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GovWin Recon - April 23, 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:

Big Data / Analytics:

Mobility/Communications:

Defense / C4ISR / Embedded Technology:

Contracting / Acquisition:

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 - April 22, 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:

 

Agency News:

Vendor News:

Cybersecurity:

Cloud Computing / Data Center Consolidation / Virtualization:

Health IT:

Mobility:

Transparency and Performance:

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!

FY 2015 Net New Army IT Funding Less than $200 Million

Times are tough for vendors that provide IT products and services to the U.S. Army.  For nearly a decade, the Army received billions of dollars in budgetary resources and it spent a generous portion of that funding on IT.  Following the drawdown in Afghanistan and the onset of sequestration the Army’s budget began to roll over.  Now it’s downright difficult to locate new program funding in the Army’s IT budget.

This difficulty is illustrated clearly in the DoD’s funding request for fiscal 2015.  The Army’s portion of the request shows a total of only $195 million in net new funding, with “net new” defined as development funding slated in FY 2015 for programs that received $0 in FY 2014.  The table below shows the programs for which funding has been requested.  The list is short, indeed.

Of these programs, the largest is the second increment of IPPS-A, the Army’s new integrated Enterprise Resource Planning system for personnel and pay.  Those familiar with the effort know that the contract competition for IPPS-A, Increment 2 is currently in source selection, so funding requested for FY 2015 will go to the winner of the contract.  This leaves only $24 million in remaining new development funding to potentially compete for in FY 2015.  I use the phrase “potentially compete for” because it’s unclear at this point if these are programs for which new contracts will be competed.

For example, Army Processing Centers are computing hubs located in DoD facilities where IT applications are stored, executed, replicated, and managed.  Work at these centers is procured, but more often than not the competitions take the form of task orders under contract vehicles held by a select number of primes, leaving the rest out in the cold.  That the Army will continue to use task order competitions to fulfill this requirement is not guaranteed.  Given the history, however, chances are high that they will.

As for the remaining investments …

Commercial-Off-The-Shelf (COTS) tactical radios offer the possibility of generating some revenue for vendors that supply the Army with these devices.

The Petroleum Quality Analysis System, developed by the Joint Manufacturing and Technology Center (JMTC) at the Army’s Rock Island Arsenal, sounds promising.  Funding in FY 2015 will buy one system and the Army intends to procure a total of 17 systems through FY 2019.  No notice of a pending acquisition could be found for this post, but it looks like there was some activity on Federal Business Opportunities in 2008-2009 related to earlier versions of the PQAS so it might be worth calling around ACC-Warren to find out if work will be required.

Funding for the Software Engineering Center’s C2 Solutions Directorate is probably for operations not necessarily related to contractor support, or for support contracts that already exist, so possibilities are limited here.

Lastly, work related to the third version of the Corporate Account Management System appears to offer some potential.  Unfortunately, I was unable to identify where this work would be done, so there are no leads on where to search for it.  Hopefully the better connected of you folks out there will have more success than I did.

Recommendations

Over the last two years, the Army’s Development, Modernization, and Enhancement (DME) funding has decreased by more than $1.5 billion.  Declines like this leave few contract dollars to compete for.  What I’ve seen in the FY 2015 DoD budget request suggests the following recommendations.

First, the Army’s overall FY 2015 DME budget totals $3.1 billion.  As the analysis above shows, only 6% of this is net new funding, meaning that the other 94% is going to established programs.  Translation – it’s more important than ever to know your customers, both potential and current.  You will want to know potential customers to develop new business by anticipating requirements, knowing how to improve current systems, and how to offer the savings and efficiencies they want.  Current customers you will want to hold close because there are plenty of competitors out there ready, willing, and able to eat your lunch.  Defensive tactics are best in this environment, meaning service and products suppliers should be responsive, accommodating, and helpful to existing customers.  They will expect this from you and this is no time for complacency.

Second, a lot of funding across the Army and DoD in general is going to operations and maintenance of systems.  This being the case, there is new spending under O&M budgets that does not fall in the DME category.  This translates into a need to investigate programs/projects funded under O&M to determine where they are investing in.  As usual, these programs come with incumbents, so be prepared to compete for work someone else is doing.

