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Federal Government Meets Small Business Contracting Goal for First Time in Nine Years

Early this month, the SBA announced that the federal government met its 23% small business contracting goal, obligating over $83 billion in prime contracts to small businesses in FY 2013.

This is the first time since 2005 agencies have obligated such a high percentage of contracting dollars to small businesses, despite financial challenges such as sequestration and constrained budgets.  Agencies also met prime small business contracting goals in the areas of small disadvantaged business and service disabled veteran-owned small business, but fell short for women-owned small business and HUBZone goals.   For small business subcontracting goals, agencies fell short by 2%, awarding 34% of subcontract work to small businesses versus the goal of 36%. 

Overall, SBA gave the combined 24 cabinet-level agencies a grade of “A” for FY 2013 small business contracting.  This is up from a B in FY 2013.  Twenty agencies received the grade of “A” or “A+” for meeting or exceeding a series of small business contracting goals.  Three agencies received “B”s, while only one agency, Energy, received an “F.”   Energy struggles to meet small business goals , because so much of its spending goes to its national labs, which are not suitable for small business contracting.  The departments of Interior and Transportation performed well on the other end of the reporting scale, receiving “A+”s for their small business contracting achievements.

John Shoraka, SBA’s Associate Administrator of Government Contracting and Business Development, credits a large part of the success to the administration’s commitment to achieving small business contracting goals.  “There’s been a laser-like focus with respect to small business procurement from the White House.”  Additionally, the Small Business Procurement Council held regular meetings on the goals to hold agencies accountable.

Congress is considering increasing the small business contracting goal even higher, to 25% and hiking the subcontracting goal to 40%, meaning nearly another $10 billion that would need to be awarded annually to small businesses.

 

GovWin Recon - August 19, 2014

GovWin Recon, produced by Deltek's Federal Industry Analysis (FIA) team, is designed to support awareness and understanding of the issues impacting the government and the contractors that serve it. Recon highlights key developments surrounding government technology, policy, budget and vendor activities.

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Spending on GSA’s Email-as-a-Service BPA

In last week’s post we took a look at lackluster spending on the GSA’s Infrastructure-as-a-Service BPAs.  This week’s post provides some analysis of spending on the GSA’s sister vehicle to the IaaS BPA, the Email-as-a-Service (EaaS) BPA.  With a ceiling value of $2.5 billion, the EaaS BPA was awarded to 20 vendors at the end of August 2012.  Unlike its IaaS predecessor, the EaaS vehicle was established at a time when the federal cloud computing market had already begun taking shape.  Federal agencies had awarded cloud contracts worth hundreds of millions of dollars in fiscal 2011 and 2012 and the GSA sought to get in on the action.  Many agencies identified email as one of the simplest systems to move to the cloud and so the GSA put together a vehicle that would facilitate the expansion of cloud-based email across government.  The $2.5 billion ceiling of the vehicle offers an indication of how much work the GSA expected to flow through the EaaS BPA.

Despite the optimistic projections, use of the EaaS contracts was not forthcoming.  As the most recent data below shows, federal government customers have largely ignored the BPAs.
  • Commerce - $975K
  • Smithsonian Institution - $17K
  • Treasury - $13K
Impressive, eh?  Since their inception at the tail end of FY 2012, three federal agencies have obligated a grand total of $1 million on the contracts.  Arranged by vendor this spending works out as follows.
  • Unisys - $975K
  • Onix Networking - $30K
The obligations to Unisys are related to the installation and maintenance of a unified messaging system for the National Oceanic and Atmospheric Administration.  The obligations to Onix Networking are for the Smithsonian and Treasury cloud-based email projects.
 
How does spending on the GSA EaaS vehicles stack up against the overall adoption of cloud-based email/messaging systems across the federal government?  Regular readers may remember the chart from a June post entitled Cloud Trends: Feds Buy Communications and Collaboration Solutions which showed that since fiscal 2010, federal agencies have implemented 27 instances of cloud-based email/bundled communications.
 
What I didn’t provide in the June post is a dollar value for these implementations.  That total, based on awarded contract value, not obligations, is $2.8 billion.  Anyone see the irony in this figure?  The ceiling value of GSA’s EaaS BPAs is $2.5 billion and agencies have awarded contracts worth $2.8 billion.  It turns out the GSA wasn’t far off in its estimate of market demand.  The trouble for the GSA vehicle is that federal customers went elsewhere to procure the service.
 
