) recession as well as early 2002 recession (2002-2004). The average percentage of finance offers who reported that their cities were less able to meet fiscal needs in the 1990-1994 recession was 72.5% while in the 2002-2004 recession was 66.3%

As finance officers are closing the books for 2008, they predict that revenues and spending will decline in inflation-adjusted terms, with revenues decreasing by 4.3% and spending decreasing by 1.5%. Year to year revenue growth is expected to slow to 1.1%. All together, 2008 projections for 2008 revenue and spending will produce a budget gap of 2.8%.

Significant factors that were cited for influencing city budgets include:

  • Prices and inflation (98%), such as energy and fuel prices
  • Infrastructure (85%)
  • Public Safety (83%)
  • Employee Rated costs, including wages (95%)
  • Health benefit costs (86%)
  • Pensions (79%)

On the spending side, NLC reported that in 2008, 73% of city finance officers reported increases in public safety spending, 52% reported increases in capital infrastructure/capital spending, and 35% reported increase in human service spending.

Expenditure Actions in 2008

As the economy continues to further put a strain on city budgets, one can only anticipate somewhat of a decrease in Information Technology (IT) spend within the cities. Currently, GovWin and Public Technology Institute (PTI) are conducting a survey with Chief Information Officers (CIO's)/Information Technology Managers from Cities and Counties across the United States. GovWin and PTI hope to have the full report of the survey complete with a report out in Late October/Early November 2008. Current responses from the survey suggest that considering the current economic conditions, 48% state their overall Information Technology Budget will stay the same over the next two years, while 39% state it will decrease. 14% anticipated the overall IT budget to increase.

For the vendor community, it will be imperative to provide solutions and technologies that can help reduce costs within the city as well as meet pain points that the cities/counties are experiencing. Vendors will also need to be willing to look at alternative funding models to fund projects within these tough economic times.

UPDATE: The New York Times has a great article on recession in the cities along with a multimedia map that shows "CIties in Trouble vs. Growing Cities." Hat Tip to "The Big Picture" blog.

The Air Force Nuclear Mission Means Security and Logistics Opportunities

As many of you know, the Air Force has received much intense scrutiny in the past few months about the state of its nuclear mission, owing to several high-profile errors. The major events leading to this scrutiny were the unauthorized transfer of weapons from Minot Air Force Base in North Dakota to Barksdale Air Force Base in Louisiana in 2007; but more recently, the accidental shipment of forward-section assemblies of intercontinental ballistic missiles (ICBM's) to Taiwan on several occasions in 2006, which were not recovered until 2008. Both of these incidents involved glitches in the accounting, issuing, loading and verification process.

The Air Force's response to these errors has shown serious re-commitment to nuclear mission oversight. A task force chaired by previous Defense Secretary James Schlesinger has evaluated the state of the nuclear mission and issued their findings in a report entitled "Report of the Secretary of Defense Task Force on DoD Nuclear Weapons Management." This report exhibits many recommendations, some of which are in queue and some of which have been cleared as mission-critical by top brass.

Not all of these recommendations will require support that is scientific in nature; in fact, many of these objectives, as one might expect, focus more on the re-organization and logistical integrity of the nuclear mission as it stands. The task force concluded that organizational changes alone would not affect the needed changes in the Air Force and delineated a path to progress involving many different types of needs that could likely become programmatic.

Among other desired goals, some of the more salient, support-critical goals for Air Force include:

  • Full review and bolstering of the adequacy of supply-chain processes for sensitive but non-materiel equipment, which includes inventory management systems, inventory validity, procedural compliance and information technology systems
  • Integration and full ownership of the ICBM engineering community into a major command at the newly-designated Nuclear Weapons Center at Kirtland Air Force Base, which will handle all nuclear sustainment activities
  • Increased full-scope education and training of the Air Force, including increased frequency of nuclear war games, a school for nuclear operations, and ongoing curricula expansion to include greater nuclear focus
  • A new headquarters office to provide a focus on nuclear matters within the service
  • Based on this activity, vendors should look to see the Air Force continue to refine its internal processes. With more and more new information on the development of the Air Force's future nuclear weapons management being released, GovWin will continue to closely monitor the increased scrutiny that is to come.

    Medicaid Budget Cuts in Ohio and Utah

    The financial and real estate markets' far-reaching slump is beginning to rear its ugly head in state-funded programs, such as Medicaid. States are wrestling with the economic implications of the downturn, trying to balance a decrease in revenues combined with an uptick in unemployment and an increase in Medicaid eligibility. As a result, trimming Medicaid services is occurring in several states.

