Buzz of the Week: Ramifications of GSA schedule woes

Sun Microsystems was the first to take a stand, but now it has company. Late last week, EMC and Canon decided to pull their General Services Administration schedule contracts — and the companies might not be the last.

In September, executives at Sun, battered by investigations by Sen. Chuck Grassley (R-Iowa) and GSA’s inspector general, determined that the costs of doing business with GSA were no longer worth the benefit and canceled its schedule contract.

At the time, many people assumed that Sun’s situation was unique, but EMC and Canon have dispelled that notion, and many believe that this is just the beginning. Insiders say that persistent issues with the schedule contract program are spurring many companies to reassess their schedule business as Sun did, by weighing costs versus benefits.

Such decisions cannot be made lightly. The GSA schedule contracts are a vital component of most vendors’ federal strategy. Traditionally, they have provided an easy way to make a broad array of products and services immediately accessible to government agencies.

Clearly, GSA has cause for concern, having lost three major contractors in a short period, with the possibility of more defections in the months ahead.

But the ramifications for federal buyers could be more serious, although difficult to prove. The GSA schedule program has always been viewed as a good initial entry point for vendors looking to bring new technologies into the federal market.

It is not difficult to imagine that some vendors might look at these bigger companies bailing out of the schedule program and simply determine that if the big guys can’t do it, they won’t even try. And federal buyers will never know what they lost.

But the broader message may be that the federal procurement environment has dramatically changed — not just for the schedule contracts, but for the market as a whole.

For every action, there is a reaction. Last week, one got a sense that the reactions are starting to become clearer.

Buzz contenders

#2: Association merger?

Two big trade associations, the Information Technology Association of America and the Government Electronics Industry Association, announced last week they are looking to merge. The two sides hope to work out the details by early next year, but this could also be a sign that the government market is changing. There has been increasing competition between these organizations as they fight for members.

But many people say that the ITAA-GEIA merger is just the beginning. They say there are other likely mergers among different industry groups, although many of those are still in the early talks — too early for people to say anything publicly. The government market continues to evolve.

#3 Yes to open source
Feds like working with open-source software, especially in the intelligence community and Defense Department, according to an October online survey sponsored by the Federal Open Source Alliance. Many of the 218 respondents reported having good success with open-source projects. But federal procurement rules still make it difficult for agencies to give open-source software a fair shake, said one DOD employee who spoke at the Red Hat Users and Developers Conference in Washington this month.

#4 Grassley on oversight
To recap: Sen. Charles Grassley (R-Iowa) was unhappy with the General Services Administration’s administrator and Sun Microsystems during what became a politicized dispute about the prices Sun charged the government on its GSA schedule contract. Sun dropped its GSA schedule Oct. 12, and the story faded from view. However, last week, IDG News Service picked the story up again when it reported that Grassley was also unhappy with GSA’s inspector general. The IG was trying to gather ev dence on whether Sun had overcharged agencies $25 million on GSA schedule contracts. IDG obtained an Oct. 17 letter from Grassley to GSA IG Brian Miller in which Grassley hints that Miller’s office should avoid the M word: micromanaging. Grassley wrote that the IG’s office should conduct training courses to “help auditors better understand exactly where the fine line between oversight and management actually lies in contract negotiations.”


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