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OMB Acquisition Guidance Directs Contract Scrutiny and Spending Cuts

On July 29, OMB issued a set of memos outlining several acquisition requirements that will impact existing and future federal contracts. Following the directive that President Obama issued in his March 4 memo, OMB created new policies that will put some contracts under high scrutiny and possibly the chopping block. The goal - save $40 billion a year by reducing spending and using less risky contract types.

OMB's guidance contains several directives and suggestions for process improvements to save money, increase competition and reduce contracting risk.

Agencies must review their existing contracts and acquisition processes and develop a plan to save 7% of baseline contract spending by the end of FY2011. To accomplish this, OMB asks agencies to consider:

  • Migrating work from cost-type contracts to fixed-price as requirements become better defined.
  • Analyzing organizations with disproportionate levels of Time &Material/Labor Hours contracts and consider whether other contract types or insourcing are more appropriate.
  • Agencies must reduce the share of dollars they've obligated in FY10 to new contracts that use "high-risk" contracting types by 10%. This includes cost-reimbursement, Time and Materials, and Labor Hours contracts. FY2008 dollars will be used as the baseline.

    Agencies should strengthen acquisition practices to pay more attention to planning and oversight, including:

  • Upfront planning to align requirements and acquisition strategies.
  • Market analysis, cost estimates and choice of contract types and incentives.
  • Internal capacity to manage programs, oversee contract performance, and mitigate risks after award.
  • Instituting peer review at critical stages of high-priority acquisitions.
  • Ensuring that systems are in place to review contract cost, schedule and performance goals on an ongoing basis and that corrective actions are taken to affect contract outcomes.

    Agencies should develop more strategic acquisition strategies. For example, OMB encourages agencies to increase participation in government-wide strategic acquisition initiatives like strategic sourcing to take advantage of volume discounts.

    Implications for Contractors

    This guidance has a laundry list of implications for contractors.

  • Potential contract cancellation or transition from a high-risk contract type to fixed-price.
  • Lost revenue on cost-plus contracts prematurely transitioned to fixed-price.
  • More scrutiny as agencies review contracts for program performance and cost control (especially organizations heavy on T&M/LH contracts).
  • Agency reexamination of acquisition strategies and requirements when only one offer is received.
  • Broader competition in areas that were questionable as sole-source in the past.
  • Better requirements development to reduce risk of fixed-price contracts.
  • Increased complexity and timeframes for procurement to incorporate deeper planning and analysis.
  • More volume purchases and/or consolidation of contracts as agencies try to create broad one-stop shops for commonly acquired products/services.
  • Additional reporting on guidance objectives to compare outcomes of current practices to new practices.
  • So what should contractors do? At a minimum, you should review your cost-plus contracts for any performance, schedule or quality issues. If there are issues, draft a list of actions to correct them immediately.You can also begin crafting value propositions that tie your program to current mission objectives. Provide metrics to support the effectiveness of your work. It is also important to develop and share strategies for reducing outsourcing program costs. For programs targeted for transition to fixed-price contracts, provide your own assessment of any ill-defined or unstable requirements that continue to pose risks.

    OMB plans to release more guidance at the end of the fiscal year, but agencies are urged to start program reviews now. It's likely that the VA, which has already canceled 45 IT projects and has had $1.1B of its IT development funding put on lockdown until program reviews are complete, will serve as a model for other agencies.

    Avoid becoming an acquisition reform casualty - start planning now.

    DHS Moves Forward with EAGLE II

    The Department of Homeland Security held an Industry Day on July 27, 2009 to discuss the acquisition strategy for the upcoming Enterprise Acquisition Gateway for Leading Edge (EAGLE) II procurement. EAGLE II will be procured as two separate requirements. One of the procurements will be specifically set-aside for small businesses, (EAGLE II – Small Business), and the second will be released on a full and open basis, (EAGLE II – Unrestricted).

    Based on the information received from industry the Small Business portion of EAGLE II will be competed by using a category based approach, whereby small businesses will compete to receive an award in one of four small businesses areas, which include: 8(a), HUBZone, Service Disabled Veteran Owned Small Business (SDVOSB), and Small Business (which includes all of the other small business categories not mention in the other three set-aside types).

    A specific strategy has not been finalized for the unrestricted portion of EAGLE II. An RFI was released on July 28, 2009 and a more detailed acquisition strategy will be available once responses are received and reviewed.

