SEWP business is up, fee down

Popularity of SEWP IV prompts NASA to lower the contract’s service fee

Top 10 departments buying SEWP products

Revenue from NASA’s Solutions for Enterprisewide Procurement (SEWP) has remained steady, even after the agency awarded new contracts for the latest generation of the SEWP program, SEWP IV. Fiscal 2007 revenue from the SEWP III contracts is $378.7 million, and revenue from the new SEWP IV contracts, awarded in May, has reached $358.3 million, according to documents. However, total SEWP revenue for 2007 is down from $755.2 million last year to $737 million this year.
Agencies are spending less per order but are placing more orders. In 2006, agencies spent about $52,000 per order, but that number has fallen to $36,000 per order. However, agencies placed nearly 6,000 more orders than in 2006, according to documents.

Department - Total spent (in millions)

Veterans Affairs - $212.7

Justice - $82

Defense - $75

NASA - $65

Navy - $63.1

Air Force - $55.2

Army - $38.7

General Services Administration - $30.4

Health and Human Services - $22.3

Interior - $15.4

As NASA transitioned to a fourth round of contracts, its Solutions for Enterprisewide Procurement (SEWP) generated revenues that beat expectations. In 2007, SEWP III revenue hit $378.7 million and SEWP IV, awarded in May, earned $358.2 million so far this year, according to budget documents. Despite an $18 million dip in total revenue compared with last year, SEWP revenue from 20,374 orders in 2007 reached $737 million.

Source: NASA

NASA said it received so many orders in the first five months of its new governmentwide acquisition contract that it lowered the fee it charges agencies to place orders.

As NASA transitioned to a fourth round of contracts, its Solutions for Enterprisewide Procurement (SEWP) generated revenues that beat expectations. In 2007, SEWP III revenue hit $378.7 million and SEWP IV, awarded in May, earned $358.2 million so far this year, according to budget documents. Despite an $18 million dip in total revenue compared with last year, SEWP revenue from 20,374 orders in 2007 reached $737 million.

“We didn’t expect to do that with a new start,” said Joanne Woytek, NASA’s SEWP program manager.

Because of the increase in business, NASA lowered SEWP’s service fee from 0.65 percent to 0.6 percent, Woytek said.

In May, NASA awarded its most recent round of SEWP contracts to 38 prime contract holders. Shifting from one set of contracts to another usually slows business, Woytek said. But that didn’t happen, and all SEWP IV contractors have at least one order, she added. The contract covers high-end computers, servers, network equipment and storage devices, but not services.

According to NASA’s contract data, the Veterans Affairs Department is the biggest contributor to SEWP’s success. In July 2006, VA decided not to renew its Procurement of Computer Hardware and Software contracts and instead buy from SEWP.

VA was responsible for 41 percent of SEWP’s revenue in 2006, spending $143.9 million on 3,908 orders, according to documents. Those orders represented 56 percent of the total number of SEWP orders that year. In 2007, VA was responsible for 29 percent of SEWP’s revenue and 36 percent of the contract’s total orders.
In 2006, NASA spent $36.3 million under SEWP, but in 2007, it increased its SEWP spending to $65 million, documents show. The General Services Administration is another major SEWP customer. It spent $30.4 million on contract orders this year — up from $14.7 million last year.

GSA has faced financial challenges in recent years, losing business and customer confidence. Most recently, Sun Microsystems announced that it plans to withdraw from its GSA schedule contract in October. GSA’s Office of Inspector General and Sun have been mired in a dispute over documents the OIG wanted the company to provide so the office could perform an audit.

Industry experts say publicity and political intervention, including a request from Sen. Charles Grassley (R-Iowa) for GSA to cancel Sun’s contract, cast a cloud over the company’s schedule business.
Some industry leaders say the dispute could raise concerns among other companies doing or seeking to do business with the government via schedule contracts. Whatever the outcome, “it put the fear of the IG audit in my customers,” said Hope Lane, who leads Aronson and Co.’s GSA schedule consulting practice.

Woytek dismissed such concerns and said anyone involved with a GWAC must recognize that oversight comes from all sides, including the Government Accountability Office, the Office of Management and Budget and inspectors general.

The revenue from Sun’s schedule contract was relatively small, industry analysts say. The company had $8.1 million in revenue under the contract in 2006, which was not enough for it to make the list of the top 140 companies holding Schedule 70 contracts.

John Slye, manager of federal industry analysis at Input, said Sun likely has plans for making that money back through other government sales.

Woytek said Sun’s pullout from the GSA schedule program won’t affect SEWP revenues because agencies must go through the company’s resellers to buy Sun products under SEWP.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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