Why they chose not to use the EaaS BPAs is a mystery.  In part, a lack of awareness of the vehicles is probably to blame.  The ubiquitous availability of cloud-based email via other procurement avenues is likely another factor contributing to the lack of use.  For example, since FY 2010 agencies have used GSA’s IT 70 schedule to award contracts for email/bundled communications solutions totaling $2.5 billion in value.  Contracts totaling an additional $200 million in value for these solutions have been competed and awarded on an unrestricted basis over that span of time.  For the EaaS BPA this total is $2 million.  Remember, this figure is contract award value, not obligations, explaining its difference from the $1 million mentioned above.  Even using awarded contact value as a measurement the conclusion is the same – very little money is flowing through the EaaS BPAs.
 
What this data tells me is that overworked and understaffed agency contracting shops use the easiest, most available avenue for procurement.  In this case that avenue is GSA’s Schedule IT 70.  Notice that full and open competitions are second in line.  Given the fact that almost every vendor has an IT 70 schedule, I see those competitions as roughly the same as unrestricted competitions.
 
In conclusion it is easy to see why no one uses the EaaS BPAs – they don’t provide advantages over other potential procurement options.  In competing and awarding BPAs for an emerging technology all the GSA did was attempt to split off work that is easily available on its standard schedule.  In doing so they cost vendors precious bid and proposal dollars that could have been put to better use elsewhere.  Finally, note that GSA is now proposing a new Special Item Number (SIN) to help agencies acquire cloud services on IT 70.  It seems the agency has also noted the use of its standard IT schedule in preference to its cloud specialty vehicles.

GovWin Recon - August 18, 2014

GovWin Recon, produced by Deltek's Federal Industry Analysis (FIA) team, is designed to support awareness and understanding of the issues impacting the government and the contractors that serve it. Recon highlights key developments surrounding government technology, policy, budget and vendor activities.

Headlines beginning with an * include quotes from Deltek analysts.

Sequestration / Budget:

Federal IT:

Agency News:

Vendor News:

Cybersecurity:

Cloud Computing / Data Center Consolidation / Virtualization:

Mobility:

Transparency and Performance:

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GovWin Recon is Deltek's daily newsletter highlighting federal government contracting news and analysis from around the government contracting world. Get it delivered to your e-mail inbox, free!

GovWin Recon - August 15, 2014

GovWin Recon, produced by Deltek's Federal Industry Analysis (FIA) team, is designed to support awareness and understanding of the issues impacting the government and the contractors that serve it. Recon highlights key developments surrounding government technology, policy, budget and vendor activities.

Headlines beginning with an * include quotes from Deltek analysts.

Federal IT:

Agency News:

Vendor News:

Cybersecurity:

Defense / C4ISR / Embedded Technology:

Contracting / Acquisition:

Legislation:

State and Local:

AEC News:

GovWin Recon is Deltek's daily newsletter highlighting federal government contracting news and analysis from around the government contracting world. Get it delivered to your e-mail inbox, free!

GovWin Recon - August 14, 2014

GovWin Recon, produced by Deltek's Federal Industry Analysis (FIA) team, is designed to support awareness and understanding of the issues impacting the government and the contractors that serve it. Recon highlights key developments surrounding government technology, policy, budget and vendor activities.

Headlines beginning with an * include quotes from Deltek analysts.

Federal IT:

Agency News:

Vendor News:

Cybersecurity:

Cloud Computing / Data Center Consolidation / Virtualization:

Big Data / Analytics:

Mobility:

Defense / C4ISR / Embedded Technology:

State and Local:

AEC News:

GovWin Recon is Deltek's daily newsletter highlighting federal government contracting news and analysis from around the government contracting world. Get it delivered to your e-mail inbox, free!

Lackluster Spending on GSA’s Infrastructure-as-a-Service BPA

 

Remember back in 2010 when the cloud computing hype-cycle was shifting into high gear?  Articles appeared every day describing the benefits of moving to the cloud, industry partners anticipated high agency demand, and then federal CIO, Vivek Kundra, announced his 25 Point Implementation Plan to Reform Federal IT Management.  Based on Kundra’s plan, the Office of Management and Budget mandated that agencies move 3 systems to the cloud.  This motivated the GSA to spend time, money, and effort putting a Blanket Purchase Agreement in place for vendor-provided Infrastructure-as-a-Service solutions.  By all indications the great migration was off and running.  Analysts projected the swell of cloud adoption would become a wave and the wave a white-topped crest that drove federal IT into a new paradigm of utility-based computing, unlimited scalability, and vastly increased savings.

