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GovWin Recon - July 31, 2013

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:

Mobility:

Transparency and Performance:

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!

 

 

Federal IT Busy Season – Countdown to Contracts or Cuts?

The last two months of fiscal year (FY) 2013 are upon us and normally that would mean that the “federal IT busy season” is heating up. But will sequestration, continuing resolutions, furloughs, and program delays mean a radically subdued busy season?  Let’s see.

Recently, I looked at total contract obligations covering all procurement categories with a view that we could see about $230 billion if overall contracted spending in Q4.  This week I want to narrow the consideration to just information technology (IT.)

The historical trend of an increasing proportion of IT obligations shifting into the fourth quarter is well established. Over the last 5 years the trend has been almost perfectly consistent as continuing resolutions have delayed contracts farther into the year. In FY 2011 and FY 2012 the percentage of IT dollars that were obligated in Q4 were 43% and 40% respectively. (See chart below.) 

 

What might this mean for Q4 of FY 2013 for IT? Let’s see what we can infer from the data and draw some conclusions. If we compare the year-to-year percentage change in IT obligations over the previous 5 fiscal years we see that the yearly percentage growth has decreased since 2007 with FY 2011 and FY 2012 each recording 4-5% less than the previous year. Even with the current pressures to reduce spending, it seems that the real turn came in FY 2011 when we saw year-over-year reductions begin. (See chart below.) 

 

In FY 2012 there were over $73.7 billion in IT obligations reported, which was 95.5% of what was reported in FY 2011.  Given the recent downward trend and the widely-held expectation that this trend will continue . . . simply applying that 95.5% rate from 2011-12 to the $73.7 billion from FY 2012 would give us about $70.4 billion for estimated total FY 2013 IT obligations. (See chart below.)

 

If we apply the same proportion of Q4 spend as in FY 2012, assuming that the historical shift trend continues, this means that Q4 spending on IT could come in at around $28 billion for FY 2013. This level would fit perfectly with recent historical spending, even when accounting for some belt-tightening at agencies.

Under this scenario, even if we do see an overall reduction from last year, we are not talking about radical reductions. Yes, it will to make busy season more competitive, but it shows that there is still a huge market opportunity to pursue … especially over the next few weeks.

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

Treasury’s FIT Office Leading the March to Financial Management Shared Services

OMB has tasked Treasury’s Office of Financial Innovation and Transformation (FIT) to assist in design, implementation, and improvement of federal financial management services shared service provider offerings.  Enhancements to the Federal Shared Services Provider’s (FSSP) framework are meant to stimulate larger agencies to move to a shared services environment for future modernization of core accounting systems.

OMB released a memo in March directing agencies to move their financial systems to a shared services environment.  OMB is encouraging agencies to look to federal providers first, as opposed to commercial vendors.

Using a shared services provider for financial management will provide the following benefits: 

  • Reduce risk of failed systems implementations (cost avoidance) 
  • Free up agency resources to focus on mission-based programs  
  • Ensure greater standardization of data which allows for more transparency  
  • Enable better decision-making by focusing resources on improved data analytics  
  • Make adoption of new government-wide requirements easier  
  • Deliver greater efficiencies and cost savings

OMB has been trying to incite agencies to adopt shared services for financial systems since 2004 with the advent of the Line of Business initiative.  The administration at the time named four federal agency shared services providers – DFAS, GSA, Interior’s Business Center, and Treasury’s Bureau of Public Debt.  Agencies were to move financial processes to one of these four SSPs when it came time to upgrade their current systems.  However, only small agencies made the leap.  Few large agencies made the change, and those that did, found if difficult.

OMB’s controller Danny Werfel stated in a March interview, that the past initiative was slated for agencies to move their entire financial systems to a provider, which became too complex.  The new effort is focused specifically on general ledger systems. 

FIT is playing a critical role in the migration effort by aiding OMB in assessing the current landscape of FSSPs and identify capability gaps, evaluating agency needs, identifying the need for additional FSSPs, and developing a strategy to address gaps.  FIT will also provide oversight for the effort by evaluating any new agency systems modernization plans, establishing a framework for agency migration efforts, maintaining core government-wide requirements, and facilitating the implementation of government-wide operational capabilities.

