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Raytheon to win LA-RICS contract?

The process to contract a vendor for the Los Angeles Regional Interoperable Communications System (LA-RICS) has taken another, almost inevitable, twist. A representative within LA County breached a non-disclosure agreement relative to the LA-RICS request for proposals (RFP) on May 23, 2011. This subsequently led the county to issue a suspension of negotiations with the highest bidder. Motorola followed by protesting a breach of confidentiality on May 31st. Motorola demanded cessation of negotiations, explanation as to why the information was shared, and requested to speak with the individuals involved. This protest follows a notice of intent (NOI) to submit a request for proposed contractor selection review issued by Motorola in late April. The county had an independent review process in which it determined Motorola was the highest bidder.

The county has agreed to negotiate a contract with Raytheon for the estimated $600 million project. Finalizing a contract has been anything but easy as Motorola continues to argue that the procurement process wasn't fair, and that there are biases within the consultant DeltaWrx.

GovWin estimates a finalized contract with Raytheon (which is partnering with EADS Secure Networks North America, Etherstack, and Powerwave Technologies) will be finalized by the start of the fourth quarter. Given the visibility of this project, it would behoove the Joint Powers Authority (JPA) to ensure it is thorough and fair with contracting decisions.

Minnesota Gov. Dayton and legislature reach budget deal: Government to resume soon

While still in the midst of the longest state government shutdown in U.S. history, Governor Dayton and the Republican-led state legislature announced an agreement that would soon end the standoff. Both have pledged to "work around the clock" until all of the details can be finalized. The Governor will then call a special session, the bill will be introduced and, if all runs smoothly, signed by all parties. After the bill is passed (our early projection is by 7/19/11), full government functioning will resume.

What the shutdown has meant for businesses

Businesses have struggled in Minnesota. Not just contractors doing business with the state, but many of the small mom and pop shops around the state. Media has widely reported cases of expired licenses, permits, and other official documentation for all sorts of businesses, professionals, and products. For example, if your liquor or tobacco license ran out during the shutdown, there was no way to renew. Professional licenses, including those for doctors and nurses also expired, with no way to renew. Business licenses expired. As mentioned in an earlier GovWin blog, the state stopped payment on all "non-essential" contracts. So, many vendors working with the state have been forced to either shutter projects or operate without payment. Good thing there is an end in sight.

What are the changes and compromises?

While the final legislation has not yet been introduced, the press releases give some idea of what is to come. Here is what has been reported, thus far.

  • Prior to the deal, the two proposals had a $1.4 billion gap that needed to be filled; Minnesota has a legislative balanced budget requirement.
  • Prior to the deal, Republicans wanted to cut and wanted no new taxes (a stump issue in recent state elections).
  • Prior to the deal, Dayton wanted fewer cuts and tax increases on the wealthy (a campaign promise).
  • In the deal, Dayton conceded and compromised no new taxes on the wealthy.
  • In the deal, Dayton conceded and compromised by borrowing $700 million from K-12 schools and $700 million from tobacco revenue bonds.
  • In the deal, Republicans conceded by giving up many of their proposed deep cuts to agencies, including 15 percent reductions to the state work force.
  • In the deal, Dayton introduced a $500 million bonding proposal to jump start new jobs in the state.

What are hidden costs?

  • The immediate costs are clear with the $1.4 billion gap filled. However, this is borrowing against future receipts, or, kicking the can down the road.
  • The state will now owe K-12 education $2.1 billion, with no concrete plan for repayment. This is a big loan, considering the entire government just shut down over $1.4 billion.
  • Borrowing against future tobacco receipts also means future repayment, as does a jobs bond.
  • Balancing the budget in the next budget cycle (FY 2014 – 2015 biennial budget) will be even more difficult. Luckily for Minnesota, revenues are projected to improve in 2014 and 2015. However, this could still be a significant challenge.

The essence of compromise

Governor Dayton acknowledged this plan is not a solution to the state's problems. Rather, he indicated that the state's financials would improve as revenues increase with an improved economy. He continued, "No one is going to be happy with this, which is the essence of a real compromise."

House Speaker Kurt Zellers said, "It's not a perfect scenario, but we are in an imperfect situation...It was about making sure we could get a deal that we all can be disappointed in... None of us got exactly all of what we wanted."

