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home > March/April 2007 issue > article
DOD means business
By Caron Golden
Special to Defense Systems
Defense contracting shops continue to line up procurement vehicles tailored to the needs of their IT customers
Defense Department officials in the market for technology
products and services don’t have to look far.
DOD recently signed a memorandum of agreement
with the General Services Administration to
address some concerns with procurement processes
that had chilled relations in recent years. The agreement is expected
to pave the way for some lost DOD business to return
to GSA contracts.
However, the department shows no sign of sending the
bulk of its procurement business to GSA or anyone else. Numerous
major acquisitions are about to come to an end, and
rather than let them expire, defense contracting shops are
preparing the follow-on deals.
The Defense Information Systems Agency recently awarded
six contracts under its Encore II Information Technology
Solutions program, and the Army announced six awards
under the IT Enterprise Solutions-2 Hardware program.
More contracts are on the way from various defense agencies
in the areas of information assurance, videoconferencing
and logistics.
DOD will continue to buy products and services through
contracts at GSA, NASA and other agencies, but defense contracts
will always attract DOD dollars.
Unique requirements
It’s not that defense procurement officials
see a problem with using other agency contracts.
They simply realize that defense
agencies are often in the best position to
deliver the products and services that defense
buyers need and provide the necessary
oversight.
“We’ve always had our own vehicles, although
we use GSA a lot,” said Kevin Carroll,
chief of the Army’s Program Executive
Office for Enterprise Information
Systems. “The reason we’ve done our own
all these years is we feel we have unique
requirements.”
That is certainly the case with the Operations,
Planning, Training, and Resource
Support Services procurement, managed by
the Army Forces Command. OPTARSSII,
which the command will award in spring
2008, will cover a wide range of services, but
all are focused on defense-specific requirements,
such as modeling and simulation,
command and control, and intelligence management.
For Army buyers, there are no other vehicles
that provide quick access to such
services.
“There’s a better flash-to-bang time, if
you will, in getting the requirement satisfied,”
said Steve Sullivan, director of Army Contracting
Agency’s Southern Region Contracting
Center-East, which is working the
OPTARSS-II procurement. “We already
have a suite of preapproved contracts that
can get the job done. There’s no lengthy
evaluation and approval process. That can
cut the time in half.”
Another case is the Information Assurance
Technology Analysis Center (IATAC)
program, that DOD’s Information Analysis
Center program office runs. The 10-year
program, which expires next year, has been
popular, and the follow-on procurement will
be worth as much as $1.5 billion in 10 years,
said Terry Heston, director of the Information
Analysis Center program office.
Heston said that with a contract of this
size, oversight and review are critical. “The
current contract’s demand caught us by surprise
in terms of the growth of the programs,
and that demands correct oversight,” he said.
Assessing the costs
But DOD officials must also weigh the cost
of doing business, especially when it comes
to buying services. But such an analysis does
not always provide a clear-cut answer.
On one hand, DOD buyers must pay a
0.75 percent usage fee when going through
the GSA contracts. “If we’re buying
$800 million worth of stuff, that adds up,”
Carroll said.
On the other hand, some would argue
that it might cost DOD just as much to run
its own contracts.
“There’s no one answer among contract
vehicles,” said Stan Soloway, president of
the Professional Services Council. “The services
did spend-analyses to identify how much
money they were sending to GSA, including
fees. The answer is that maybe it’s the
wrong thing to do, maybe it’s the right thing.”
What’s needed, Soloway said, is a strategic
assessment to determine the relative costs
of service contracts.
Shay Assad, director of defense procurement
and acquisition policy, asked him
to bucket general categories of services
across the board and tie that to best practices
in awarding and managing contracts —
something that had not been done yet.
“We’re trying to align the kinds of services
being bought with different strategies to
think about policy proposals and get a better
understanding of the nature of purchases,”
Soloway said.
The issue is significant: DOD spent
$146 billion on services in fiscal 2006. And
given budget pressures and a different party
now leading Congress, DOD’s acquisition
processes could come under greater
scrutiny, said John Slye, a senior analyst at
Input.
“The name of the game around town
now is scrutiny,” he said, “especially with
Iraq contracting, but also systems contracts.”
Unintended consequences
Defense organizations are certainly feeling
the pinch. Soloway said cost-cutting has reduced
the number of skilled contract managers,
which, in turn, affects institutional
memory.
John Taylor, program manager of the Air
Force’s Network Centric Solutions Contract
(NetCents) vehicle, which is only in the early
stages of its acquisitions strategy for a follow-
on contract, is dealing with downsizing.
“It means we have to work harder and smarter,” he said. “We’ve done some outsourcing for contractor support. They can’t sign orders, but they can help us get to the point where we have proposals, and contracting officers can sign off on them.” But Taylor said he believes that “for the most part for NetCents, we’ve been able to retain a lot of the corporate knowledge.”
But contractors are having a tougher time.
Input is seeing more downward pressure in appropriations
as the war continues. “So it makes it an even more competitive
business,” Slye said. “There might be some minor increases
here and there, but overall, we’re looking at another
lean year for IT systems integrators.”
Competing, of course, is not cheap. Bid and proposal costs
can run to the hundreds of thousands of dollars, and vendors
could be competing on dozens of contracts. In the case of
multiple-award vehicles, vendors have no guarantee of substantial
business, because they must later compete for individual
task orders.
“There’s strong support of multiple-award vehicles, but at
some point, you reach a tipping point,” Soloway said.
“It’s too expensive for mid- and smaller-size companies to
grow in the marketplace,” he said. “Companies have to ask
themselves if they’re better off expending thousands in [bid
and proposal] money on multiple-award contracts and governmentwide
acquisition contracts or spending a bunch on
different enterprisewide acquisition contracts. They can’t do
both.”
TeleCommunication Systems (TCS), for example, spent
about $500,000 to win a $10.8 million contract through the
World-Wide Satellite Systems (WWSS) program, issued by
the U.S. Army Communications-Electronics Lifecycle Management
Command contracting authority.
“It pays off big if you do win,” said Mike Bristol, vice president
of TCS’ Network Solutions Group Government. “But
it’s very hard for a small company to compete because you’re
competing with large companies with massive [bid and
proposal] dollars. It’s often beyond the reach of small
companies.”
TCS also sells its satellite products through the GSA schedule,
but much what of what the company provides is customized
for individual customers. Bristol said he was unsure
that GSA could keep up with the technology and customized
solutions needed by the services.
Others, however, argue that bid and proposal costs are the
price of doing business, and companies have to play where
the contracts are.
“Companies have to decide if they can compete or not,”
said Dan Heinemeier, president of the Government
Electronics and IT Association. “You’re going to see companies
play as long as there are potential wins for them. It’s
the only game in town, and they have to be able to deal with
it.”
All those factors come into play as DOD and the military
services begin issuing RFPs and making awards for new contracts
this year.
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