This is what was supposed to happen.  The reality is that agencies dragged their feet and the cloud wave evaporated into puddles that dotted the federal technology landscape.  Among the flotsam and jetsam littering the market shoreline was GSA’s IaaS BPA.  Once anticipated to be THE way that agencies entered the cloud, the IaaS BPA became instead just another little used contract vehicle with poor ROI for the GSA.  You can’t fault GSA for trying to capitalize on a trend.  After all, as an agency driven by the fees it collects from government customers, it was doing what any investor does – try to front-run the market.  Alas, the data below showing spending on the vehicle has been the result.

  • DHS - $2.7M
  • DOE - $579K
  • NEH - $124K
  • Labor - $13K
  • DOJ - $11

By my calculations, federal customers have awarded cloud contracts worth approximately $24 billion since fiscal 2010.  In comparison, 5 agencies have obligated a total of $3.4 million on GSA’s IaaS BPA.  Prefer to compare spending to spending and not to TCV?  According to OMB’s data federal agencies spent $2.1 billion on cloud computing in fiscal 2012.  This number rose to $2.3 billion in fiscal 2013.  By any measurement the amount of money obligated for cloud solutions on the IaaS BPA has been very, very low.  The numbers break out as follows by vendor over the same period of time.

  • CGI Federal - $3.3M
  • Autonomic Resources - $124K
  • AT&T - $13K
  • Verizon - $11K

CGI Federal’s earnings have come from hosting Department of Energy and Department of Homeland Security data, while Autonomic Resources’ earnings from a single hosting project at the National Endowment of Humanities.  Curiously, both AT&T and Verizon won business providing cloud-based mobile telephony services for the Department of Labor and Department of Justice, respectively.

It’s anyone’s guess why spending on the IaaS BPAs has been so low.  Deltek’s cloud contracts data shows that from FY 2010 through FY 2014, federal customers have awarded IaaS contracts worth close to $13 billion dollars.  Most of these contracts have been awarded via Full and Open ($11 billion), GSA IT 70 ($299 million), and Alliant Large Business ($249 million) competitions.  It’s clear that agency customers prefer to compete cloud infrastructure contracts on their own using more expensive unrestricted competitions and other acquisition avenues provided by GSA.  Therefore, the problem with the IaaS BPAs can’t be too high a fee structure.  It can’t cost more to compete contracts unrestricted than to compete them via a BPA, can it?

My guess is that most agency contracting shops simply aren’t aware that the IaaS BPA is available.  In the end they’ve chosen to use the methods they know best and the contracts that are most familiar.  This conclusion is reinforced by the similarly poor use of GSA’s Software-as-a-Service BPA for email.  Spending on it too has been lackluster, but I’ll save this tale for next week.

Healthcare.gov – Can CMS Get it Right?

As the next open enrollment window approaches on November 15th, many are wondering if CMS can get it right.  A recent GAO report and statement by GAO’s William T. Woods Director, Acquisition & Sourcing Management before the House Subcommittee on Oversight and Investigations, Committee on Energy and Commerce show numerous ineffective planning and oversight practices at CMS during the development and implementation of the website.

As of March 2014, CMS reported obligating $840 million for Healthcare.gov and its supporting systems, including $150 million in cost overruns for the initial version which failed in October of last year upon launch.  CMS blames much of the cost increases on changing, ill-defined requirements and system complexity.  CMS’ ability to provide adequate oversight was exacerbated by compressed deadlines.  “Pressure of deadlines drove a lot of the decisions that were made by CMS,” according to Woods.

GAO made five recommendations to CMS to better manage the ongoing effort to develop the federal marketplace and improve future contracting efforts:

·          Assess the causes of continued marketplace cost growth and delayed functionality and develop a mitigation plan

·          Ensure that quality assurance surveillance plans and other oversight documents are collected and used to monitor contractor performance.

·          Formalize existing guidance on the roles and responsibilities of contraction officer representatives and other personnel assigned to oversight functions.

·          Provide direction to contracting and program staff about the requirements to create acquisition strategies.

