Postal Service's $1Billion Deal Comes Due

The U.S. Postal Service's planned $1 billion information technology services contract is attracting some of the largest providers of computer hardware and services.

Companies known to be competing for the Postal Service's Acquisition for Desktop Extended Processing Equipment II contract include Hewlett-Packard Co. of Palo Alto, Calif., Getronics NV of Amsterdam, and Gateway Inc. of San Diego, and incumbent Compaq Computer Corp. of Houston. The agency intends to issue the solicitation in early August and select a contractor by October.

"For whoever will win this, it will be huge," said Ellen Zidar, manager of e-government services at Input, a Vienna, Va.-based IT market research company. Zidar said it is unusual for the government to award such a large contract to a single vendor.

Companies that bid on ADEPT II must prequalify by demonstrating they are sufficiently large and financially stable to deliver service for an extended duration across a large geographical area. This leaves only a handful of potential competitors, Zidar said.

The selected vendor must also provide most favored customer pricing and the ability to negotiate any single order for 500 or more systems or a single order valued at $1 million or more.

The five-year contract has options for another four, said Terry Downer, Postal Service purchasing specialist and ADEPT contract administrator.

"We're going to go after the contract very aggressively. We've put a significant amount into the relationship," said Ron Ross, president of Compaq Federal.

The company has held ADEPT I since 1994, which it inherited with the purchase of Digital Equipment Corp. That contract amounted to more than $1 billion in sales for Compaq, according to the company.

Ross said Compaq can offer the buying leverage of a large company, strong customer support services and continuation of the company's strong working relationship with the Postal Service.

"We understand [the Postal Service] environment very well," Ross said. He said that Compaq won the Postal Service's quality supplier award winner for 1997, 1998 and 1999.

"Compaq seems to have a good relationship with the Post Office, but with a contract like this, it comes down to pricing to some degree. There is a lot of hardware purchasing here," Zidar said.

One of those trying to wrest the ADEPT contract from Compaq is Hewlett-Packard. "It is a good offer," said Bruce Klein, general manager of the public-sector organization at Hewlett-Packard.

Klein said that Hewlett-Packard was evaluating possible partners and is looking towards an NT server solution for printers and e-mail. The company may also offer the option of its pay-per-use pricing program, in which usage for storage and servers is billed in a utilitylike manner, designed to result in long-term cost savings.

The Postal Service, rather than putting the work on a General Services Administration schedule or going with a desktop outsourcing model, will manage seats in-house and contract only for hardware and support services.

The contract calls for computers, printers, disk storage, tape backup units and systems software. The winning company must also provide support services such as hardware repair, maintenance and replacement.

The Postal Service is using the Gartner Group's enterprise tier original equipment manufacturer ranking to determine acceptable hardware, making only Compaq, Dell Computer Corp., HP, IBM Corp. and Toshiba and top qualified resellers of such equipment acceptable.

According to the pre-qualification criteria published June 25, a three-year warranty must accompany all equipment, and equipment already in place must be also be maintained.

The contract also carries some unique requirements. For example, the winning contractor must be able to provide remote support. It must offer version control management that can uniformly upgrade software across the system. The contractor must also provide a means of recycling the discarded hardware, as well as a Web-based ordering and invoice service for obtaining new equipment.