    Both the unrestricted and set-aside portions of EAGLE II have an anticipated Solicitation release date of 1QFY10 with proposals anticipated to be due during 2QFY10. GovWin will provide an Opportunity Advisor Report in the near future which will provide a more detailed analysis of the EAGLE II procurement.

    Developing the Tribal Welfare Market

    The 12th National Child Welfare Data and Technology Conference was held from June 23, 2009, through June 24, 2009, in Bethesda, Maryland. The Conference focused on improving data through information technology within agencies, tribes and courts. One of the main focuses of the workshops was improving state data on Indian child welfare services.

    In the past, tribes have not been afforded the same federal resources made available to states to develop the infrastructure necessary to collect and report child abuse and neglect data. There is no federal agency that oversees the gathering of Indian data, and the National Data Archive on Child Abuse and Neglect System (NCANDS) does not currently include data from American Indian/Alaskan Native child welfare services.

    A step in the right direction occurred on October 7, 2008, when George Bush signed into law the Fostering Connections to Success and Increasing Adoptions Act of 2008. Part of this Act creates direct access for tribal governments to the Title IV-E Foster Care and Adoption Assistance program. The legislation authorizes and appropriates $3 million for each fiscal year beginning in 2009 for technical assistance to tribes regarding activities need to enhance the administration of tribal programs under Title IV-E. It also includes one-time start up grants of up to $300,000 a year for up to two years for tribes seeking to apply to the federal government to operate the Title IV-E program.

    Vendors interested in the tribal welfare market should become acquainted with the National Indian Child Welfare Association. NICWA is a national nonprofit group that works to address the issues of child abuse and neglect through training, research, public policy, and grassroots community development. They also work closely with tribal and urban Indian child welfare programs to increase their service capacity, enhance tribal-state relationship, and provide training, technical assistance and information services. State Indian Child Welfare (ICW) Managers have also developed a network to support and develop Indian Child Welfare practices in the states, holding monthly teleconferences. ICW's goals are for uniform Indian child welfare data elements in state systems that would effectively promote state and tribal connections.

    Senator Warner hosts Virginia Summit on Broadband Access

    On Monday, July 27 Virginia Sentator Mark Warner hosted a half-day summit for any interested individual or groups to review the Broadband Technology Opportunities Program (BTOP)/Broadband Initiatives Program (BIP) ARRA funding opportunities.

    As the August 14 deadline for applications in the first of three rounds of funding fast approaches, the primary goals of the summit were to connect state and local government stakeholders with federal executives from the Department of Commerce and the Department of Agriculture in charge of the BTOP/BIP funding programs, to connect potential private and public sector partners, and to provide supplemental information and proposal support for Commonwealth proposers.

    Panel members included David Villano, Assistant Administrator, Telecommunications Programs, Rural Untility Services, U.S. Department of Agriculture, Larry Strickling, Assistant Secretary for Communications and Information, U.S. Department of Commerce, and Karen Jackson, Deputy Secretary of Technology, Virgina Information Technologies Agency.

    Beyond workshops and summits such as this one, guidance can be found in a number of places. GovWin's Chris Dixon recently delivered a webinar on State and Local Stimulus Guide: Broadband. GovWin's Economic Stimulus product also has an initiative report on BTOP. Senator Warner is also maintaining a site for the Broadband Summit with the presentations from the event and additional resources. And of course, the Department of Commerce is maintaining the Broadband USA site as a portal for information around the BTOP/BOP programs.

    The packed auditorium at Piedmont Virginia Community College had an audience of predominantly local public officials from the Commonwealth seeking clarification and guidance on how to tap stimulus funding. Deadlines, definitions and documentation still have governments nervous about the likelihood of submitting a winning proposal. Vendors who can establish public sector partners and assist in the proposal process will have the most success in seeing the BTOP/BOP funding stream. And remember, round two of this program is expected to begin in late 2009 and round three will happen in 2010.

