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Time to go back to GOTS?

So I was talking to a GSAer Friday after an e-mail exchange about the fact that Canon USA and EMC Corp. both decided to pull their GSA schedule contracts. “Are you surprised?” this person said. My response: Frankly, yes. (We were surprised enough to make it this week's Buzz of the Week.)

Sometimes it sucks to be correct when we worried that Sun was a sign of things to come.

After the Sun Microsystems fiasco where Sen. Chuck Grassley (R-Iowa) and the GSA inspector general essentially chased a vendor off the contracts, then Sun was a lone example – an anomaly. The came news Friday, first reported by GovExec.com, that EMC and Canon were pulling out. (We had heard earlier in the week that at least one schedule vendor was thinking of pulling out, but we didn’t know who. I had some level of confirmation Thursday night.)

In September, of course, Sun Microsystems, battered by investigations by Grassley and GSA's inspector general, determined that the costs were no longer worth the benefit and company officials decided to cancel its schedule contract.

Grassley, apparently not satisfied about having chased Sun off the schedule program, has suggested that the Sun issue is a sign of a bigger problem.

“I fear the Sun contract fiasco may be only the tip of the iceberg. I hope it is the exception, but many contracting officials suggest otherwise,” he said, speaking Wednesday on the Senate floor.

He may be right -- just not the problem that he thinks he is fixing.

At the time, many people assumed that Sun was a unique case. Unfortunately that is not the case. EMC and Canon last week made it clear that Sun was not alone.

There are many troublesome aspects of this still evolving story. The most troublesome aspect is that Sun, EMC and Canon may not be alone. Insiders tell me that others are thinking of dumping out of their schedule contracts. Knowledgeable people tell me that there have been persistent issues with the schedule contract program – some within GSA’s purview; many outside GSA's control. Those problems, however, are spurring companies to assess whether the schedule program makes sense for their companies -- again, the core question they are asking: is the cost worth the benefit.

This is not just a issue for vendors. It has significant ramifications for agencies. The schedule contracts have long been seen as an initial entry point into the government market -- a good place to start doing business with the government. There will undoubtedly be a real cost to GSA losing three vendors. But the real damage is more difficult to see, both for GSA and for agencies. If the schedule contracts were an initial entry point to the government market, there will be vendors considering doing business with the government that will 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. Opportunities lost.

But even more troublesome is that this is perhaps the most real sign so far that procurement environment has fundamentally and dramatically changed – not just for the schedule contracts, but government procurement over all. Many insiders said that companies will likely find that the government contracting world outside the schedule program is not necessarily any better. "We live in an environment where oversight is important, and where it will continue within GSA and outside GSA. It's life now," one insider told me. And it is going to force even greater fundamental changes.

Over the past decade, the government has made a conscious effort to move away from a world where the government operated largely outside the larger market. The concept is that the government simply couldn’t define markets. Furthermore, many of the tasks the government does are not core competencies. This is particularly true in the world of information technology. Yes, agencies can hire programmers and create their own systems – GOTS or Government Off-The-Shelf products. Over the past decade, however, there was a broader assumption that – guess what, the market is more efficient then a closed environment. So, over the past decade or so, there was a assumption built into fundamental rules such as the Clinger-Cohen Act andRaines Rules that agencies should use standards and commercial software. That allows the government to harness innovations in the market and, perhaps more importantly, focus on their actual missions, which, in most cases, is not writing code. The assumption is that it is more efficient and more cost effective. It is the way, frankly, everybody does business.

Implicit in that is allowing agencies to participate in the commercial market – and encouraging companies to compete for government work. Through that competition, there are better ideas, more efficiency and, yes, better prices.

So, if the government procurement world has fundamentally altered -- if the pendulum really is marching back to the pre-1990s world -- it might be time to assess whether the assumptions are still valid. If not, it will necessitate some big changes. For example, if the government decides that it should not participate in the market, then agencies will need to rehire scores of programmers to create government-only systems – systems that will probably be stovepiped, not build on broad standards that foster greater information sharing.

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

Posted on Nov 12, 2007 at 12:17 PM


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