Ready, set ...
- By Michael Hardy
- May 17, 2004
As the clock ticks closer to the award of the U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) contract, expected in late May, systems integrators are eyeing other vehicles, preparing bids and evaluating opportunities that are still years away.
No single opportunity looms on the horizon, but projects from the Homeland Security and Defense departments continue to turn contractors' heads. New governmentwide vehicles that General Services Administration officials are developing are also high on the list of long-term goals.
According to officials from market research firms Input and Federal Sources Inc., contractors are watching several new opportunities closely. Many are from DOD and DHS, but civilian agencies, including the Education and Treasury departments, also have potentially lucrative opportunities in view.
For example, Education officials are expected to release a request for proposals soon for Ednet, an information technology services contract that some integrators are interested in, said Brian Haney, manager of client support at Input. The $70 million contract may not be a big deal by DOD standards, he said, but it is for Education.
Treasury officials recently released the RFP for their Treasury Communications Enterprise (TCE) project. Meanwhile, officials at the Department of Health and Human Services are evaluating bids for an IT infrastructure consolidation effort at the Food and Drug Administration.
Agencies may be bound by a tight IT budget — the Bush budget request for 2005 asks for only $59.8 billion for IT, a scant 1 percent increase from the 2004 request — but they still have some enticing opportunities for contractors, industry analysts say.
The market is "not extraordinary, but it is healthy," said Ray Bjorklund, senior vice president of consulting at Federal Sources Inc. "There's not lot of new stuff, but it's growing."
However, he added, tighter budgets and an emphasis on consolidating systems are leading to a smaller number of contracts, making each one more important. "It's quite hard to quantify," he said. "There is enough anecdotal evidence to say that is happening."
Action at DHS
Vendors are targeting contracts that meet their skills, partners and business goals. Homeland security continues to hold sway with some contractors, including Unisys Corp., which is trying to develop a stronger market presence in that field.
The company is bidding as a subcontractor to Lockheed Martin Corp. on US-VISIT. It also is in the running for Transportation Worker Identification Credential, a smart-card program at the Transportation Security Administration, and the Electronically Managed Enterprise Resources for Government Efficiency and Effectiveness (EMERGE2) program, which will provide the infrastructure for departmentwide back-office automation.
Another possibility is the Security, Planning and Integrated Resources for Information Technology (SPIRIT) contract, which will provide a broad range of IT services for homeland security agencies during the next 10 years. The SPIRIT RFP remains on hold, but Unisys and other contractors are awaiting a chance to bid.
Unisys officials have developed "an aggressive stance on homeland security and are moving forward," said Greg Baroni, president of Unisys' global public-sector division.
"Where before we were doing a number of different things, we are now more focused," said Ira Kirsch, president of the U.S. federal government group within the global public-sector division. "I think Unisys has come a long way in this marketplace. We are viewed in a much different light than we were three years ago."
The company also is working on opportunities beyond DHS, Kirsch said. Other prime targets are the $1.5 billion TCE contract and the Air Force's $10 billion Network-Centric Solutions contract.
Unisys officials will work to win a spot on Alliant, a governmentwide technology services contract that will replace two existing vehicles managed by GSA.
"Anytime there's a generic kind of contract, these vendors all have to get on it," Bjorklund said. "They all have to have a stake. It's often the only way they can sell into an agency. Otherwise, they don't have an easy way for their customers to order."
Officials at Computer Sciences Corp. are watching EMERGE2 and Alliant, but they are also considering more specialized opportunities, said Austin Yerks, president of business development for CSC's federal sector. The company is trying to recover its reputation after stumbles on high-profile projects — and has already lost out on at least two contracts that Yerks said last fall were important to win.
CSC does about $1 billion in business a year through the GSA schedule contracts and governmentwide contracts, Yerks said. Bidding for a place on Alliant is an easy decision, he said.
"We probably do a little more business through GSA than most," he said.
Yerks said he plans to try to expand existing business during the next couple of years. As the prime contractor on the Army's logistics modernization effort, CSC is well-positioned to pursue similar logistics projects with other branches of the military, he said. He plans to compete for a contract with the Atlantic Undersea Test and Evaluation Center next year, building on the company's range support business, which includes several existing contracts with the Air Force, the Navy and NASA.
He also plans to bid on the Federal Aviation Administration's Flight Service Station A-76 contract to be awarded next year. The program will consolidate the network centers that support private pilots.
Decisions about which contracts to prepare bids for and which ones to let pass are all part of daily life for integrators. The task is made more difficult by a growing emphasis on cost justification as Office of Management and Budget officials require agencies to prove the value of their technology expenditures.
"It's becoming important for agencies to look at mission, but it's becoming equally important for vendors to look at the agency's mission," Input's Haney said.
To decide which contract opportunities to bid on, integrators take a variety of approaches. They may evaluate new contracts, usually starting the thought process several years before the contract's planned award.
Officials at CACI International Inc., for example, are considering up to $7 billion in projects during the next 18 months, said J.P. London, chairman, president and chief executive officer. Some of those will be coming up in the next few weeks.
However, London's company will probably bid on only $1 billion to $2 billion worth of business, he said. It's the winnowing process that all business leaders grapple with.
At CACI, various contract opportunities are supported by company leaders, and an internal competition among them determines how the company will invest its proposal resources, London said. The advocates of the opportunities are paid bonuses when their contract wins company approval.
"It tends to filter up the better deals through the scrutiny of competitive review within the company," he said. "We have certain milestones we have to go through. Each milestone is a different kind of review."
Each new opportunity first gets a cursory review to determine whether it's of interest and within the company's abilities to handle, London said. Each successive round is more exacting, with company officials analyzing the competition, the potential profit, the need for subcontractors and other aspects.
"It takes a lot of discipline, and there are people who will tell you it's a waste of time, but we find it's weeding the chaff out," London said. "It's not a matter of sitting down and reading a 600-page paper, taking an afternoon while you've got your feet up looking out the window. It can take a team of people a week to dig into some of these more complex deals."
"The decision-makers of these companies have to take the pipeline of opportunities and determine whether they have the capabilities and competencies to pursue them," Bjorklund said. "It's a constant evolutionary process that becomes increasingly tactical. You may see them spend two or three years chasing something and then get right up to the end and say, 'We can't do this.'"
OMB is having an increasingly intense impact on agencies' choices, Haney said. The President's Management Agenda, which calls for greater oversight of the way agencies spend their money, is just starting to have a significant effect, he said.
"This is really the first year where you can see that that [principle] is taking hold in procurement budgets," he said. "This is a level of oversight that the government hasn't seen in a quite a long time. It requires agencies to really think holistically about what they need before they go out and procure."
At CSC, Yerks said he tries to keep the company's government business divided evenly between systems modernization projects, information technology services engagements and engineering services.
Yerks said he tries to keep his vision reasonably short term. "The horizon that we use is two years," he said. "Anybody who thinks they can look out further than that is better than me."
A long-range vision is crucial though, Bjorklund said.
"For a strategically important procurement — a big juicy one — three years is usually not too early," he said. "Some people are working these things five years early. Typically, if they don't have at least nine months, they probably are too late. The other companies, their competitors, are also thinking about positioning and they're developing teaming relationships. If you get to the game too late, you're going to be strategically at a disadvantage."