The year ahead in business

Companies eye contracting policies, Congress and conversation in 2005

Members of Congress will eye changes to the General Services Administration, and Rep. Tom Davis' (R-Va.) procurement reform initiatives are expected to return with a new chance for passing.

Meanwhile, companies will have an increasingly generous suite of electronic tools available for managing GSA contracts. New policy directives are likely to encourage more agencies to try performance-based and share-in-savings contracting.

Contracts that have been under development for more than a year, including the sweeping Networx network services vehicle, will be up for bids. Officials at GSA's Federal Technology Service (FTS) were willing to listen to companies as they shaped that contract, and business leaders expect to have similar access ... and consideration ... on other issues in the future.

All in all, businesses are expecting a fast-paced and, in some ways, tumultuous 2005.

Share-in-savings momentum builds

Federal integrators have heard about share-in-savings contracts for a while, but this year, they may see the idea flourish.

Earlier attempts to introduce the share-in-savings approach have failed to gain support, industry executives said. But the story could be different in 2005, which observers say could be a pivotal year for the concept. The contracting method calls for vendors to make more of an upfront investment in projects but allows them to share in the savings generated.

"Today, there is high interest in share-in-savings," said Emory Miller, senior vice president for government affairs at Robbins-Gioia. Office of Management and Budget officials have received 45 share-in-savings business cases for review, which means agency officials are preparing to issue solicitations based on the paradigm.

No one expects all 45 proposals to get the stamp of approval, however. Ken Buck, director of the Share-in-Savings Program Office at GSA, has been meeting with OMB officials to identify which proposals are suitable for the model.

The trick is to locate deals that would produce savings upfront to compensate contractors. Agency officials must determine the baseline cost of performing a given information technology function. Contractors use that baseline to calculate a return on investment. But getting a handle on cost is not easy.

"It's a struggle to figure out what a real baseline is," said Ron Knecht, a senior vice president at Science Applications International Corp.

But some pieces of the share-in-savings puzzle are falling into place. Late last year, the two rule-setting councils for civilian and defense acquisition approved a draft final rule that would establish share-in-savings contracting procedures.

Six contractors are also ready to do business under GSA's share-in-savings blanket purchase agreements.

"The infrastructure is in place to support this," Buck said.

Nevertheless, integrators approach share-in-savings contracting with caution. Knecht said the approval of a final rule ... as opposed to the current draft ... will help raise the comfort level for officials in the private sector. Industry leaders, he said, want to "make sure the customer and the contractor have a clear understanding of what the rules are."

"Anytime you have a fairly dramatic shift in procurement rules, it is slow to take off," said Don Scott, senior vice president of EDS' U.S. Government Solutions division.

Share-in-savings also has a deadline. The language that authorizes the contracting practice expires in late 2005, although some observers expect Congress to extend that authorization.

"Timing is important," said Dan Chenok, a vice president at SRA International. SRA and SAIC are among GSA's share-in-savings BPA holders.

Congress expected to tackle ASIA again

Although industry insiders don't agree on how much technology business legislation Congress will deal with this year, they hope it isn't much. However, they do agree that Davis is likely to take another shot at passing the Acquisition System Improvement Act.

ASIA, which Davis first introduced last year, included provisions of 2003's Services Acquisition Reform Act (SARA) that did not get included in the final version of that bill. ASIA would have created an exchange program so that acquisition professionals in companies and agencies could temporarily trade places. It also would have instituted some share-in-savings initiatives and would have required agency officials to design redundant telecommunications systems to improve security.

During the negotiation process over ASIA in 2004, lawmakers added many of its provisions to the Defense Department authorization legislation, which had been a successful route for passing most of the SARA legislation. ASIA did not fare as well.

"The issues that were raised in ASIA are still issues that need to be addressed legislatively," said Alan Chvotkin, senior vice president and counsel at the Professional Services Council. "I would expect the major provisions to be reintroduced."

