Engineering Services Schedule Spells Multibillion-Dollar Market

By Nick WakemanCompanies from giant Lockheed Martin Corp. to tiny Cexec Inc. are lining up to take a shot at what could turn into a multibillion-dollar market ? the General Services Administration's new schedule for engineering and technical services.Called the Professional Engineering Services schedule, it should be up and running by the end of the year. It will allow all agencies to buy a wide range of services, from high-end systems design and development to operations and maintenance.The market for these services is huge, with an estimated $60 billion spent annually by defense and civilian agencies, sources said.GSA is developing the schedule in part because of the wild success of services on the information technology schedule, which generated more than $1 billion in business in 1998, said William Gormley, assistant commissioner for acquisition at GSA's Federal Supply Service.That number, which was achieved during the first year of the schedule, should more than double this year, he said. "We started hearing from our customers, 'Why am I still having to go through a long procurement for engineering services? Why haven't you streamlined?' " Gormley said.GSA is making a modest prediction of $100 million in engineering services the first year or so on the schedule, Gormley said. "But the potential is there to be equal or greater than IT services," he said. Engineering services comprise a variety of tasks, such as consulting, business case analysis, independent verification and validation, operations and maintenance, research and development, signal processing, simulation and modeling, support services and testing and evaluation of products and systems. In addition to Lockheed Martin of Bethesda, Md., and Cexec of Dulles, Va., others angling to be schedule holders include: Nichols Research Corp. of Huntsville, Ala.; Science Applications International Corp. of San Diego; and Unisys Corp. of Blue Bell, Pa. A request for proposals on the contract is imminent, officials said.A bidders conference in May drew representatives from more than 250 companies, Gormley said. Among them were Anteon Corp. of Fairfax, Va.; Averstar Inc. of Burlington, Mass.; Booz-Allen & Hamilton Inc. of McLean, Va.; Computer Sciences Corp. of El Segundo, Calif.; DynCorp of Reston, Va.; Federal Data Corp. of Rockville, Md.; Litton-PRC Inc. of McLean; SRA International Inc. of Fairfax; and TRW Inc. of Cleveland."I would expect everybody with a [engineering services] contract to get on the schedule," said Mike Solley, executive vice president of Nichols Research Corp.Creating a schedule is an excellent idea, because it is one of the most efficient, fastest and least costly ways to procure services, said Bert Concklin, president of the Professional Services Council, an industry group in Arlington, Va. The government buys nearly $60 billion of such services each year, he said. Defense agencies account for about $40 billion of that spending, he said.GSA's schedules have increased significantly the pace of procurement, Gormley said. "Our studies indicate that it takes 268 days to do a formal contract, but four to six weeks to do a blanket purchase agreement [off the GSA schedule]," he said. "That's a significant savings."Speed and flexibility are what draw agencies to the schedule, said Ronald Knecht, senior vice president of corporate development for SAIC. "People can go out on short notice and get what they need without going through a long procurement," Knecht said.Long procurements make it harder for agencies to adjust their buying as their needs change, Knecht said. "The schedule's flexibility helps them stay closer to reality," he said."We really believe this is going to explode," said Lee Cooper, vice president of business development for Unisys Federal. "This is an opportunity to supply our customers with a quick turnaround and be more responsive to their needs."Government and industry officials expect the engineering services schedule to follow a rapid growth pattern similar to the IT services schedule. None of the company officials would predict how much business their individual corporations will do on the schedule.Several of Nichols' existing customers with the Navy and intelligence agencies already are talking about moving work from contracts to the schedule, Solley said.Unisys and other companies are seeing the same interest, Cooper said. "Contractors that have current contracts will be working with their customers to see if they want to do the work on the schedule," he said.Using the schedule offers the agencies benefits, such as pre-negotiated labor rates and defined solutions, Cooper said. "All that results in being able to procure services faster," he said."This is another move in the direction of commercial ways of doing business," said Ken Morton, vice president of business development for Lockheed Martin Technology Services Group. "All our customers want to move toward a streamlined way of doing business."The schedule also should open up opportunities for smaller companies. "I think the distinction between large business and small business will be blurred," Cooper said.Because currently most engineering services are part of larger procurements, few small businesses have the opportunity to be prime contractors, Cooper said. "But now they'll have the opportunity to be the prime on task orders, so we'll see more competition," he said.Executives at Cexec, a $31 million-a-year information technology company, see the schedule as a way to make the playing field level for small and large companies alike."We are going to be pursuing opportunities in integrated logistics support, acquisition and life-cycle support and systems test and evaluation," said Donald Klug, vice president of marketing for Cexec.The company already provides this type of support to the Federal Aviation Administration, the Department of Interior and the U.S. Postal Service, he said.The schedule for IT services has helped small businesses, with 30 percent of the task orders going to them, Gormley said. He said he expects the same to happen with the engineering services schedule.But companies large and small will have to adjust the way they do business, Cexec's Klug said. "The schedule is going to put more pressure on us and other companies to proactively do business development," he said. "If you sit and wait, you are going to be too late in the game."