Perhaps Speaker Zellers' comments sum the collective sentiments well. There is plenty of disappointment to go around. Getting the state back on track to doing business next week will at least begin the healing and move things forward for another two years. While not exactly material for rejoicing, contractors can at least breathe a sigh of relief as payments should resume soon.

Check back next week for a follow-up blog with important updates from the finalized budget and the impact it may have on state contractors.

Read my previous blog on the MN shutdown, here.

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White House Orders Service Support Contract Cuts. Are You Vulnerable?

If you were watching contracting industry news last week, you probably picked up a note of alarm coming from press reports. But it isn't time to panic. It's time to plan. As Government Executive e and other industry news outlets reported, the White House last week announced plans to require every federal agency to cut spending for management support services contracts by at least 15 percent by the end of fiscal year 2012.

Speaking to agency leaders gathered for a White House Forum on Accountability in Federal Contracting , Office of Management and Budget Deputy Director Jeffrey Zients said, "We're calling on all agencies to reduce their spending on these contracts by a minimum of 15 percent. If you do the math," he explained, "This totals six billion [dollars] across the government, and it's an important next step in making contracting more efficient." Zients, who also carries the title of Chief Performance Officer, noted, "We'll be tracking and recording progress in the months to come, to ensure that we hit our six billion dollar target by the end of fiscal year '12."

Zients urged agency leaders to plan their cuts carefully, saying the effort should be, "Thoughtful, not mechanical. It is not a call for insourcing and not a numbers game."

White House graphic showing growth of management support services from 2000-2010

White House graphic showing growth of management support services from 2000-2010

What he didn't say is that the process began quite some time ago. The Consolidated Appropriations Act that funded much of federal activity for fiscal 2010 required agencies to inventory their service support contracts, which agencies released earlier this year. But last November, in a move signaling concern about the levels of services spending, OMB issued a letter of guidance showing growth of management support services from 2000-2010 to all agencies requiring deeper analysis of those inventories by June 30, 2011. In other words, agency heads knew this was coming. They just completed analyzing their service support contracts in preparation for the day they'd have to trim the roster.

The size of the announced cut is a bit of a surprise – many had anticipated a 10 percent target, modeled on a Department of Defense effort to cut 10 percent of its service support contracts per year for each of the next three years. But the content of yesterday's announcement wasn't a surprise to the agency heads who will have to make the cuts.

It didn't shock your customers. The question is, were you ready?

Determining the Impact on Your Business

Determining how vulnerable your operations may be is a simple enough matter. In last week's announcement, OMB identified 15 specific codes from the Products and Services (PSC) Code Manual that agencies should examine as they assemble their 15 percent. These codes, identified by OMB as "special interest functions," relate to functions that "require increased management attention due to heightened risk of workforce imbalance." I'll list those below to save you time researching them.

Targeted Product and Services Codes (PSCs):

Special Function PSC codes

I should note, however, that agencies aren't required to cut only from these categories – but since these were specifically called out, contractors reliant on these codes need to be most concerned.

There can, however, be a great deal of variation between agencies as to which codes see the most spending. In the Veterans Administration's inventory , for example, only four of the targeted codes appear, and just one – Automated Information Systems Services – gets the bulk of the spending. The GSA's inventory , on the other hand, touches on almost every one of the 15 categories – and shows that GSA spends more on Program Management/Support Services than all of the other targeted codes combined. A quick search for "2010 Service Contract Inventory" on the Federal Register website will yield other agency's inventories. Once you've analyzed your clients' spending, perform a brutal assessment of what functions your company might be performing that could be construed as closely related to "inherently governmental." Those are your greatest vulnerabilities.

In his announcement, Zients himself explained, "While many of these contracts do provide valuable services, some of these contracts are unnecessary and could be reduced. Sometimes agencies are spending money on consultants to write reports that really don't go anywhere. They sit on the shelf. And in some situations, it's hard to distinguish actually between contractors and federal employees. And believe it or not, there are still cases where we have contractors managing other contractors... clearly an unacceptable loss of control."

Those are your primary clues. If that description reminds you of a service your company provides, it's time to have an honest conversation with your client about what to expect.

There is no way around it. The government is going to spend less money through contractors in FY '12. Zients pointed out yesterday that government spending on contractors declined by $80 billion in FY '10 – the first reduction in 13 years. Over the next several years, the contractors that thrive will be those best prepared to help the government streamline. If you're worried that last week's announcement left your company vulnerable, the best business decision you could make might be to pick up the phone and start giving your clients ideas on how they can meet these new requirements, and how you can help.