Chvotkin also predicted additional legislation concerning security clearances and more work on service contracts for enterprisewide software licenses.

Several of President Bush's e-government initiatives will get additional review, and so will some competitive sourcing provisions, he said.

"There's going to be a lot of activity," Chvotkin said. "I don't know how much legislation is necessary vs. desirable."

Larry Allen, executive vice president of the Coalition for Government Procurement, agreed.

"I think you can expect to see ASIA reintroduced in a somewhat reconstituted form," he said. There might also be a move to mesh GSA's Federal Supply Service and FTS into one organization, he said.

However, Allen's organization will urge Congress not to add any substantive directives to GSA procurement bills in the coming year. Comparing the state of procurement to a crowded platform on a train track, Allen said, "you need to have time to let the platform clear before you do anything else."

David Marin, deputy staff director and communications director for the House Government Reform Committee, which Davis leads, said an array of legislative measures that affect businesses may be on the horizon.

He cited reauthorization of the Paperwork Reduction Act, the Postal Accountability and Enhancement Act, federal property management reform, the creation of a federal chief information officer and ASIA.

With a click of the mouse

Companies trying to either get onto a GSA schedule contract or change their product listings on the schedules are finding life increasingly easier thanks to new electronic tools from GSA. Agency officials plan to upgrade the tools in 2005, continuing work they started last year.

Officials launched eOffer in 2004, giving vendors a way to electronically apply for a spot on Schedule 70, the IT contract. They also added three services schedules to the system in 2004 and will add one more, Management, Organizational and Business Improvement Services, in 2005, said Neal Fox, assistant commissioner of the Office of Commercial Acquisition at GSA. That means vendors who want to be on any of those contracts, or the IT schedule, can submit their proposals and supporting documents online.

The system is becoming labor-intensive on GSA's side, as employees process the applications, Fox said. Agency officials plan to implement a solicitation-writing tool to alleviate that problem. That likely will not be until 2006, but in 2005, agency leaders will determine if a commercial application will do the job or if they need to develop custom software, he said.

"We would hope to have all the schedules converted by late '06 or early '07," he added. "The implementation [of the eOffer system] has gone fairly smoothly. The biggest issue is getting the word out."

Another system, called eMod, is tied into a policy change that eliminates many of the modifications that vendors once had to make to their schedule contracts any time they added new products. Now, if the new products are in the same line as those already listed and the pricing structure is the same, companies don't have to file a modification.

Meanwhile, they can file some of the modifications that are still required electronically.

Officials used the systems for the first time last fall, awarding a contract to Dell Federal Systems and modifying a contract IBM holds through the electronic systems.

To help spread the word about the systems, GSA officials began giving away the digital certificates necessary for electronic authentication on the system, which otherwise would cost companies about $100, he said. "I think we're out there breaking new ground, showing that electronic signatures can be used for highly technical and complex documents," Fox said.

The systems, and several others that GSA provides for agencies to use, are all steps along the road to a paperless process, said Mary Wall, GSA client relationship executive at Unisys, which has a contract to support the systems.

"They have to, as an organization, continue to streamline the cost and also continue to accept greater responsibility," she said of GSA. "EMod is one more example of where they're responding with automation."

Businesses are beginning to adopt eOffer, but slowly, Wall said. Of the 805 offers that GSA officials received for Schedule 70 contracts after eOffer was implemented last May, 61 have come through the electronic system.

Agencies may beef up protest venues

Business leaders might have to rethink the way they protest contract awards if some agency officials enact the changes they're seeking in 2005. Tired of seeing losing bidders take their gripes to the Government Accountability Office, agency officials are trying to strengthen internal processes so that contractors will be confident in seeking redress at the agency level.

"There's a lot of talk about trying to add some teeth to the agency-level protest process at some agencies," said David Nadler, a procurement attorney with Dickstein Shapiro Morin & Oshinsky and chairman of the Industry Advisory Council's Procurement and Acquisition Shared Interest Group.