    This week talk of Medicaid budget cuts have been reported in Utah and Ohio. According to The Salt Lake Tribune, in Utah, the Department of Health is proposing a 3% reduction to spending, primarily through a $10 million cut to the Medicaid program, which results in a loss of $23 million in matching federal funds. Optional Medicaid services, such as vision care and physical therapy would vanish and an average 2% increase in provide inflation would be rolled back. In addition, eligibility for help may become tougher. For example, pregnant women, with the exception of those who are high risk, could see the amount of assets they can receive drop significantly from $5,000 to $3,000.

    Meanwhile in Ohio, Fox news has reported that the Department of Job and Family Services is cutting approximately $80 million from its budget in an effort to comply with Governor Ted Strickland's request that state agencies cut 4.75% from their budgets. The Governor's request is an effort to address the looming $540 million deficit in the state's two year budget. As a result, the Department is cutting back on adoption services, Medicaid fraud detection activities and a state-federal program that works to transition people from welfare to work.

    Other states are feeling the same budget crunch. Concerns are rising over the economic downturn and the impact on Medicaid enrollment, which is likely to increase, while state revenues are simultaneously decreasing. According to statistics from The Urban Institute, a 1% increase in unemployment would increase Medicaid enrollment by 1 million (approximately 600,000 children and 400,000 non-elderly adults). The resulting price tag of these projections is an increase of $3.4 billion, including $1.4 billion of state spending. Since there is no cap on the number of enrollees, if an individual is eligible; the state must legally provide services. Since all states are required to balance their budget, these outcomes could be catastrophic and potentially call for federal fiscal relief.

    Balancing the Behavioral Health Gap in California

    California is in the midst of improving their behavioral health services, assembling the requirements for a Behavioral Health Electronic Health Record (BH-EHR) system that would allow for the exchange of client information according to a standards-based model of interoperability.

    In November 2004 California passed Proposition 63, now known as the Mental Health Services Act (MHSA), intended to provide resources to support the delivery of mental health services by California's fifty-eight County Mental Health Programs and to monitor their progress toward statewide mental health goals. To facilitate the improvement of behavioral health services, the Department of Mental Health (DMH), in collaboration with the County Mental Health Programs, has assembled the requirements for an Electronic Health Record (EHR) System. Each county is responsible for its own budget and project proposals to meet the individual needs of the clients in their respective communities.

    The development of standards for each county is an ongoing process, leaving some counties more developed than others. DMH hopes to aid the process by releasing a Request for Information (RFI) for the California BH-EHR (member login required). The purpose of the RFI is to share business and functional requirements with vendors and to obtain information about each vendor's ability to deliver standards-based and interoperable behavioral health information systems in California. The RFI will assist in obtaining information from vendors to be shared with the County Mental Health Programs with the intent to aid County/Vendor compliance with requirements. There is no single statewide system.

    The RFI includes the CA BH-EHR Functional Requirements Survey, outlining the functional requirements for each county's electronic health record system. California's roadmap for full integration estimates full functional EHR and Personal Health Record (PHR) systems in place for 2014. Two counties with Request for Proposals out include the County of Los Angeles (member login required) and Merced County (member login required).

    Wall Street bailout/rescue would have marginal impact on state and local IT market

    UPDATE (10/03/08): The House passed the legislation (263-171) today.

    UPDATE (10/02/08): The Senate passed a slightly revised version of the legislation (74-25) last night. The House is expected to revisit the legislation as early as Friday. The Senate attached the bailout/rescue legislation to a completely unrelated bill that had previously passed the House.

    UPDATE (09/30/08): The bailout/rescue bill failed to pass in the House today, but one political expert expects a re-vote on the bill in coming weeks. It will be interesting to see if market events vindicate one side or another in this debate in coming days.

    State and local government-IT vendors should have guarded optimism in regard to potential impact of any Wall Street bailout/rescue plan. Regardless of the specifics, vendors in this space should remember that all impact on this market would be indirect. State and local revenues rest on a three-legged stool of income taxes, sales taxes, and property taxes. So, anything that might increase employment, encourage consumption, and stabilize housing prices would be a good thing for state and local revenues. However, this plan has been offered only as an option to keep the bottom from falling out, not to return the market to its soaring heights. No one is pushing the idea that this will be any sort of "trifecta" for employment, consumption, and housing.

    However, any plan that relies on new federal debt is likely to reduce the value of the dollar, which would at least benefit the few states with a significant share of the nation's $1.2 trillion in export income. So, we're mostly talking about California, Texas, New York, and Washington state.