FIT recently launched a series of teleconferences to introduce the financial management shared services initiative to industry and explain how industry will be engaged throughout the process.  FIT is taking the lead in developing the marketplace where agencies can choose from financial service offerings, service delivery options, and purchase through SSP storefronts.  The ultimate goal is to launch a financial management product and services catalog by spring or early summer of 2014.  FIT will act as a liaison for agency customers, but they will buy directly from the provider.  FIT will work with agencies to develop a modernization timetable which will include the selection and migration to a SSP. 

Werfel expects it will take several years for SSPs to be able to meet all agencies’ financial system needs.  Enhancements to SSP service offerings will be added to the initial catalog and storefronts over time. 

 

Cyber Security Themes in the FY 2014 NDAA

Last week I provided readers with an early look at some big data requirements and initiatives in the House Committee on Armed Services’ version of the National Defense Authorization Act (NDAA) for Fiscal Year 2014.  This week I will stick with the technology theme, but focus instead on the cyber security provisions and directives in the House committee’s version of the legislation.

From mandating the modernization of business systems, to fostering the adoption of commercial cloud services, the technology priorities Congress sets out in the NDAA have for years helped to shape IT spending at the Department of Defense.  Arguably, Congress’ influence has grown even more decisive in the last few years as the DoD’s IT budget shrinks and it is compelled by law to devote a greater percentage of its available funding to priorities set out in each year’s NDAA.  Take for example DISA’s current competition for commercial cloud computing services, which began as a provision in the FY 2012 NDAA.  Fiscal 2014’s version of the NDAA will have an impact as well, particularly in the area of cyber security.  The cyber themes in this year’s pending iteration of the NDAA focus on both supply chain integrity and on defensive and offensive cyber capabilities.

Supply Chain Integrity

Two sections in the committee report (pp. 289-290 & 297-298) order the removal of IT hardware manufactured by the Huawei and ZTE Corporations from government and computer networks.  The issue of supply chain integrity has been under discussion across the DoD for some time now.  However, these two corporations have been linked explicitly with spying operations by the People’s Republic of China, comprising a clear and present danger to networks where their equipment has been installed.

My Take - Although it seems unlikely that government and vendors have not already purged equipment from these two manufacturers from their networks, the inclusion of this directive indicates that Congress believes the threat remains.  Hopefully Congress is wrong on this, but if it isn’t then vendors that still have Huawei and/or ZTE equipment in their environments will incur additional costs replacing it.  Assuming this provision makes it through to the final version of the legislation, vendors seeking to do business with the DoD will be required to prove that they have removed this hardware from their networks.

Offensive Capabilities

In a section on exploiting foreign commercial cellular networks (p. 201), the committee report expresses concern that the future security of U.S. forces deployed abroad will depend on the DoD acquiring “the ability to both exploit and defend against modern commercial cellular networks.”  The committee therefore encourages relevant DoD commands to assess the level of the threat in different geographic areas and to acquire capabilities to “exploit and defend against any vulnerabilities” that are identified.

My Take – In the unlikely event that U.S. Cyber Command does not already possess capabilities for exploiting foreign commercial cellular networks this sounds like a potentially new area of investment for the DoD.

Defensive Capabilities

In the ever evolving world of cyber warfare, the committee notes that adversaries abroad are increasingly using techniques that can compromise the “perimeter defenses” of DoD networks (p. 205).  Securing data within networks and not just securing the network itself is one area of investment that the DoD has actively promoted in recent years.  In fact, a central tenet of the Joint Information Environment (JIE) is creating a unified environment that reduces the network surface vulnerable to cyber attacks.  Congress, however, also wants the DoD to look into acquiring new capabilities, such as “dynamic maneuvering” and “moving target” technologies, and to integrate these capabilities into the emerging JIE.

My Take – The committee report also directs that the DoD brief the House Armed Services committee quarterly on its adoption of these new perimeter defense capabilities.  This tells me that Congress will continue to stay on top of the DoD’s implementation of the law.  Close scrutiny in this area suggests that the DoD will be under pressure to procure newer cyber defensive tools, not only because these tools will help defend networks, but also because Congress intends to keep its foot in DoD’s back.  This area could therefore provide a business opportunity for vendors that provide such solutions.