And, to avoid being caught unprepared, focus on market intelligence about the future. Our Federal IT Services Industry Outlook, 2010-2015 might be the best place to start.

Debt Limit Debate: What It Means for Federal Contractors

If it wasn't hard enough to follow the budget and appropriations process, we are now in the midst of a debt limit debate that seems eerily familiar - a stalemate that boils down to hard positions on spending cuts and tax increases. The last time we saw this was during the FY11 appropriations, and it is no surprise that both Republicans and Democrats are playing hard ball when it comes to raising our debt ceiling. My team (Deltek Federal Industry Analysis) and I spend countless hours sifting through legislative information to get to the elements that impact federal contractors, and I have to say, this has never been more daunting and interesting as it is now, due to the high level of uncertainty, and to be honest, the political rhetoric and positioning that has been part of the fiscal debate since the November 2010 elections. The current issue regarding the debt limit is complicated, and while I make no claims of being an expert on the topic, I've done my best to try to get down the point that everyone in our community wants to know about – what does this mean for contractors?

The first step is in just trying to understand the issue and why it's so important. The Congressional Research Service wrote a report on the topic that I found helpful as a "Debt Limit for Dummies" substitute.

There are two types of federal debt:

  • Debt held by the public – total net amount borrowed from the public to cover the federal government's accumulated budget deficits. Annual budget deficits increase the debt held by the public by requiring the federal government to borrow additional funds to fulfill its commitments.
  • Debt held in government accounts (intragovernmental debt) - debt issued to certain accounts (primarily trust funds), such as those associated with Social Security, Medicare, and Unemployment Compensation.

The combination of these two have put the government debt at $14.3 trillion, and according to Treasury Secretary Timothy Geithner, this limit will be reached by August 2, which means that an agreement needs to be made by July 22. Everyone knows that the government is operating under a deficit, which means that outlays are less than income. Without raising the ceiling, which legally allows the government to incur more debt, the feds have to work with only the revenue streams (such as taxes) to meet federal obligations.

Obviously, raising the debt ceiling doesn't actually solve the debt problem. CBO's federal debt forecast from June 2011 illustrates just how scary the picture could be by 2035 under two scenarios – the Extended Baseline scenario in which current relevant laws (e.g. tax cuts extended, current Medicare/Medicaid and Social Security) are extended, versus the Alternative Fiscal scenario in which assumes changes such as the end of tax cuts, changes in Medicare payments rates, etc.

CBO Debt Analysis

That's the long term view that is likely shaping the hardline debate. But what really happens if an agreement on the debt limit is not reached now? Most media headlines state that the federal government would default on its debt if an agreement isn't reached. While I've learned that that isn't exactly the truth, here's my understanding so far:

  • Without an agreement on a new debt ceiling, Treasury would not be able to incur any new debt to cover its obligations.
  • Without the ability to borrow more, the federal government would have to rely solely on incoming revenues to finance those obligations. Debt payments could still be made to avoid default, but since we're in a deficit, it doesn't take a genius to figure out that incoming revenues do not cover all of our existing debt, let alone any new debt (which would have to be incurred to continuing operating).
  • CRS' estimates from April 2011 stated that if the debt ceiling was not raised, in order to meet its obligations just through the 2nd half of FY11, the government would have to either eliminate ALL discretionary spending (and would still need additional savings) or 70% of all mandatory spending. It's scary to think about what would be necessary for FY12!
  • Although most expert opinions I've read agree that default is not a given, they also agree that the public debate and seeming inability to compromise has a real impact on the global perception of the US and its ability to pay its bills. The economic implications of that alone during a recession is chilling.

What This Means for Contractors

Even if an agreement on the new debt ceiling is reached, it will likely include some level of spending cuts, which no contractor like to hear. Without an agreement, the threat really comes down to the government's ability to pay its contract obligations and how that impacts planned programs.

Contractor Implications


Our advice is similar to what it was when we were facing a government shutdown, because whatever the cause, the outcome – possibly not getting paid – is the same:

  • Collect any fees owed your company by the government as soon as contractually possible, just in case.
  • Analyze your projects to determine which are related to essential functions. It stands to reason that if the government has to prioritize payments, essential functions will be higher on the list. Essential functions, as defined by OMB guidance related to government shutdowns, include:
    • 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

  • As you talk with government executives in your BD efforts, ask them about their thoughts on the impact of the government reaching its debt limit on current and future programs. They may not be able to give you a clear answer, but the fact that you've raised the issue will be remembered.
  • Anticipate delayed program starts (for the limited number of new programs), and delayed acquisitions for upcoming solicitations. Analyze and prepare contingency plans.