    Vendors should not expect the bailout/rescue as it is currently conceived to result in a surge of state and local IT spending even under the rosiest of plausible scenarios (emphasis on "plausible"). The best way to spur state and local government IT spending in the short run is via federal grants (GovWin research) for social services, justice/public safety, transportation, education, university-based R&D, and homeland security. A bailout/rescue that relies on massive amounts of new federal debt is more likely to put severe downward pressure on federal grant funds in the short run.

    Also, keep in mind that even if housing prices were to stabilize tomorrow, the long-term trend will be for property taxes to decline or grow slowly as Baby Boomers seek to either stay put, downsize, or cash out of their homes. The property-tax leg of the revenue stool will remain weak for many years to come and only a new economic boom that generates millions of new jobs and/or growing incomes could reinforce the other two legs. (The "housing boom" might have been nothing more than an infusion of easy international money for mortgage holders, but it did boost spending all across all sectors of the economy, which led to more jobs with little wage inflation.)

    Some Observations on The Navy's CANES SD and NGEN Competitions

    The Department of the Navy's Space and Naval Warfare Systems Command (SPAWAR) in San Diego had a busy 2008 Fiscal Year. The next Fiscal Year promises to be busier still as SPAWAR San Diego heads up the competitions for theConsolidated Afloat Network Enterprise Services System Development (CANES SD) and Next Generation Enterprise Network (NGEN) contracts. Following contract award, both efforts will be directed by the Program Executive Office-Enterprise Information Systems (PEO-EIS) at SPAWAR San Diego. A third competition (set-aside for small businesses) to integrate all of PEO-EIS' systems into CANES, called CANES Service-Oriented Architecture (SOA), will also proceed in FY 2009, but this acquisition will be directed by SPAWAR Charleston. CANES and NGEN, along with the Navy-Marine Corps Intranet (NMCI) and Marine Corps Enterprise Information Technology Services (MCEITS), are designed to be cornerstones of what the Navy's Office of the Chief Information Officer (OCIO) calls the Naval Networking Environment~2016.

    Centralizing acquisition responsibilities for CANES SD and NGEN at SPAWAR San Diego provides distinct project management and contracting advantages for the Navy. In management terms, focusing these efforts at PEO-EIS provides a greater degree of project command and control for the Navy. The desire for greater Government C2 capabilities is a lesson learned directly from the NMCI project, which the Navy outsourced entirely to Electronic Data Systems (EDS) nearly a decade ago. Meanwhile, in contracting terms, unifying acquisition efforts under SPAWAR San Diego translates into requirements documents that strive toward NNE~2016 goals simultaneously. To this end, the SPAWAR Contracting Office has informed GovWin that the acquisition timelines for CANES SD and NGEN will follow approximately parallel paths. Similarly, the Contracting Officers handling CANES SD and NGEN have said that language put into the solicitations will be coordinated (as closely as possible) in so far as it is feasible to do so. Specifics are unavailable at this time, but if one solicitation appears before the other it may be advantageous for interested vendors to examine it closely even if they are not bidding on that effort.

    Generally speaking, what this means for industry is that vendors should choose carefully which of these efforts they'd like to bid on. The CANES SD documentation released so far clearly stipulates that no vendor can bid on the Systems Development contract as a prime or sub and also bid on the CANES Service-Oriented Architecture (SOA) Small Business Set-Aside as either a prime or a subcontractor. The Navy is demonstrating a heightened concern to avoid Organizational Conflict of Interest issues. It would not be surprising if the draft NGEN documentation anticipated for release in the next few weeks also contained similar clauses. The bottom line is that the Navy appears determined to diversify the contractors working CANES SD and NGEN to as great an extent as is reasonable. The fact that PEO-EIS is providing project management for both of these efforts makes this acquisition strategy possible.

    Understanding this, who then can be expected to be leading competitors for CANES SD and NGEN? Given the Navy's increasing satisfaction with NMCI, EDS is likely a leader in the competition for NGEN. This said, if this analyst's hunch about the Navy's OCI concerns is correct, then EDS could be out of the picture for CANES SD. This leaves a few large systems integrators who are working similar efforts in the Marine Corps and elsewhere at DoD. Here are a few possibilities based on incumbents who are working large-scale, Service-Oriented Architecture (SOA) based efforts for the USMC and other DoD customers. This list is by no means exhaustive, but it is based on similar work being performed.

    The Naval Networking Environment~2016 is envisioned to be a unified, global network environment resulting from the convergence of several large scale IT integration and development efforts being carried out across the Navy and Marine Corps. CANES SD and NGEN will be large pieces of the NNE~2016 puzzle so those interested in winning work with the Navy should pay close attention to how the competitions play out for these requirements.