 

GovWin Recon - July 30, 2013

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:

Big Data / Analytics:

Transparency and Performance:

Defense / C4ISR / Embedded Technology:

Contracting / Acquisition:

State and Local:

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!

 

 

 

 

 

Could We See $230 Billion in Fourth Quarter Federal Spending?

As we enter the second half of July federal agencies and contractors alike are preparing for the close out of fiscal year (FY) 2013, ending September 30th. This is commonly referred to as the “federal busy season,” when agencies work to finish up whatever procurements they need to award within the fiscal year, and is often characterized by a flurry of last-minute spending in a “use it or lose it” mentality. So will we see such a spending spree in the age of sequestration and widely-reported budget constraints?  Even with these uncertain factors, recent spending data suggests that we still could see more than $230 billion in contracted spending in the fourth quarter (Q4) of the fiscal year.

Previously, I tried to beat back some of the fear and uncertainty with some data analysis. In a previous blog post I looked at the reported Q1-Q2 obligations among the top spending 20 federal agencies for FY 2012 to try to estimate what we might possibly see for FY 2013, even if we experience a 10% across-the-board reduction in contracted spending.  Given that the Department of Defense (DoD) and several other departments tend to lag by 90 days in some of their contracts reporting I thought an update and comparison might be informative.

The results for these lagging agencies are not insignificant, especially for the defense branches. (See table below.) The Q1-Q2 data reported by the beginning of July (green) included some sizeable increases compared to the same quarters reported at the beginning of April (blue). The differences are noted in both dollars and percentage (red).  Note that all the FY ’13 percentages and remaining dollars are based on an assumption of 10% reduction from FY ’12 levels.

 

The data reporting lag among these 20 agencies resulted in $60 billion in obligations being reported in the 3 months after the close of Q2. So when it came to assessing where we are at the end of Q3 and what is potentially left to spend in Q4 I wanted to factor in this data lag to get as accurate a picture as possible, given the available data.

FY 2013 Q1-Q3 Obligations and What’s Left for Q4

Completing a similar FY 2012-2013 comparison for Q1-Q3 reveals that the top 20 agencies could have over $225 billion left to spend in Q4, even with a 10% cut from FY 2012. (See table below.) The remaining federal agencies that report to FPDS account for an additional $5 billion under this framework.

In an attempt to account for the delayed reporting by DoD and select other agencies, the Q3 data, which is the lagging quarter, is adjusted according to the percentage difference between April and July Q1-Q2 data in the table above. While this is not perfectly precise, I believe it is a reasonable approach to mitigate for the data lag and give us a little better shot at seeing what Q4 might look like. (The 90% assumption still applies.)

 

 

Comparing the historical Q1-Q3 percentage of total yearly obligations for FY 2012 and a projection for the same for FY 2013 shows that many of the departments have a hefty chunk left to spend and that has been their historical norm, at least for FY 2012.

To put this into the total federal context, all reported federal contract obligations for Q4 of FY 2012 were $161 billion and total FY 2012 contract obligations topped $517 billion. Total FY 2013 obligations for Q1-Q3 total $240 billion, when accounting for data reporting lags by the Defense Department and other agencies.

So if my 90% assumption were to play out and my data lag adjustment is anywhere in the ballpark we could see total FY 2013 obligations top out at $465 billion with nearly half of FY 2013 obligations coming in the Q4. That sounds like folks will be pretty busy to me.

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

Want more?  Get additional perspectives and a deeper dive into the potential for a big Q4 with our free July 30, 2013 webinar: Pent Up Demand: Prepare for the Fourth Quarter Super-Sized Spending Spree

Get more information and register here.

 

 

GovWin Recon - July 29, 2013

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:

Defense / C4ISR / Embedded Technology:

Contracting / Acquisition:

Legislation:

State and Local:

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 - July 26, 2013

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:

Big Data / Analytics:

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 - July 25, 2013

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:

Agency News:

Vendor News:

Cybersecurity:

Cloud Computing / Data Center Consolidation / Virtualization:

Health IT:

Big Data / Analytics:

Defense / C4ISR / Embedded Technology:

Contracting / Acquisition:

Legislation:

State and Local:

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 - July 24, 2013

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:

Big Data / Analytics:

Defense / C4ISR / Embedded Technology:

Contracting / Acquisition:

Mergers and Acquisitions:

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!

 

 

 

 

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