·          Ensure that IT projects adhere to requirements for governance board approvals before proceeding with development

Since Healthcare.gov’s debut in October, the site has been stabilized and even exceeded enrollment targets for the year, totaling more than 8 million enrollees.  CMS fired its original site development contractor, CGI, in favor of a new contractor Accenture.  Additionally, HHS has a new secretary, Sylvia Burwell, as well as a new Principal Deputy Administrator of CMS, Andrew Slavitt.  In late July, HHS added Leslie Dach as Burwell’s senior counsel to help manage health insurance exchanges.

At the subcommittee hearing, CMS spokesman Aaron Albright said, “CMS takes its responsibility for contracting oversight seriously and has already implemented contracting reforms that are more extensive than the recommendations in GAO’s report.”

However, even CMS’ new contract with Accenture has already experienced cost overruns, growing from an estimated $91 million to over $175 million in obligations to date while not delivering promised functionality.

Congress is justifiably concerned about ongoing progress with the Healthcare.gov website, as well as CMS’ ability to effectively manage contracts and contractors for the site.  The upcoming procurement for a follow-on contract to Accenture’s current work and the addition of cloud service vendor, HP to supplement hosting services currently provided by Terremark, adds even more complexity to the program.   CMS originally intended to transition hosting from Terremark to HP Enterprise Services Virtual Data Center, but has since decided to continue with Terremark for the main system and have HP host staging and other test environments for the federal marketplace. 

Slavitt told Congressmen that the situation this year is “vastly different.”  He went on to say the agency is contracting differently, “making sure that we have precise requirements, with daily management and senior level accountability that goes all the way up to the secretary.”

 

GovWin Recon - August 13, 2014

GovWin Recon, produced by Deltek's Federal Industry Analysis (FIA) team, is designed to support awareness and understanding of the issues impacting the government and the contractors that serve it. Recon highlights key developments surrounding government technology, policy, budget and vendor activities.

Headlines beginning with an * include quotes from Deltek analysts.

Federal IT:

Agency News:

Vendor News:

Cybersecurity:

Health IT:

Mobility:

Waste, Fraud and Abuse:

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GovWin Recon is Deltek's daily newsletter highlighting federal government contracting news and analysis from around the government contracting world. Get it delivered to your e-mail inbox, free!

September – the “Spendingest” Month of the Year

Washington can be a pretty polarized town and August is perhaps the most polarized month of the year in DC. I don’t mean this from a political or policy standpoint, but in the general workaday sense. On one side, many government officials and their staffs – from Congress to the Administration and the bureaucracy – leave town on break. On the other side, the federal contracting community – both inside and outside government – is busy ramping up to close out the fiscal year (FY) before time runs out on authorized budgets. Most of this effort will come to fruition in September, making it the “spendingest” month of the year.

In this series of entries I have been looking at the potential for federal contract spending that could likely come in the final quarter of this fiscal year – the fourth quarter, or Q4 – spanning the months of July, August and September.  Rather than taking any one year as a benchmark, I hope that looking at a 5-year average will help smooth out any outliers that would skew the perspective. In the first week, I looked at total Q4 contract spending for the top 25 departments and agencies across all categories of contracted products and services. Last week, I looked at these same 25 departments specifically from a Q4 information technology contract spending perspective to see which departments should have the largest portion of their FY 2014 IT budgets still on the table for Q4. In this third entry I am digging deeper into the Q4 spending data to see how it breaks out month-to-month.

Total Contract Spending

As mentioned previously, federal departments report spending about 32% of their yearly contract dollars in Q4 across all product and services categories. A deeper look at spending data over the last five fiscal years reveals that, on average, 18% of federal contract dollars are awarded in September alone. (See chart below.)

 

Information Technology

For IT, however, the percentage of federal fourth quarter contract spending rises to 39% and that translates into $30 billion in IT products and services contracted during the quarter. So does IT’s higher overall Q4 proportion translate into higher September spending as well?  It sure does. Compared to the 18% across all categories of spending, IT contracting in September averages 23%. (See chart below.)

 

No wonder Q4 gets labeled as a “the busy season” and September is dubbed a “spending spree!” Almost one quarter of all federal IT contract dollars are obligated in the final four weeks of the fiscal year.

Next week, we’ll see how the largest 25 departments and agencies compare in their average September IT spending.  Stay tuned.

 

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Originally published in the GovWin FIA Analysts Perspectives Blog. Follow me on Twitter @GovWinSlye.

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