    Small Businesses Prove Their Mettle on Seaport-e

    With 1,679 prime contractors on NAVSEA's Seaport-e program, it's easy to imagine smaller companies might get lost in the shuffle. However, over 80% of the prime contractors are listed as having small business concerns. So the question is not if small businesses have gotten a piece of the pie, but how much?

    GovWin's Federal Task Order Database currently provides information on 1,247 task orders that have been awarded under Seaport-e since 2004 and carry a total value of over $17.3billion. Roughly 27% of that total value has gone to small business contractors.

    GovWin has compiled a list of the top 10 small business contractors, sorted by total award value, as shown in the following graph. These values are based on the total potential task order values for task orders awarded between May 27, 2004 and September 19, 2008.

    Top 10 Small Business Contractors on Seaport-e

    For more Seaport-e program trends, check out GovWin's recent blog post on Seaport-e recompetes.

    Continuing Resolution 2009: Congress’ Buying Time Could Impact Technology Vendors

    Stop-gap legislation has been introduced into the U.S. House of Representatives to fund the federal government though March 6, 2009 under Continuing Resolution (CR) unless regular appropriations bills are enacted before then. The Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 (H.R. 2638) would fund federal agencies at 2008 levels, with the exception of the Department of Defense, Department of Homeland Security, and Military Construction and Veterans Affairs, which would receive full year appropriations. If passed by the end of September, the bill would also avoid any government shutdowns that would occur if Congress fails to enact any funding bills by the end of the fiscal year.

    Continuing Resolutions at the fiscal year's end have become an established norm in the federal appropriations landscape for a decade as Congress appears either unwilling or unable to tackle the task of providing regular year-long operating funds for federal agencies before the fiscal year begins.

    Funding Highlights of the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009:

    • $487.7 billion in FY09 funding for the Department of Defense
    • $40 billion in FY09 funding for the Department of Homeland Security
    • $72.9 billion in FY09 funding for Military Construction and Veterans Affairs.
    • Continuing Appropriations for all remaining agencies and activities that would be covered by the regular fiscal year 2009 appropriations bills until a full appropriation is enacted or March 6, 2009 (whichever occurs first)
    • $22.9 billion in emergency supplemental appropriations for relief and recovery from hurricanes, floods, and other natural disasters

    GovWin's Take

    This new CR goes beyond the most commonly chosen time span of December or January to stretch out to March of 2009.

    • The entire House of Representatives is up for reelection this cycle and is in the heat of campaigning for their jobs. Rushing to complete regular appropriations bills by the end of September has been off the radar for weeks, if not months. But in passing a CR the Congress walks the tight rope between getting something passed so they can run home to campaign and facing voters who wonder why they have been ineffective in getting the basics of their job done.
    • A government shut-down is something legislators strongly wish to avoid, unless it serves to bolster their reelection chances. So it is highly likely that some form of CR will be passed.
    • The President has threatened to veto any appropriations bills that spend more than he has recommended, so while the CR would keep budgets at 2008 levels analysts in the Administration will be combing through the bill to find any hidden pork. The question remains whether or not the President wishes to close-out his time in office with a veto.
    • With March 2009 expiration, the Democrat-led Congress keeps its options open for dealing with a new administration that will kick off in January. If Obama wins the March deadline buys time to allow the new administration to shape the budget for the rest of the 2009 fiscal year. If McCain wins it will allow a (presumably) opposition Congress to wield some weight with the new White House.
    • With the current financial market bailout nearly monopolizing Congress' attention this CR will likely sail through.

    Bottom Line for Information Technology Vendors

    • Vendors may need to revise their business development account plans (if they had not forecasted the impact of a likely CR from the onset.) New IT projects in the FY 2009 budget may be put on hold for half the year, or more and existing programs waiting for increased funding will likely have to wait longer. It is possible that IT projects agencies have planned for in the first half of the year won't happen at all.
    • Large company federal units should begin to communicate to their corporate entities to not expect that they will make their numbers and corporate needs to look to other commercial sales organizations to bridge the gap.
    • Vendors may consider reassessing of their hiring plans and compensation plans for 2009 to determine how this "treading water" period impacts these plans and make adjustments as necessary.
    • This is a 1-2-3- punch for federal technology vendors: 1) Market growth was projected to slow in FY09; 2) The bailout of the financial markets currently in development will curtail growth even further; and 3) Now this CR, although not completely unexpected, is longer than what many in the industry would hope for to make 2009 a more positive year.

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