It is interesting to note that, as with the near-government shutdown from earlier this year, the lack of concensus among lawmakers when it comes to reducing federal spending could actually add to federal spending. The government could have incurred costs if a shutdown occurred, and the case is the same if a debt ceiling agreement isn't reached and the government incurs penalties on its obligations.

There are ways that Treasury can postpone reaching the limit that have been employed in the past (discussed in the CRS report), but it is not clear if these options are on the table. And even so, they would only be band-aids to a problem requiring quadruple bypass surgery.

Ten-year state budget projections and business opportunities, part two: Six simple strategies

This is part two of a two-part series on GovWin's 10-year state budget projections.

As mentioned in part one of this series, the news regarding state financials has not been positive for a while. FY 2012 is looking like one of the worst (in terms of a decrease in overall state budgets) in history. However, things are looking up as business opportunities exist now and are projected to increase looking at FY 2013 - 2015. For businesses interested in capitalizing on this business intelligence, here are 6 simple strategies to survive doing business with the states during these economically hard times. For a complete recap of the data used as a basis for this article, read part one (it's free).

1.Save the date: Circle the wagons; circle the date; save the date; do whatever it takes to make it through FY 2012; weather slower growth in FY 2013; and capitalize on more normalized growth in FY 2014 and 2015.

2.Hunker down: Even during difficult recessionary times, states still do business procuring goods and services. If your company has an interest in doing business with a particular state, hunker down and wait out the storm. If you have existing contracts, you may need to focus on service and existing contracts to help make it through the hard times. By FY 2013, things should be improving slightly. By FY 2014, most state business should be back on track. State economies should be chugging along at pre-recession growth levels by FY 2015.

3.Let the wind take the chaff: Weaker companies will not be able to weather this storm by waiting for state purchasing to pick back up in the next few years. If your company has interest in doing business with a state, weathering the storm will ultimately prove fruitful. As weaker companies fall aside, when procurement and opportunities pick back up, you should be well-positioned in a market with fewer competing companies. In the meantime, continue to let officials know your company is stable and ready for business when opportunities arise.

4.Talk to decision-makers to create the want: Through my 13 years working in state government, I've learned a few things. Most companies believe that unless there is an RFP, and money is specifically allocated in a budget, then procurement will not happen. This is similar logic used by some in their job searches; if a position is not advertised, there must not be any openings. Sure, sometimes it works that way. However, in state government, if a decision-maker becomes interested enough in a business solution or product, the funds can suddenly become available as long as the purchase is below the threshold for legislative or cabinet-level approval. Things are moved around in the budget for items decision-makers want. Simply, find those decision-makers and make your pitch. If enough desire is created, your solution should at least be on the table for further discussion, worst case. Who knows, you may just secure a surprise and lucrative contract.

5.Get creative and cooperative: Governments want solutions that do a few simple things, including increasing efficiency (saving money), improving service to citizens, and creating job opportunities. As I have suggested in several previous blogs, states are not as interested in bandit contractors who only provide solutions that take funds away from the state. Get creative with providing solutions that save the state money. Get cooperative with providing solutions that will bring jobs to the state. Trust me; your company will be in the next governor's press release if you do. Many companies have shied away from true cooperation with state government. Rediscover the lost art of giving back to the community, and bring more than the latest shiny solution.

6.Engage governments in strategic education: GovWin continues to read and hear from state officials who are interested in finding out the best possible solutions for the problems they face. Often, they are not aware of the possibilities. This ignorance impacts RFPs and RFIs that are released since they only ask for what the agency believes it can get. Take the time to educate decision-makers on possible solutions through a cooperative and consultative process. A sales pitch can always be disguised as a consultation. However, creativity in solutions for states should always include saving money and improving services. If your solution by itself will not meet all of a state's needs, offer solutions that would require your cooperation with other vendors. Even if your company winds up with a subcontract out of the deal, it is still a win.

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Ten-year state budget projections and business opportunities, part one: The good-news graph

This is part one of a two-part series on GovWin's 10-year state budget projections.