    A look at the Justice/Public Safety and Homeland Security market for the month of July

    The month of July saw an increase in activity within the Justice/Public Safety and Homeland Security technology market. This activity was in part due to new and increased efforts to safeguard the American people. The United States Senate, along with the Secretary of Homeland Security Janet Napolitano, moved forward on two fronts that address security within our borders and within our prison systems. The first was the effort taken by the Senate to discuss the issue of cell phone contraband being found and used within prisons across the country. GovWin reported on this hearing earlier in the month in which witnesses testified on their thoughts surrounding the use of cell phone jamming equipment. A proposed Senate bill, S251, aims at amending the Communications Act of 1934 to permit targeted interference with mobile radio services within prison facilities. If passed, prisons would be allowed to jam cell phone usage in and around prison facilities. Currently there are 26 states who have signed a petition to allow the use of this type of technology. As this bill makes its way through congress, GovWin will be keeping an eye on any new developments through our existing opportunities for this type of technology.

    Not only did the Senate hold a hearing on cell phone jamming, but it also held its second important hearing this month on the new plans to reform REAL ID and replace it with PASS ID. The major concern over the last 3 years regarding the implementation of REAL ID is the price tag. The implementation of REAL ID measures has proven to have great financial effects on the already deficit-ridden budgets of states. In order to comply with REAL ID, many states have or are in the process of implementing multi-million dollar drivers licensing and credentialing systems. The goal of PASS ID is to reduce the costs to states and remove some of the most contentious portions of the REAL ID requirements, such as inflexible electronic document verification, cost, and re-enrollment systems. Changes are already being noticed as the District of Columbia's Department of Motor Vehicles recently delayed the release of an RFP for a new driver's license credentialing system in order to add potential provisions for PASS ID. Political backing of PASS ID is prevalent in the continued support expressed by Secretary Napolitano. GovWin will continue to monitor the developments of the REAL ID vs. PASS ID saga and will report on any changes within existing driver's license contracts and future planned contracts.

    The month of July saw many people in congress and officials at the state and local level getting restless as they await word on if their projects will receive economic stimulus funds. As of today, there has been no word on public safety and homeland security funding awards for localities through the economic stimulus package. The reason for this is mostly due to the timelines associated with most of the economic stimulus grants. Applications for grant funding were mostly due in the middle to end of June. GovWin estimates that award information will begin to pick up in August as the stimulus funding award timelines hint at August-October.

    Not only did a lot of action take place at the Federal level for the Justice/Public Safety and Homeland Security market, but localities saw a steady level of contract awards. For example, Motorola is currently negotiating a contract with Dane County, Wisconsin for a roughly $34 million VHF 700/800 MHz Digital Trunked Radio System. Twenty First Century Communications recently was awarded a 5-year $1.5 million contract with Los Angeles County, California for an Automatic Mass Notification System. Rocky Mountain Offender Management System LLC was awarded a $1.64 million contract with the Colorado Department of Corrections for Offender Electronic Monitoring.

    Not only was money flowing out of agencies through contracts, but agencies are continuing to save money and look for ways of opening up funds for a variety of new projects. Harris County, Texas will be looking at a Security System for the Houston Ship Channel. Montgomery County, Virginia along with a consortium of agencies will be looking for a consultant to help plan for the New River Regional 911 consolidated dispatch center. Milburn Township and Summit, New Jersey will be undertaking the same type of project as they study the possibility of sharing police, fire, and court services. Finally, North Little Rock, Arkansas has expressed their desire to look into Next Generation 911 in the next few years.

    It is no surprise that July was one of the more active months since the economic stimulus package was passed. States and localities are still looking to do business within the Justice/Public Safety and Homeland Security market. This is not a shock to anyone who follows this market as year after year, public safety remains one of the top priorities of congress, state CIO's, and city/county officials. GovWin expects to see a continued increase in business opportunities for public safety communication vendors, security system vendors, access control and identification vendors, and optical/surveillance vendors.

    Nation's 6th largest city has $700 million in cash reserves!

    Too bad it's in Canada (unless you have a North American public-sector practice, that is). Yes, the hockey player in the video is the 11-term mayor of Mississauga, Ontario. It's a segment from some sort of Canadian-style Daily Show.

    Of course, that's only $643.4 million in US dollars.

    The Augustine Committee: Is NASA’s Future Human Spaceflight in Jeopardy?

