Dell touts new BPA as model

FAA agreement includes more than hardware costs

Dell is pointing to a blanket purchase agreement it signed in September with the Federal Aviation Administration as a model that other agencies could follow.

The BPA, which includes system maintenance, management, disposal or recovery costs, and low prices on components, is a total cost of ownership (TCO) model that more agencies should use, said Troy West, general manager and vice president of Dell Federal.

The BPA demonstrates Dell's ability to understand agencies' mission needs, West said. The company wants to be a trusted adviser to agencies, not just a hardware supplier, he added.

Cheryl Rogers, an FAA program director in Oklahoma City, and Cindy Cassil, FAA's chief information officer for regions and centers, based in Washington, D.C., developed the BPA with Dell. Available throughout the Transportation Department, it could be worth up to $20 million a year to the company.

The deal spans one year with four one-year renewal options. It could offer the FAA savings of 25 percent to 40 percent compared with General Services Administration schedule contract prices, Rogers said.

The BPA is the FAA's second with Dell and third overall. Some aspects of the contract, including asset tagging so that new machines can be easily tracked and accounted for, were part of the older agreements. Other provisions, including the cost of recycling or disposing of machines, were not.

The previous BPAs were only for one year each, so the agency didn't get to take advantage of the TCO provisions, Rogers said.

"We decided it really made sense to put an agreement in place," she said. "In doing so, that saved the agency a lot of money. We have a lot of emphasis within FAA on cost control. When you start moving toward a standard, you have the ability to reduce your costs."

Asset tagging solves one of the biggest problems with asset management: knowing what an organization owns and where those resources are, Cassil said.

"When you get into operating systems that become obsolete, you have to figure out how to get them out of your organization," she said. "If we know what comes into the inventory right from the beginning, that will help us."

West said he considers the BPA a significant win, especially if other agencies adopt the TCO approach. But he added that lately the government market has been challenging for Dell and other players. Some analysts say the company is seeking subtle repositioning strategies to maintain its position at the top.

Dell is trying to take a more formal approach to its partnerships with systems integrators in an effort to build on their strengths, West said. The company is also expanding its own small-business initiatives.

In August, Dell reported second quarter 2006 revenue of $13.4 billion. That was a 15 percent increase compared with the $11.7 billion posted for the same quarter last year, but it was less than the predicted $13.7 billion. At the time of the announcement, Kevin Rollins, Dell's chief executive officer, blamed a weak federal technology market for the missed target.

All those factors suggest that Dell senses a need to cultivate more civilian government business, said Brian Alexander, a senior vice president at Raymond James and Associates. Dell may have seen some market softening because of its dependence on the Defense Department, Alexander said.

"They need to figure out a way to broaden their customer base," he said.

The market has been challenging at all levels recently, said Ross Ely, vice president of corporate marketing at MPC, a computer maker that is much smaller than Dell.

"Government is a tough place to play," he said. "You have to understand there are going to be ebbs and flows."

Dell opens North Carolina plant

Dell has opened a new manufacturing plant in Winston-Salem, N.C., that will produce desktop computers for the company's East Coast customers, including federal agencies. The 750,000-square-foot facility will eventually employ 1,500 people, according to the company.

Federal customers will benefit from the plant's proximity to Washington, D.C., said Dell spokeswoman Colleen Ryan.

"In addition to the plant, we'll have [technicians] on the ground in North Carolina who, depending on certain factors, will be able to make the trip north in just a few hours," she said.

The new facility could contribute to lower costs, too, Ryan said, because shipping distances will be less than from other manufacturing sites.

"What we're good at — what we have a really strong track record of doing — is leveraging operational efficiencies and passing value along to our customers," she said.

— Michael Hardy

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