The news for state and local government simply has not been good this year. Record government employee layoffs are reported across the country. Wisconsin rioted. Minnesota is currently not functioning as a government. California had several near misses and is cutting deep. Texas almost shut down state IT. New York, Texas, Florida, New Jersey, and Pennsylvania are all making deep cuts. What about the good news? Did we forget about that? No, we did not. There is good news in state budgets, and not so far in the future.

GovWin ran a statistical analysis of state budgetary spending from FY 1987 through FY 2012. This analysis, based on strong data and an extremely robust model, projects great news for future state budgets. What we found is graphed below (See Figure 1, below). We are calling it the "Good-News Graph."

Click to view Full Size

From FY 1987 through FY 2008, the data is remarkably consistent with an average 5.84 percent annual growth rate. However, the state budgetary train starts to unsettle a bit in 2009, moving slightly above the prediction line (compare the blue line of actual state expenditures to the red line of prediction by FY in Figure 1, above). This slight bump was likely the result of the first rounds of stimulus funding. Then, budgets experienced a massive spike in FY 2010 and 2011 due to many factors, notably stimulus funding, increased health care costs (both for state workers and Medicaid), increased retirement/pension costs for state workers, and unemployment compensation. This is an anomaly – an outlier in terms of state budgetary spending with a combined 10.75 percent growth rate over the two-year period (FY 2010 was +6.68% and FY 2011 was +4.07%). Projections put 2012 as the largest (and only) overall budget decrease (-2.99%) since we began tracking. It should be noted that the tracked data includes the seminal 1987, 2000, and 2001 stock market losses and resulting economic declines.

While FY 2012 shows a record loss in overall funding, it is still well above the prediction (see blue and red lines, Figure 1, above). Why did this happen? Simply, states are getting serious about budget cuts as they face the specter of expiring stimulus funding. Slashing measures include layoffs of state workers, increasing state employee contributions to health care and retirement, state worker pay freezes or reductions, agency consolidation, efficiency measures through IT, and cuts to departments and programs deemed unnecessary in difficult economic times. Is this reason to abandon ship and leap from the towers of high finance? Probably not.

So, what does this mean for vendors and contractors? FY 2012 will certainly be difficult for most state governments and their associated contractors. However, even within this record budget reduction, there is good news as FY 2012 budget levels are still above those predicted by our model. Ultimately, these historic spending levels in FY 2012, while greatly reduced from the epic spending boom of FY 2010 through 2011, still contain a myriad of business opportunities. Even while cutting, states are buying the goods and services they need to properly function.

While only 20 of the 50 states have reported budgets for FY 2013, we were able to use this data (again, very strong data and model) to project not only 2013 data for all states, but for fiscal years moving forward. Looking at the orange line on the graph (budget projections from FY 2013 data), the good news really solidifies in FY 2013; the blood-letting is predicted to stop with a near-flat growth rate of 0.13 percent. Largely, this will be the result of states having made the hard choices and deep cuts needed to balance their budgets and get back to business. Look for business prospects with the states to improve from here onward.

Comparing trends and projections, the states' budgets illuminate the larger picture for overall economic recovery. Contrasting the red line (budget projection from FY) to the orange line (budget projection from 2013 data), the data shows lower-than-normal spending for portions of FY 2012 through FY 2014. The best news in making this comparison is that spending is projected to be lower than expected for only a portion of 2014. In short, budgets are expected to continue and accelerate the growth projected in FY 2013 into FY 2014. While growth should accelerate in FY 2014, look for states to be back on track in FY 2015 with an average annual growth rate of about six percent. For the best illustration of this, compare the projections from all data sources (see Figure 1) by looking to where the red, orange, and green lines converge in 2014.

Analyst's Take: Quite simply, this is good news. While similar dates for economic recovery are often reported in the media, we at GovWin thought you would want to see our analysis in black and white. The data makes a lot of sense, explaining what many in the business community may have been sensing and feeling.

We are just beginning to scratch the surface of this data at GovWin. Stay tuned for coming reports and articles on the impact of state budgets on various verticals (health care, social services, justice and public safety, and IT). With that said, there are things companies can do to take immediate advantage of this business intelligence to leverage business with state governments during these difficult times. For more information on this, read part two in this series on this blog tomorrow - Ten-year state budget projections and business opportunities, part two: Six simple strategies to do business with the states in hard times.

Subscribers can read both parts of this article and additional analysis posted here.

