E-Gov, Security Concerns to Drive Federal Market in 2001

By Nick Wakeman, Senior Editor

The push for electronic government and information assurance will help drive the modest increases in federal spending expected in 2001.

The government market for information technology goods and services is expected to grow by 1.7 percent in 2001, reaching about $39.7 billion, according to a new market study by the Government Electronics and Information Technology Association. The Arlington, Va.-based group represents companies that make, sell and service IT and defense systems.

The group's annual market report looks not only at budget documents submitted by government agencies to the Office of Management and Budget, but the association also talks to senior agency officials, information resource managers, program managers, congressional staffers and Wall Street analysts.

The results of the interviews and analysis of the budget documents were to be unveiled at an Oct. 31-Nov. 2 conference in Arlington.

On the minds of many government officials is how to implement electronic government projects, said Sarah DeCarlo, vice president of business development for government markets at AT&T Corp. of Basking Ridge, N.J. DeCarlo served as co-chair of the group that put together the market research project.

"E-gov is big, exciting and dynamic, and for some [government officials] it is a little overwhelming," she said.
Issues such as an aging work force and difficulty in replacing high-tech workers also are influencing agencies' IT purchases, DeCarlo said.

Agencies are expected to rely more on contracting concepts such as share-in-savings, where the contractor builds a system and is paid according to the amount of money the system saves, said Jeanmarie Klitzner, a director of business development at Computer Sciences Corp. of El Segundo, Calif. She was the chairwoman of the civilian government portion of the study.

Performance-based contracting, which also relies heavily on results as the basis for payment, will be getting more consideration in the coming years, she said.

"We are starting to see agencies forming partnerships where industry takes on greater risk," Klitzner said.

Spending by the top seven defense and civilian agencies is expected to rise from $22 billion in fiscal 2000 to $24.3 billion in 2005. The Air Force is the biggest spender with $4.7 billion going to IT in fiscal 2000, and $5 billion expected in 2005. The Army is spending $3.3 billion in 2000, rising to $3.8 billion in 2005.

Among civilian agencies, the Transportation Department is expected to have the most growth, increasing spending from $2.4 billion in 2000 to $3.2 billion in 2005.

Because of changes in the way agencies report their spending, it has become more difficult to determine how much agencies are spending in specific IT areas, such as networking equipment, software development and PCs, said Mary Freeman, market research manager for the federal division of Verizon Communications Inc. of New York. Freeman was the chairwoman of the budget forecast portion of the study.

To get more insight into specific spending patterns, the association is working with market research firm Eagle Eye Inc. of Fairfax, Va., to analyze patterns based on actual spending, she said.

Spending by agencies continues to shift from individual contracts to vehicles such as the General Services Administration schedule and governmentwide acquisition vehicles, Freeman said.

"Companies really need a portfolio of contracts so your customers can get to you," said Michael Kush, vice president of business development at VGS Inc. of Fairfax, Va. Kush was in charge of the defense spending forecast.

Information assurance and security issues are major drivers of spending among the defense agencies and the military services, Kush said. "We don't see that going away anytime soon," he said.

The Defense Department sees IT as the answer for getting more done with less people and resources, as well as being a strategic tool, he said.

"The Army is talking about transformation," he said. The service wants to become highly mobile with the ability to deploy its people and equipment through airborne operations. The pace of those operations also has increased.

"They want situational awareness. They want to know where the enemy is and where their own forces are," Kush said.

The speed of gathering and distributing that data also is increasing. "They aren't going to be satisfied if the information is hours old. They want it in 30 minutes or faster," he said.
To do this, more money is going to be spent on knowledge management applications, so they can use the information they have, Kush said.

Defense leaders also want innovative solutions, Kush said. "The message is, 'Let's start thinking in the 21st century. Too often you tell us what you think we want to hear rather than what we need to hear.' "