"This is the biggest year for federal IT contract vehicles in a decade," according to one analyst.
This year is a big one for federal IT contracts.
The top two contract vehicles to be awarded within the next year, the General Services Administration’s Enterprise Infrastructure Solutions (now out for bid) and Alliant 2, have a collective ceiling value of $100 billion.
Toss in close to a dozen more contracts with potential multibillion-dollar ceilings, and you’ve got a particularly active – and exceedingly important – year ahead for federal agencies, contracting officials and competing contractors.
“This is the biggest year for federal IT contract vehicles in a decade, and when the dust settles by the middle of next year, the playing field will be set for the next decade in IT services,” said Brian Friel, principal of One Nation Analytics LLC, in an interview with Nextgov.
Based on his calculations, Friel said the top dozen federal IT contracts awarded this year will take up a sizable chunk of the total federal IT budget for the next decade. Assuming an average period of performance of 10 years – a safe assumption considering EIS is a 15-year contract – Friel said the top dozen federal IT contracts awarded over the next year could be worth a combined $10 billion per year over the next decade.
“Normally, the ceilings are astronomical for these kinds of contracts, but these are not unrealistic ceilings,” Friel said.
In other words, more than 10 percent of the government’s entire IT budget will flow through these select contract vehicles for IT services, hardware and software, networking, cybersecurity and defense, totaling $100 billion by 2026. That’s plenty of money to bump many small- to mid-sized companies into the upper echelons of government contractors, and more than enough to keep the top contractors busy.
Not surprisingly, analysts at Deltek report that cost is a key factor in these large contracts, but it’s not as if the government is trying to spend all the money it can.
In fact, as Alex Rossino, a senior principal research analyst at Deltek, told Nextgov, the trend toward longer periods of performance can actually work out better for federal agencies. Instead of spending significant investment and time getting procurements through the acquisition process every few years, lengthier contract vehicles allow efficiencies that otherwise go by the wayside.
“Contracts are becoming longer, and a lot of it has to do with convenience,” Rossino told Nextgov. “If you can have a contract vehicle with the proper on- and off-ramp mechanism that allows you to refresh vendors and available services, it’s really an efficiency mechanism. It costs a lot of money to compete these things.”
As long as procurements ensure an avenue to onboard emerging technologies in competitive fashion, such as by awarding contracts to multiple vendors and issuing task orders for vendors to compete on, lengthy contracts have a high-value proposition.
Another noticeable trend is the shift toward strategic partnerships, said Deltek Principal Research Analyst Kyra Fussell.
GSA’s active involvement with agencies like Defense Information Systems Agency and the Department of Homeland Security on various contracts should reduce duplicative investments across agencies, and takes some of the load off individual contracting offices.
The Defense Health Agency also decided to procure requirements for its Defense Health Information Technology Services contract through GSA rather than an individual procurement after significant exploration revealed GSA’s Schedule 70 program contained many of its desired services. DHA canceled what Deltek analysts estimate would have been a $10 billion procurement and will work with GSA’s Schedule 70 to create a special item number for DHA and its partners.
Much of the contracting action for these large IT contracts is underway. Here’s a look at some of the most important federal IT contracts and vehicles over the coming year.
- GSA began soliciting bids for its next-generation telecommunications contract in February. EIS will be worth up to $50 billion over 15 years, and is the follow-on to the Networx vehicle awarded in the mid-2000s. EIS will also replace 83 local regional local service contracts after its award, likely in early 2017. GSA is currently working with agencies to develop transition plans from old telecommunications contracts to EIS.
- The Defense Information Systems Agency – the Pentagon’s IT arm – just last week began collecting bids for its Encore III contract, valued at $17.5 billion at up to 10 years. Officials describe the contract as integral to creating an “integrated and interoperable” DOD Information Network. The contract has a 5-year base and five 1-year options. It’s also a contract to watch, as it is of the “lowest price, technically acceptable” variety. That means the government will determine acquisition of services based first on price, not on technical superiority.
- Bids for Alliant II, a governmentwide acquisition contract led by GSA, could be solicited in the coming months. Alliant II “provides a common framework and terminology for defining and understanding components of an IT solution,” according to Deltek, and is designed to be flexible enough to conform to new policies put in place by the Office of Management and Budget. Alliant II will replace the $50 billion Alliant vehicle, which expires in 2019. Thus far, agencies have spent some $24 billion on Alliant. The ceiling for Alliant II is expected to be between $50 billion-$65 billion.
- The U.S. Army, which is the most active of the military branches this year in IT, will receive bids for its Information Technology Enterprise Solutions 3 Services contract through March 14. The contract, which aims to boost the Army’s IT infrastructure both within U.S. borders and in war zones, is valued at approximately $12 billion.
- The Army is also expected to release its Common Hardware Systems-5 contract in late summer. Valued at $2.5 billion, the contract’s aim is to “improve interoperability and connectivity on the battlefield,” according to Deltek, and will provide hardware, software, computing processing, storage, display technology and a variety of other professional services.
- Early in 2017, the Army is likely to award its Desktop and Mobile Computing 3 contract, a follow-on to an existing contract in which incumbents have thus far spent $3.6 billion of a $5 billion ceiling – more than half of which went to Dell. This is primarily a hardware-based contract for computers and could be worth $5 billion.
- Finally, the Army scrapped one of its largest efforts, the Installation Modernization program (called IMOD-II), for unspecified reasons. IMOD-II was expected to be worth $4 billion.
- FirstNet posted a request for proposal to build the nation’s public-safety broadband network in January, with bids due in April. Fussell calls the timeline for award – by the end of 2016 – “very aggressive,” and said it’s likely the FirstNet group is purposely moving quickly in anticipation of bid protests from telecommunications vendors. FirstNet is valued at some $6.5 billion. It also has a very lengthy period of performance: 25 years.
- The Social Security Administration’s $2.8 billion IT Support Services contract is expected to be bid out this spring. Several other large-scale IT contracts, valued at up to hundreds of millions per dollars, could also be awarded this year. They include an IT services contract for the Agriculture Department’s Farm Service Agency; the Centers for Medicare & Medicaid Services’ SPARC program and the U.S. Navy Seaport-E program. The National Institutes of Health may also allow new vendors onto its existing CIO-SP3 contract vehicle.
Importantly, almost all the largest potential contracts are multiple-award indefinite delivery, indefinite quantity contracts. That means tens of companies will typically “win” a contract and compete for individual task orders. Given the huge amount of money and services up for grabs over the next several years, the federal contracting space is going to be as competitive as ever.
Dozens of companies will “battle it out for task and delivery orders during the next 10 years,” Friel said.