A maturing federal market
- By Diane Frank
- May 07, 2001
For the General Services Administration's Federal Supply Service, the age of discovery is over.
After four years of rampant growth, business on the FSS information technology schedule is beginning to slow. Agencies are buying more products and services than ever off the schedule — sales in the first six months of fiscal 2001 are up by $300 million, or 4.8 percent, over the same time last year — but the rate of growth has slackened.
Sales grew 56 percent from 1998 to 1999, but just 17.4 percent from 1999 to 2000, according to GSA figures.
GSA, however, is not sitting still. Even as IT schedule sales skyrocketed, the agency developed a slew of options for buying products and services, including two companion schedules. Now GSA believes it can fuel more growth by helping customers find new ways to take advantage of all these options.
"We've mounted an effort to identify as many solutions sets as we can creatively both internally and through talks with customers and industry," said Patricia Mead, acting deputy assistant commissioner of acquisition at FSS.
Logical Chain of Events
The slower growth in sales, after several boom years, is not unexpected, observers say.
The schedules program "grew and it is still growing, but the IT schedules themselves aren't experiencing the same robust growth," said Larry Allen, executive director of the Coalition for Government Procurement, an industry group that represents more than 300 federal contractors.
IT vendors were able to pick up steam on the FSS schedules more quickly than other vendors because in 1999 IT schedules became the first to be open to services, which are now driving most of the growth, Allen said.
"The bottom line is that we're well- positioned on a couple of different levels," said Harry Heisler of Micron Government Computer Systems Inc., which last week was acquired by Gores Technology Group. "Thirty-five to 40 percent of my business is transactional and [with] the remaining 60 percent, the government is outsourcing some responsibility to us, like logistics management, customization or integration of third-party products."
Heisler said Micron has been adding software or other outside components to its solutions for quite some time, and its GSA contract is not just an original equipment manufacturer agreement. In fact, Micron has even incorporated other OEM systems, such as IBM Corp. notebook computers, into its government solutions.
Uncertainty regarding Micron's ownership during the last month or so didn't help sales, "but we're still well ahead of 2000," Heisler said, adding that sales climbed in 1999 in part because of preparations for Year 2000 computer problems and U.S. participation in the air campaign in Kosovo, followed by a slump in 2000. "Half of the Micron year is over, and GSA schedule sales are up thanks to the current popularity of the [blanket purchase agreement] strategy that our customers are using."
The rapid expansion of IT schedule sales began when Congress passed the Clinger-Cohen Act of 1996, which gave agencies more flexibility in how they buy products. For one, Clinger-Cohen cleared the way for agencies to establish blanket purchase agreements — under which a single contract is set up with schedule vendors for recurring needs — by endorsing the concept of volume discounts. That became a strong reason to use the preapproved schedule products and services rather than start from scratch to set up an indefinite-delivery, indefinite-quantity contract.
GSA helped its own case by making it possible for companies to offer services in addition to products on the GSA schedule. That freed agencies to make quick buys off the schedule, rather than setting up their own services contracts.
"You see the acceptance of acquisition changes, agencies finally becoming comfortable with using vehicles like the schedules and now they have reached some kind of maturity plateau," said Phil Kiviat, president of the Kiviat Group, a federal marketing consultant firm.
A New Era
As GSA sees it, though, the next wave of change has already begun, as agencies become more sophisticated shoppers.
Under existing regulations, vendors can team up on purchases, which means an agency can turn to a schedule for pack-age deals rather than buying pieces individually.
For example, FSS has been promoting the purchase of seat management services from the schedule. This is an outsourcing-style contract under which, for a flat monthly fee, a team of vendors manages anything from an agency's desktop hardware and software to an entire network.
Such services are already available through GSA's Federal Technology Service and NASA, but GSA promotes the schedule as a more flexible vehicle. An outsourcing team is often made up of many vendors, almost all of them available on the IT schedule.
GSA also has created several other schedules through which agencies can buy consulting services, including Management, Organization and Business Improvement Services (MOBIS), Pro-fes-sional Engineering Services and Human Resources Management. These open the door for even more complex buys.
For example, last month FSS launched a program called E-connected Intelligent Remote Office (EIRO), through which agencies can put together a package of mobile computing products and services by using three schedules: IT, Human Resources Management and MOBIS.
The new program is much more flexible than its predecessor, Office Anywhere, which reflects the FSS way of doing business, said Robin Bourne, deputy director of the FSS IT Acquisition Center. "Office Anywhere was going to define the solution, and with EIRO, customers can define the solution themselves," he said.
EIRO and seat management are models of how FSS plans to do business, Mead said. The service did not create a new schedule for these solutions sets, but instead looked for common issues raised by federal customers, and is now identifying vendors that offer components of the solutions that address those issues.
This adoption of commercial practices has long been the FSS way of doing business, Allen said.
"One of the things that GSA has tried to do from time to time is eliminate the artificial, government-made distinctions," he said. The emphasis on solutions is just an extension of that because "it makes it easier for their federal customers to find things."
It doesn't end there. On May 14, as part of the revamped GSA Advantage Web site, FSS will unveil E-Buy, an online program that will enable agencies to request quotes on volume product purchases or services, cutting across all the schedules.
"We need to help people go horizontally rather than vertically," said Teresa Sorrenti, director of the FSS Acquisition Operations and Electronic Commerce Center.
That approach, Kiviat said, is crucial as the federal market picks up ideas from the private sector. "There are certain niches that people are interested in.... If [FSS is] moving toward classifying solutions areas, then that is a great concept."
Dan Caterinicchia contributed to this article.