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California CDCR seeks proposals for contraband cell phone managed access

Earlier this month, the California Department of Corrections and Rehabilitation (CDCR) began the process of replacing its current contract for inmate telephone services through competitive procurement. The invitation for bids (IFB) will replace the current contract held by the California Technology Agency and set to expire January 31, 2013. In its place, the state hopes to contract for new inmate telephone services as well as a managed access system for cellular telephone usage in the prison system. This managed access system will be one of only a few in the country as cell phone contraband continues to rise.

The state issued a request for information (RFI) in August 2010 seeking vendor interest in participating in demonstrations of technology to prohibit the use of contraband cell phones at correctional facilities. The following March, California released its concept statement on cell phone and wireless device eradication. This document outlined high-level functional requirements, needs statements, risks associated with the project, and cost estimates. The state concluded that a managed access system was the only currently-available technology to allow signal access to certain devices while prohibiting access to other devices. Given current federal law, the jamming of communications is illegal, and the cost of using signal triangulation would be too high.

The decision to use a managed access system is estimated to cost between $18 million and $35 million. The system will draw unauthorized cell phone signals to an onsite, mock, high-signal commercial-grade cellular tower that thwarts communications. Authorized cell phone signals are not allowed to connect to this tower and will find a real commercial signal to complete the call. This system will be used throughout 33 adult institutions. The state currently houses more than 165,000 adult offenders.

A managed access system was tested and deemed successful in Mississippi in late 2010. This was the first testing of this type of system and garnered a variety of support by prison and correctional officials across the country. It also found support from many congressmen and the FCC since it didn't require the FCC to amend current laws prohibiting the jamming of communications.

The CDCR's managed access system procurement will undoubtedly be the largest in the country given the size and scope of the California prison system. This size and scope is the reason proposals are not due until October 31, 2011. Whoever wins this contract will have the firepower and experience necessary to win contracts like this across the country. Since this is a first-generation technology, it will be interesting to see what the managed access vendor field looks like since we have yet to see many vendors proposing this solution to states.

IT Implications of Chicago Mayor Emanuel’s First 30 Days in Office

Over the Fourth of July holiday weekend, I drove back home to Sweet Home Chicago with my family. As we were driving on the Chicago Skyway, we passed the "Welcome to Chicago" signage, and it was an odd feeling seeing Rahm Emanuel's name on it.

I have always loved the Chicago political scene. I remember back in high school, reading American Pharaoh: Mayor Richard J. Daley – His Battle for Chicago and Nation, the book that first got me really interested in the state and local realm.

This was my first time back in the Windy City since a new mayor had taken seat. For 21 years of my life, Richard M. Daley was in the leadership post.

When I finished off the drive, it struck me that it would be great to take a look at what Emanuel has accomplished since taking office.

IT Commitments: Campaign Promises and the First 30 Days

Back in February, I reported on Emanuel's campaign platform and the information technology (IT) implications it had to the vendor community [Subscription required to read in full].

To summarize my earlier thoughts on his election: "Rahm Emanuel's victory in this Tuesday's election for mayor of Chicago, bodes well for IT vendors. His campaign agenda was filled with items in the Community Development, Economic Development/Regulation, General Government Services, and Justice/Public Safety verticals. His victory, along with Mayor Gray's (2010) in Washington, D.C., proves that IT remains a key area of investment for America's major cities despite the economic downturn. As with the election of Gov. Quinn (2010), the spotlight is on procurement reform and ethics for government as the state and city seek to reverse their historic (and somewhat overblown) reputations for corruption."

Target: Lobbying Transparency

As of June, when Emanuel marked 30 days as mayor of Chicago, the city has made some progress on the pillars of his platforms. A recurring theme is the use of publicly posted data to improve transparency, efficiency and accountability for city government operations, with a particular emphasis on enhancing the way it collects lobbying data, increasing the amount of available information and decreasing inefficiencies, and posting it online in a searchable format. In fact, the city has posted eight separate lobbying-related datasets to its data portal.

"I am committed to changing the way city government does business," Mayor Emanuel said in a press release [PDF] about the lobbying data. "It's now easy for the public to find and track extensive information about lobbying activities in this city, including gifts, compensation and expenditures."

Technological Involvement

Mayor Emanuel also highlighted the steps his administration has taken over the past 30 days in order to address the core challenges facing the city and build a better government for Chicago.

Looking through the Emanuel administration's list of 24 achievement in its first 30 days [PDF], I feel that many of them have implications for state and local IT.