 

GovWin Recon - April 21, 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:

 

Agency News:

Vendor News:

Cybersecurity:

Health IT:

Big Data / Analytics:

Mobility/Communications:

Waste, Fraud and Abuse:

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 - April 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. 

 

Federal IT:

Agency News:

Vendor News:

Cybersecurity:

Mobility:

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!

 

 

 

GovWin Recon - April 17, 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:

Cloud Computing / Data Center Consolidation / Virtualization:

Health IT:

Big Data / Analytics:

Transparency and Performance:

Waste, Fraud and Abuse:

Defense / C4ISR / Embedded Technology:

Contracting / Acquisition:

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 - April 16, 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:

Transparency and Performance:

Defense / C4ISR / Embedded Technology:

Contracting / Acquisition:

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!

 

 

 

A Possible Contracted Spending Scenario for the Rest of FY 2014

Can you believe that we are half way through fiscal year 2014? Let’s take a look at the data to see what can we tell so far about how much federal departments have spent on contracts at the mid-point in the year and see what might be in store for us in the second half of FY 2014.

When I looked at the mid-fiscal-year spending rates last year, I proposed what I felt was reasonable approach to projecting potential contract obligation rates for the remaining two fiscal quarters. This year I again set a baseline that in FY 2014 agencies will obligate at least 90% of what they did in FY 2013 to drive my general projections for what they might spend on contracts in the second half of the fiscal year. See my previous blog for a more detailed explanation of my approach.

Contract Obligations Compared

The twenty top-spending departments account for $122.4B in combined Q1 and Q2 obligations for FY 2014. If they spend 90% of what they did in FY 2013 they will have $285.5B left to obligate in the remaining two quarters of this fiscal year. (See table below.) Under that assumption, the remaining federal departments and agencies would account for roughly $4.5B for Q3 and Q4, reaching the overall $290B mark for the second half of the year.


Observations

  • Only a few departments have a FY 2014 Q1 and Q2 obligation rate lower than they did in FY 2013, suggesting that their obligation rates may be higher than last year at this time, depending on total final obligations.

  • At this point in FY 2013, each defense branch had reported at least $3 billion more in obligations than they have reported for FY 2014, even under sequestration.
    • Navy has reported $15.2B for FY 2014, compared to $25.3B at this point in FY 2013
    • Army has reported $12.4B for FY 2014 18B, down from $17.8B for FY 2013
    • Defense Agencies have reported $16.6B for FY 2014, compared to $19.1B for FY 2013
    • Air Force has reported $14.1B, compared to $17.3B for FY 2013.

  • Seven of the twenty departments above saw drops of 5% or more from FY 2012 to FY 2013, five of which are civilian agencies, i.e. Energy, NASA, DHS, Justice, and Education. But without exception each of these departments has reported increases in the first two quarters of FY 2014 compared to FY 2013. Energy, NASA, and Education each show increases of 15 percentage points or greater.

  • Energy’s yearly cyclicality continues. During Q1 and Q2 the DoE tends to obligate roughly 45% and 75% alternately from year to year. Looking back at FY 2011 reveals that they spent $11.1B in the first two quarters, which accounted for 45% of their $25.1B total FY 2011 obligations.

  • NASA also reveals cyclicality in its contracting. In FY 2011 NASA reported $6.4B in combined Q1 and Q2 obligations accounting for 41% of their $15.4B total obligations for that year. Looking at the chart above we can see an oscillation in NASA’s obligations since then with $7.8B reported so far in FY 2014. Depending on whether my 90% assumption is pessimistic regarding their final spending will determine whether they have between 40-50% of their budget yet to obligate this fiscal year.

Implications

Some of the year-to-year changes shown above may be due to the appropriations levels and funding priorities that these departments received under the FY 2014 Omnibus funding bill passed earlier this year. However, what these changes more likely indicate is the impact of agencies having actual budgets earlier in the fiscal year, compared to having full-year continuing resolutions that freeze priorities and limit flexibility.