    The Augustine Committee, led by Norman Augustine, held its first public meeting on June 17, 2009 to discuss and review the U.S. Human Space Flight program. The committee's plan is to generate a report by late August 2009 that will look at the current status of Constellation as well as various alternatives, and the committee will also look into the status of COTS and ISS commercial resupply. GovWin is currently tracking the Constellation Umbrella Program under Opportunity ID 46605. Some of the programs under this umbrella are currently on hold pending the outcome of the reports, including, Ares V Cargo launch vehicle (49094) and the Hardware Development for the Ares Cargo Vehicle (51452).

    Currently, NASA is in the process of designing two boosters, the Ares I and Ares V. Ares I will have the sole function of launching mission crews into orbit. Ares V will be designed to launch other hardware for use on missions and will have a heavier lift capacity than the Ares I booster. The Ares V Cargo launch vehicle has not been awarded to date and will be designed to serve as NASA's primary vessel for safe and reliable delivery of large scale hardware to space. This effort includes multiple hardware and propulsion element teams, and the first flight of the Ares V is planned for 2018.

    The Aim of the Augustine Commission:

    • Conduct an independent review of ongoing U.S. human space flight plans and programs, as well as alternatives, to ensure the Nation is pursuing the best trajectory for the future of human space flight - one that is safe, innovative, affordable, and sustainable
    • Aim to identify and characterize a range of options that spans the reasonable possibilities for continuation of U.S. human space flight activities beyond retirement of the space shuttle
    • The identification and characterization of these options should address the following objectives:
      • Expediting a new U.S. capability to support utilization of the International Space Station (ISS)
      • Supporting missions to the moon and other destinations beyond low-Earth Orbit (LEO)
      • Stimulating commercial space flight capability
      • Fitting within the current budget profile for NASA exploration activities

    NASA has a website dedicated to tracking the Review of U.S. Human Space Flight Plans Committee.

    President Obama's administration tentatively cut another $3.5 billion out of NASA's exploration budget for the next four years pending the outcome of the Augustine report. The report will also help decide the budget fate for NASA programs that include the Orion crew capsule, the Earth Departure Stage, and the Altair lunar landing.

    Often times NASA projects grow in scope, complexity, and cost as work gets underway, and a potential, but not necessarily feasible solution would be for the U.S. aerospace industry to become more efficient by finding a way to conduct research and development for the human spaceflight program with the $22 billion NASA's been given to spend on exploration between now and 2013. A former suggestion from the Augustine panel in 1990 was to "turn to new and revolutionary technologies to build more capable and significantly less costly means to launch manned and unmanned spacecraft." The Augustine panel may need to now help come up with a way to do that in order for NASA to accomplish a lot of the projects that are coming up the pipeline with the current budget constraints.

    Governator and CA Legislature Finally Reach Deal

    California legislature and Governor Arnold Schwarzenegger met on Monday to finalize a state budget deal. The result is a broad cut across California's government, moving costs into the future and taking funds from cities and counties. The action is an attempt at erasing the state's $26 billion deficit.

    Some implications of the budget deal and their corresponding savings include:

    • K-12 schools and community colleges over 2 years: $6 billion
    • University of California and California State University: $3 billion
    • Three unpaid furlough days per month for state workers: $1.3 billion
    • California's health care program for the poor (Medi-Cal): $1.3 billion
    • State prisons: $1.2 billion
    • CalWORKS: $528 million

    Members of both parties have placed blame on the ongoing recession for the choices they made. Assembly Republican Leader Sam Blakeslee of San Luis Obispo stated "This is of course, one of the most difficult economic times to face our state since the Great Depression. So none of these were easy choices. All of them entailed difficult options for the state." While Assembly Speaker Karen Bass, D-Los Angeles, stated "For Democrats, I have to tell you that many of the cuts we had to make...in another time we would have thought were unthinkable". She went on to say she felt that due to the recession she and her colleagues "didn't have a choice"

    Leaders have expressed confidence in Monday's agreement, but only time will tell for sure what the outcome will be. A floor vote is scheduled for July 23rd, and leaders are already in the process of briefing their caucuses.

    In lieu of these major cuts, GovWin anticipates a rather large decrease in volume of Information Technology procurements within California, especially as they relate to verticals such as Education, Health Care, Justice and Public Safety, and Social Services. To that end, don't be surprised if opportunities believed to be coming down the pike get put on the back burner, or some opportunities under evaluation get canned altogether.