Some of them explicitly involve technology. In addition to the lobbying data, several of the administration's other initiatives rely on posting information to the City of Chicago's Data Portal to improve transparency and access to data, on everything from performance benchmarks for city services, to the city's budget -- the 2011 Appropriation Ordinance -- in both human- and machine-readable formats.

Another initiative that relies on technology is the Tax Increment Finance (TIF) Reform Task Force, which solicits citizen-contributed ideas, and releases machine-readable data towards its goal of improving transparency and efficiency to the TIF system, a "special funding tool used by the City of Chicago to promote public and private investment across the city."

Technological Implications

Other achievements touted by the Emanuel administration have implications for IT spending. The administration cut $75 million from the 2011 budget, much of it through improving grants management, merging overlapping functions across departments, and improving procurement. While in some cases, this may represent a potential loss of opportunity (such as the freezing of non-essential contract spending), other efforts to consolidate functions can produce opportunities to streamline and integrate systems.

In similar fashion, the mayor's office touted another $75 million in savings in the FY 2012 Chicago Public Schools budget, with impacts to IT vendors in the form of reduced equipment budgets for non-teaching staff and other cuts to administrative and non-classroom functions.

However, the administration is also in the process of developing a new teacher evaluation system, which will require the ability to collect and assess data and generate report cards, not only on teacher performance, but on the teacher training and development programs that support them.

Rounding out the trend, the adminstration released its report on collaboration opportunites between Chicago and Cook County [PDF]. Its promise of potential annual savings of $140 million represent either direct opportunities for IT vendors (such as the centralization of energy management), to changing the way IT products and services are procured (through expanded joint purchasing between city and county).

Additionally, the administration established the Internet Essentials public-private partnership with Comcast to help expand home broadband access to families of children receiving free school lunches, as well as increased training and education.

Technology Leadership

Additionally, during his first 90 days, Emanuel named Chicago's technology leadership team and announced an overhaul of the city's information offices. To make Chicago's data management more efficient and allow it to respond effectively to taxpayers' needs, the Department of Information Technology will become part of the city's budget office.

Emanuel selected John Tolva, director of citizenship and technology for IBM, to lead City Hall's innovation and technology initiatives as chief technology officer. He will work closely with Jason DeHaan, who will continue as chief information officer, and Brett Goldstein, who will become chief data officer.

Analyst Take

Overall, I feel Emanuel, like Daley, sees the importance and the role IT has in city government. Major procurement reform and transparency efforts will dominate the IT efforts early on in his agenda. Look for IT to play a major role in consolidation activities as well efficiency initiatives in the next few fiscal years.

To see a full list of the 100-Day goals, please see the Chicago 2011 Transition Report. [PDF]

Originally published on

HHS releases much-anticipated insurance exchange proposed rulemaking

On July 11, 2011, the Department of Health and Human Services (HHS) released two notices of proposed rulemaking (NPRM) related to state health insurance exchanges. One of the NPRMs provides guidance on the establishment of the exchanges by outlining federal requirements for states that elect to establish their own exchange, for health insurers looking to offer qualified health plans in the exchanges, and for employers who wish to participate in the Small Business Health Options Program (SHOP). The NPRM is currently open for 75 days of public comment, with final rules expected by year-end.

The proposed rule is notable for the considerable flexibility it gives to states in both the governance and structure of the exchange. The rule opens the door for states to use a state-federal partnership model that will combine state-designed and operated business functions with federally-designed and operated functions. Though by no means required, this option could be used by states in areas such as eligibility and enrollment and health plan management. Also notable in the NPRM is the governance flexibility afforded to the states. HHS further codifies the notion from the Affordable Care Act (ACA) that an exchange must be run by a government agency or nonprofit entity established by the state.

Though HHS received some comments from those who were less than thrilled about a nonprofit entity running the exchange, HHS believes states should have the flexibility to use the nonprofit model if they so choose. The NPRM reserves considerable discretion to the states to appoint a board of directors for an exchange. To its credit, HHS creates a more diverse and inclusive group of stakeholders by adding large employers, public health experts, health care providers, health insurance issuers, agents and brokers, and American Indian tribes to the list that an exchange must consult on an ongoing basis.