How useful or accurate this kind of macro-level estimation is depends in large part on its main assumptions. Last year this approach pointed to roughly $300 billion in potential combined FY 2013 Q3 and Q4 obligations. The final data shows that actual obligations came in at $265 billion, so my 90% assumption was optimistic in the age of uncertainty, sequestration, and year-long continuing resolutions. Actual combined Q1-Q2 obligations among the top twenty departments declined from $237.1 billion in FY 2012 to $194.0 billion in FY 2013, an 18% drop.

So far in FY 2014, these same departments have reported combined Q1 and Q2 obligations of $122.5 billion, BUT the four largest spenders – the defense branches – have not fully reported their Q2 data. Looking at the civilian departments only give us $65.7 billion, $57.6 billion, and $64.2 billion for FYs 2012, 2013, and 2014 respectively, so FY 2014 is running only 2% below FY 2012 levels and is nearly 12% ahead of FY 2013.  We’ll just have to wait and see what comes from DoD.

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

Spending Trends: DoD Enterprise Resource Planning Systems

The Department of Defense spends almost $7 billion per year to maintain and operate its nearly 3,000 business systems.  With an annual IT budget of more than $35 billion, this spending on business systems accounts for approximately 20% of the DoD’s IT budget per year.  That’s a lot of money and in a time of increasing fiscal tightness, the DoD has been working for years to implement large-scale Enterprise Resource Planning (ERP) systems that will enable the department to decrease spending on its business systems and finally achieve a legislatively-mandated clean audit by FY 2017.  Because the size of the DoD’s investment in ERPs is so large and the work has gone on for so long, this week’s post will take a look at annual spending on many of the largest ERPs being implemented.

The ERPs Examined

The table below contains a list of the 16 DoD ERPs for which spending data was compiled.  This is not a complete list of the ERPs being implemented across the department, but it does include most of the largest systems.  Multiple instances of these systems being implemented in the various military departments are also included.

Before going further, a comment must be made about the limitations to the government provided data.  The Office of Management and Budget (OMB) requires that every fiscal year departments must submit what is called a Capital Asset Plan and Business Case Summary for every one of its major IT investments.  These documents, referred to as Exhibit 300s, contain the numbers of contracts awarded for work related to the investment.  It is these contract numbers that have been used for the spending tables below.  Unfortunately, spending data is not available for each of the contracts listed, so the data presented here is only for contracts with verifiable spending data.

Spending Trends

Figure 1 below shows that annual spending on DoD ERPs increased every year from FY 2009 to FY 2012.  That trend ended in FY 2013 as spending declined by $318 million due to the impact of sequestration; illustrating that even programs mandated by Congress are not immune to the across the board cuts sequestration demands.  If sequestration continues in FY 2015 and beyond (as looks likely) it is safe to assume that spending will continue trending down to flat.  Concerning FY 2014, $364 million was spent in Q1.  If this trend holds steady throughout the fiscal year, spending will total at least $1.45 billion, reflecting a bit of a rebound due to the restoration of some funding by Congress.  It is doubtful that spending will re-attain levels seen in FY 2011-FY 2012.  Last but not least, annual spending on these DoD ERPs averaged $1.52 billion from FY 2009 to FY 2013.

 

Total Spending by IT Segment

Government reports obligations by Product Service Codes and contracting personnel are notorious for selecting codes that do not accurately reflect the product or service being rendered.  This being what it is, the following data is to be taken with a grain of salt.  In Figure 2 below categories of PSCs used for obligations on DoD ERP projects have been grouped into IT market segments – Hardware, Software, and Services.  Of the three, services spending far outweighs spending on either hardware or software, coming in at a total of $7.1 billion obligated from FY 2009 to FY 2014.  Obligations for software come in second with $541 million spent over the same 5.3 year period.  Obligations for hardware total $301 million.

 

 

Services Spending Trend

Taking a closer look at spending on services related to DoD ERPs, Figure 3 shows that it tracks very closely with the overall trend shown in Figure 1 above.  The exception would be FY 2012, which saw the beginning of a decline in services spending whereas overall DoD ERP spending continue to rise in FY 2012 before declining in FY 2013. 

