DOD defends software deals
- By Dan Verton
- Jun 27, 1999
The Defense Department's strategy of negotiating hefty discounts for enterprisewide commercial software licenses has drawn fire from industry, which fears DOD may not be getting the best deals possible.
DOD launched its Enterprise Software Initiative (ESI) last month when it awarded a $9.8 million task order to Oracle Corp. for database software, development tools and services. DOD also plans to complete a second round of database awards as well as a series of "quick hit" software agreements covering office automation, enterprise management, records management and information assurance by the end of the year [FCW, June 14].
However, industry representatives recently faced off with officials from DOD, challenging the department's assertion that ESI provides DOD with the best possible price and claiming that blanket purchase agreements offer little value over existing contract vehicles, such as the Integrated Computer-Aided Software Engineering (I-CASE) contract. The contract, awarded to Logicon Inc. in 1994, was envisioned as a vehicle for automating large-scale software development.
Vince Steckler, vice president of Logicon, said his company offered to provide the Army another quote on the Oracle database deal after DOD had decided to go through Oracle directly. "We definitely believe we could have beaten that price," Steckler said. "The objective of the government should be to get the best deal possible." On complex sales, "the resellers can, in general, beat a direct price," he said.
According to Robert Guerra, president of consulting firm Robert J. Guerra & Associates, DOD may not be on the right track if all vendors are guaranteed to receive a BPA under the strategy laid out by ESI. "Enterprise agreements for BPAs is an oxymoron," Guerra said. "My concern is with the lack of competition in the award process whereby [DOD has] generally gone directly to the [original equipment manufacturers] for the individual software titles. I think that the government is making the basic assumption that no one can sell software for less than the manufacturer or OEM. While that seems a logical conclusion, I think the reality of the business today is much different."
For example, the U.S. Transportation Command negotiated a 74 percent discount on a three-year, $43 million Oracle license through Logicon. "It really gets sweet," said Air Force Col. Steve Woolf, chief of programs at Transcom, describing the deal. He said the contract came with 3,000 education and training units, consulting hours, maintenance, extra applications and on-site technical support to assist the command with development. The Air Force has concluded three such deals through Logicon totaling approximately $125 million, Steckler said. However, the real difference, he said, comes with the ability of Logicon and other resellers to dedicate the time necessary to find the customer the right solution. An Oracle deal concluded 13 months ago by Logicon in support of the Air Force Materiel Command took a year to finalize, Steckler said. "The Army doesn't have the resources to spend a year working with a customer," he said. "So right now [the BPA strategy] is just another contract vehicle, and there are plenty of contract vehicles out there."
Chip Mather, senior vice president at Chantilly, Va.-based Acquisition Solutions Inc., called ESI one of the "most important initiatives going on in government today." He said DOD is realizing the payback that comes from treating software as a managed asset. "We have been inordinately worried about saving $5 on a PC when we can save hundreds of millions of dollars if we apply the same principles to software."