The NPRM also outlines the approval process by which a state exchange may be considered operational in accordance with the January 1, 2014 deadline outlined in the ACA. The first step in the approval process is the state submittal of an exchange plan to the HHS. Though the exact procedure of submitting this plan has not yet been outlined, the choice of the state to submit an exchange plan constitutes the election to establish a state-run exchange. HHS will provide a detailed template for states in the future. The second step in the approval process (also to be outlined in more detail), is a readiness assessment of the state by HHS, which is also considering (pending additional comments) the establishment of a 90-day review process for the exchange plan, similar to that used for Medicaid and CHIP.

In a bright spot for states, HHS has allowed for conditional approval of an exchange plan even if a state cannot demonstrate complete readiness by the January 1, 2013 deadline. This allows states flexibility to use 2013 to attain readiness by the operational January 1, 2014 deadline.

Analyst Take

The above overview of the NPRM should by no means be considered exhaustive and inclusive; however, I do think those sections outlined paint a picture of considerable flexibility. It seems HHS has taken state concerns regarding timelines and direction to heart. By allowing conditional approval of the exchange plan on January 1, 2013, HHS gives states more time to become operational. As for both the governance of the exchange and the entity that will house the exchange, this NPRM reserves the ability for states to choose a board and entity that best meet the needs of the state. Though not answering all questions from states and vendors, this rulemaking is a good launch pad for guidance. The NPRM also represents an effort to make exchanges more inclusive and diverse with stakeholder opinion. Specifically, the addition of large employers, providers, and issuers will, I believe, create a strong, beneficial exchange.

Finally, it appears HHS has considered the difficulties of expense and the limited timeframe of exchange development in this rule. By allowing states to partner with the federal government for development and operation, HHS can alleviate considerable concern caused by limited resources.

For more information on health insurance exchange activity in the states, please consult our analyst perspective, Health Insurance Exchanges: Who's Ahead Now? (log-in required).

Justice, public safety and homeland security June review

The justice, public safety and homeland security markets for June seemed to follow the same trends as May: radios and waiting. In May, radio projects and radio frequency rebanding efforts were occurring all over the country, and little changed in June.

Over the past several monthly reviews, prescription drug monitoring programs (PDMP) have been front and center. Delaware, which issued its PDMP request for proposals (RFP) in April, is close to an award that will bring the state closer to implementation of a new drug monitoring database. Georgia and Maryland are closer to a PDMP system; however, formal solicitations have yet to be issued. Tennessee issued a solicitation for a controlled substance monitoring database (CSMD), and Texas released one for prescription data collection. Finally, Oklahoma was previously been under contract with Optimum Technology for its PDMP, but will now develop a system in house.

While next generation 911 (NG911) may not have trended in June, it continues to gain traction across the country despite very few states implementing a statewide NG911 system. Many states are hesitant and will remain so until more specific standards are developed and funding is available to assist smaller public safety answering points (PSAPs). One state looking closely into NG911 technology is Florida, which awarded a consultant contract to L. Robert Kimball to assist in planning a statewide NG911 system. In Iowa, the state Interoperable Communications Board released an RFP for a 911 feasibility study. The state is contracting with L. Robert Kimball through 2015 and is continuing to look into 911 and wireless options for a statewide system.

Radio projects continue to dominate the market, partly because of the Federal Communications Commission's mandated January 1, 2013 deadline. Therefore, a discussion of some of the large-scale awards and underdeveloped projects is warranted.

Monmouth County, New Jersey and Bucks County, Pennsylvania awarded contracts to Motorola for $30 million and $37.8 million, respectively. Motorola was also the chosen vendor for Mississippi's statewide 700 MHz public safety broadband network. While the contract has not been officially approved, the expected cost is $56 million.

In addition to states and localities that awarded full radio systems, several localities issued consultant solicitations to begin developing radio systems. Orange County, New York issued an RFP for a communications consultant, as did Wake County, North Carolina. Both counties are seeking vendors to assist in the development of a radio system in order to move from older, antiquated systems.

Analyst's Take

Similar to May, vendors need to continue to work with localities to develop plans for narrowbanding and radio system development. Many counties and cities operate aging radio systems and need assistance in determining how to proceed. For some agencies, narrowbanding and new radios may be enough, while some agencies need to replace their entire system. Oftentimes these decisions are based on funding availability and, therefore, vendor assistance is vital.

Following the end of the fiscal year for many localities, July may bring new project development or revisiting past projects that were put on hold while waiting for funding. July will be an interesting month that could bring a number of new opportunities.

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