 

Spending by Defense Entity

Finally, Figure 4 shows spending on DoD ERPs from FY 2009 to FY 2014 by Defense entity.  Data for only the top 5 organizations has been included here.  Of these, the Navy leads the way with just under $3 billion in obligations on its ERPs.  Army comes next with $2.3 billion in obligations, followed by the Air Force with approximately $1.3 billion.

 

Implications

Several implications can be drawn from this data:

  • No IT program is immune from sequestration.  Sequestration took a bite out of all IT spending across the DoD, including spending on critical ERP implementations that will enable the DoD to meet Congressional mandates for achieving a clean audit by FY 2017.
  • Spending is rebounding somewhat in FY 2014. The approval of an FY 2014 budget rolling back some sequestration cuts will provide some relief to vendors working on DoD’s ERPs.  This relief will not amount to a full recovery of spending levels attained in FY 2012, but it will provide breathing space until sequestration cuts reappear in FY 2015.
  • Services spending is likely to suffer in FY 2015.  The return of sequestration in FY 2015 is likely to translate into a big decline in services spending related to DoD ERPs.  Software and hardware spending are also likely to suffer, but proportionally less than services spending given that far more is spent on services annually.

 

Agencies Not Poised to Meet Data Center Consolidation Goals

Four years after the launch of the Federal Data Center Consolidation Initiative (FDCCI), agencies have only closed 746 data centers.  With less than six months to go before the end of the fiscal year, it’s unlikely agencies will meet the goal of closing 1200 data centers. 

New data released via data.gov shows agencies only plan to close an additional 352 data centers by the end of the fiscal year, for a total of 1098.  However, all of these numbers may be moot given the ever evolving definition of a data center and end goals of the consolidation initiative. 

Announced in February 2010, the FDCCI intended to promote the use of Green IT by lowering the energy and real estate footprint of government data centers; reduce the cost of data center hardware, software, and operations; shift IT investments to more efficient computing platforms; and increase the overall IT security posture of the government.  In doing so, the administration planned to save $5 billion by closing 40% of federal data centers by 2015.

2010 data center inventories uncovered 2,094 data centers over 500 square feet, with a goal of closing 800.  A change in the definition of a data center to include spaces down to 100 square feet grew that number to 3,133 and resulted in a new closure goal of shuttering 1200 data centers.  Since then, with even further changes to the definition of a data center, GAO efforts uncovered over 7,000 data centers to date.  All the while, agencies have plodded away at closing data centers and optimizing those that remain. 

The latest closure data shows 1098 total closures planned by the end of the fiscal year.

No baseline data has been published regarding the total number of original data centers or targeted number of closures by agency given new definitions.  Additionally, the focus of FDCCI has shifted to data center optimization versus data center closures or reductions, and it has moved to the PortfolioStat program for continued monitoring and reporting.  However, I thought it would be interesting to compare today’s data center closure goals as reported to data.gov to the original closure goals which would have resulted in 800 closures.

In many ways, this is an apples to oranges comparison, because the definition of a data center changed since the original targets were established.  The logical assumption would be that agencies would be able to close more data centers than originally targeted back in 2010, because the definition of a data center now includes small data centers, upping each agency’s baseline number of data centers.  For some agencies, this holds true.  Commerce has closed 54 data centers opposed to its original target of only closing 18.  The same holds true for Justice and GSA. 

However, other agencies are not even close to meeting their original closure goals.  The Department of State originally planned to close 79 data centers, but to date has only closed four.  Veterans Affairs planned to close 83, but has only closed eleven to date.   And DOD planned to close 344, but has only closed 277.

Maybe closure numbers are irrelevant at this point, but even GAO has criticized OMB for not putting in place proper leadership and mechanisms for measuring progress. 

Investments are paying off in the form of freed up floor space, savings on energy expenses, decreases in O&M costs, improved visibility into the IT infrastructure, and better utilization of IT staff.  However, savings have fallen well short of the original intent of saving $5 billion.   At the end of FY 2013, FDCCI had documented about $63 million in savings. DOD projected savings of $575 million through FY 2014.

 

 

 

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