GSA's services pact languishes

Moving into its sixth month of existence the General Services Administration's estimated $6 billion Virtual Data Center Services program has yet to see its first task awarded leading some observers to speculate that a three-year push to consolidate or outsource the government's dozens of data centers may be running out of steam.

Awarded in February VDCS was established to provide a governmentwide vehicle for agencies to buy low-cost outsourcing services. Agencies were expected to use VDCS in light of an Office of Management and Budget directive which was issued in October 1995 to consolidate or outsource data centers that are too small to be economically operated. The deadline to follow the directive is June 1998.

The program's three vendors - Computer Sciences Corp. SunGard Computer Services Inc. and Unisys Corp. - have centers ready to handle the computing workloads of federal agencies. But to date that business has failed to materialize.

"I have heard absolutely nothing going on on a governmentwide basis " said a deputy chief information officer at one agency. "I am wondering about the teeth in the OMB directive."

"Some of the momentum is being lost " said Linda Berdine a data center consultant and subcontractor on CSC's VDCS team. She said what activity there has been in data center consolidation has been in the form of interagency transfers of processing chores.

In an interagency arrangement - also referred to as cross-servicing - an agency offloads some or all of its data processing workload to another agency's data center. This approach is an alternative to outsourcing in which an agency transfers its data processing to a private contractor.

'Fight This All the Way'POverall small data centers appear to be resisting consolidation industry executives said. "They are going to fight this all the way " said one vendor executive who requested anonymity.

The executive said agency data centers are fighting for their existence and were encouraged to hold on to the centers when the Federal Aviation Administration in May awarded its data processing services contract - the Integrated Computing Environment-Mainframe and Networking - to an Agriculture Department data center. Agencies view the award as a chance to attract business from other agencies. "Data centers want to survive and ICEMAN put the icing on the cake " the executive said.

Some data centers meanwhile have received waivers from OMB to continue operations. The Centers for Disease Control was granted a waiver because it demonstrated the center's costs were justified said Jim Seligman director of CDC's information resources management office. The agency has since expanded its data center adding an IBM Corp. mainframe that runs 230 million instructions per second.

The Department of Health and Human Services' Program Support Center is in the process of transferring financial applications from six HHS agencies to the expanded CDC center. Also within HHS the National Institutes of Health earlier this month merged its Information Technology Service (formerly Parklawn Computer Center) data center into NIH's Division of Computer Research and Technology.

Seligman said CDC has looked into the VDCS contract but is not planning to use it at this time. He cited the expense of replicating the CDC center's high-bandwidth connectivity at a remote data processing site and a recent investment in a data center facility.

As for VDCS the main source of activity on the contracts thus far has been agency data centers calling for price checks sources familiar with the contract said.

"They are using VDCS to get price quotes " Berdine said. "They are using it to compare the cost of transferring it within the government vs. outsourcing."Olga Grkavac senior vice president of the Information Technology Association of America's Systems Integration Division said the lack of activity on VDCS shows that "outsourcing is still a tough sell among government agencies." She said a lack of examples of outsourcing among agencies makes it "hard to build momentum."

VDCS vendors reached for comment last week acknowledged that there has been no business to date but they said interest in the program has begun to build.

The program's first task-order competition is set to begin this week as GSA is expected to kick off an outsourcing bid for the Education Department's National Student Loan Data System. However that procurement does not represent a shift in activity from the public sector to the private sector because the program's data processing operations are currently handled by a contractor Raytheon Corp.'s E-Systems unit.

Still the Education project could jumpstart the contract agency and industry executives said.

"A big success will break the dam on this " said John Ortego deputy assistant commissioner for GSA's Information Technology Service and the acting director of the agency's Federal Computer Acquisition Center. He said Education plans to outsource 15 more data centers if the student loan project is successful. Calls to the office of Education's chief information officer were not returned. Ortego said GSA has received numerous inquires about the contract and OMB is "working hard to make sure agencies consolidate." OMB officials could not be reached for comment.

Gerard Biggs marketing manager for VDCS with Unisys said the company is planning to bid the Education task order which he said will "solidify [VDCS] as a valid and credible alternative." In general VDCS is "starting to pick up " he said. Biggs said the Smithsonian Institution the Federal Highway Administration the Securities and Exchange Commission and the Import-Export Bank are among the agencies that have made inquiries.

"It's slow getting off the ground but I believe it will be used " said J. Pat Ways group vice president of business development for CSC's Systems Group. He said he expects small and midsize data centers to use the program adding that CSC is performing a preliminary cost analysis for three agencies which he declined to identify. He said the agencies that have contacted CSC have been influenced by the OBM directive.

Ways said he does not expect large agencies to use VDCS in the immediate future.

The USDA has positioned itself as a service provider in light of ICEMAN. "We have gotten a flood of calls with ICEMAN from other federal agencies " said Kathleen Rundle acting director of the USDA's Kansas City Mo. data center. She said data centers are "trying to determine which way they should go" in regard to cross-servicing vs. outsourcing to a contractor.

Seligman noted that it can take an organization a year or more to complete the business analysis leading to an outsourcing decision.

NASA which has already gone through mainframe consolidation is in the process of developing a "fairly long-range" business case for NASA's mainframe operations at the Marshall Space Flight Center said Ron West NASA's CIO. The agency is evaluating outsourcing and NASA is "looking at GSA to see if we want to move in that direction over the next few years " he said.

VDCS also may be slow in attracting business because agencies are focusing on other IT issues. Alvin Pesachowitz vice chairman of the Chief Information Officers Council said data center consolidation has not been "brought up as a key topic" in council discussions.

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