    Senate holds hearings on Identification Security as REAL ID vs. PASS ID debate heats up

    Yesterday morning the Senate Committee on Homeland Security and Governmental Affairs held a hearing in order to discuss the REAL ID Act of 2005, as well as a revised bill called Providing Additional Security in States Identification Act (PASS ID), which would reform REAL ID in an attempt to make it work with less strain on state governments. In addition to the opening remarks by the members of the committee, Secretary of DHS, Janet Napolitano and Vermont Governor Jim Douglas each gave their testimony as part of the first of two panels. The second panel included Stewart Baker, former assistant secretary of DHS, Leroy Baca, Los Angeles County Sheriff, David Quam, Director of Federal Relations from the National Governors Association (NGA) and Ari Schwartz, VP and CEO from the Center for Democracy and Technology.

    Secretary Napolitano expressed her concern with the current REAL ID Act, but does support the revised PASS ID, as a way to increase the security surrounding the issuance of driver's licenses without putting added financial burdens on state governments. According to Napolitano, nationwide license standards are essential because of the gap in ID production across the country.

    The PASS ID Act is sponsored by six senators and had some collaboration from the NGA, which seems to show a bit more bipartisanship and buy in from more states. PASS ID would remove some of the portions and requirements from REAL ID that were the most contentious, such as inflexible electronic document verification, high costs to the states and re-enrollment systems.

    Governor Jim Douglas and NGA Director David Quam both provided testimony that advocates the passing and future implementation of PASS ID. The PASS ID Act was created and built around many of the concerns of the states, while REAL ID did not seem to provide the same open forum. Additionally, PASS ID still would provide the added security measures that REAL ID sought to establish, while allowing the system to be less intrusive and easier to implement at the state level.

    While yesterday's testimony is only the beginning of the debate on PASS ID versus its predecessor, REAL ID, it was a much needed forum to facilitate the discussion of what PASS ID is and enable the public to understand the need for a more secure driver's license system. If PASS ID passes during this year, vendors will need to be aware of the differences to REAL ID and how they can assist states and make the transition as smooth as possible.

    Senate holds hearing on cell phone jamming technology

    Today, the US Senate Committee on Commerce, Science, and Technology held a hearing titled "Contraband Cell Phones in Correctional Facilities: Public Safety Impact and the Potential Implications of Jamming." The hearing was organized to discuss matters surrounding the Federal Communications Commission's ban on cell phone jamming, and to also discuss Senate Bill S251, the Safe Prisons Communications Act of 2009. S251 aims at amending the Communications Act of 1934 to permit targeted interference with mobile radio services within prison facilities. Speakers included Steve Largent, President and CEO of CTIA; Gary Maynard, Secretary for the Maryland Department of Public Safety and Correctional Services; Richard Mirgon, Association of Public Safety Communications Officials (APCO); John Whitmire, Texas State Senator; and Inspector General John Moriarty, Texas Department of Criminal Justice.

    Most of the discussion centered on the use of cell phone jamming technology and whether it is an effective way of curbing inmate cell phone usage. The panel was split on whether or not this is a necessary tool for correctional agencies. Richard Mirgon of APCO stated that APCO is against this type of technology because of the risk it poses to public safety officials and first responders. Mirgon felt that jamming all cell phone usage in and around a jail limits the ability for public safety officials, specifically prison officials, from communicating with one another during a crisis. Mirgon felt that inmates will find a way around the system, no matter what is in place. He stated that APCO supports cell phone detection technology and phone-sniffing dogs. Others, such as John Moriarty, support S251 and would like to see measures taken to jam cell phone usage. The argument made is that agencies need to fight technology with technology.

    Currently, a few states have tested and researched cell phone detection equipment, which has been estimated at $500,000 per prison (Texas), which includes equipment and personnel. It is currently unknown as to how much cell phone jamming technology would cost because it currently is illegal. It is not unreasonable to estimate that it would cost the state roughly the same amount of money as cell phone detection equipment costs.

    This is definitely a topic which most, if not all wireless providers will keep an eye on. If ruled legal, this technology could have detrimental effects on wireless coverage. At the same time, it opens the door to a variety of different vendors who have the capabilities to implement this type of technology. In the long run, cell phone jamming could be a multi-billion dollar industry due to the number of prisons across the country. It also has the potential to spread across market lines and possibly be implemented in schools. Interested vendors should keep a close eye on S251 to see if cell phone jamming becomes a reality.

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