Plenty of people in industry believe that agency protests are futile, a matter of "asking the agency that disappointed you to correct itself," Nadler said. In addition, a GAO protest can put the brakes on a procurement, while that is not typically the case with an agency-level protest.

But now, some agencies "are looking at enhancing the agency protest mechanism to have a higher level of review and scrutiny of protest decisions," he said.

A few agencies already feature robust protest venues. Nadler cited the Air Force as an organization with a well-regarded internal protest mechanism. The Federal Aviation Administration's Office of Dispute Resolution for Acquisition offers another model, Nadler said.

That office's employees try to facilitate settlements by using alternative dispute resolution, which draws on techniques such as mediation to avoid litigation. A survey by the office shows that mediation, neutral evaluation and fact-finding are the most popular alternative methods, according to the office's Web site.

Some industry executives, however, forecast a reduction in protests, which makes the strengthening of protest mechanisms a moot point to some degree. Agency officials have become more adept at issuing clear Section M information, the section of a solicitation that tells bidders how agency officials will measure and compare proposals, said Phil Foote, chief operating officer at STG.

"We have seen increased sophistication in the whole procurement process," he said. "Agencies have demonstrated a pattern of issuing more detailed and quantifiable Section M evaluation criteria. Such proactive improvements by the agencies will, no doubt, lead to a reduction in protests."

Keep talking

When FTS officials began developing the Networx telecommunications contracts, they took pains to ask industry officials what would make the contract attractive to companies, draw the most competition and inspire the best offers.

The dialogue led to some of the specific details in the contracts, including their billing requirements ... streamlined from the first proposal ... and the timing of the award of the two contracts. Instead of awarding the smaller Networx Enterprise contract nine months after Networx Universal, FTS officials now plan to award them at the same time.

Agencies have always listened to input from companies, said Robert Collett, vice president of engineering at AT&T Government Solutions. However, other observers said the attitude among agency officials is changing and the exchange will remain robust into the new year.

"The dialogue is far more public," said Susan Zeleniak, vice president for civilian agencies at MCI. "Government always met with companies and heard them out, but in one-to-one meetings, that might have left out some players."

The development of Networx has been marked by public industry meetings and appearances by FTS officials on the lecture circuit, such as at conferences, breakfasts and luncheons hosted by interest groups.

It's not only FTS officials, however, who are ready to talk. Commerce Department officials took a similar approach in developing the Commerce Information Technology Solutions Next Generation contract.

Shiv Krishnan, president and chief executive officer of Indus, said the dialogue between company and Commerce officials improved that contract, too, and led to measures to prevent the largest small businesses from competing against the smallest.

Timing is everything, Krishnan added. "If you get to the customer 18 to 24 months before the contract is expected to be awarded, you have an opportunity to provide your views," he said. After that, it may be too late.

Bob Woods, president of TopSide Consulting, said agency officials seem more willing to seriously consider the needs of companies.

"The government is obligated to listen, but it's not obligated to change," he said. "It's been obligated [all along], but I'm not sure it's always listened. That's the difference."

Both industry and government benefit from the discussion, as long as it's genuine, said Tony D'Agata, vice president and general manager of Sprint's Government Systems Division.

"It is in the government's best interest to have a dialogue with the industry to shape their requirements," he said. "It is also beneficial to have discussions during the procurement process to [ensure] that the government understands the offers and can fairly evaluate them."

However, he said, the discussions are less effective if government officials try to please industry leaders at the government's expense. "It may also waste the time of the parties if the exchange is a procedure to check a box but has no intended purpose for program modification," he said.

The dialogue is better in technology acquisitions than in some other aspects of government, Allen said.

"There are some aspects the coalition deals with where the dialogue is one-way and partnership [between government and industry] is ephemeral at best," he said.

Moore is a freelance writer based in Syracuse, N.Y.

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