Hot opportunities may leave some contractors in the cold

Contractors face a double-edged sword in today’s market.

There are opportunities to help government transform itself through consolidation and standardization, but those same trends also may cost business for some contractors.

“There are going to be winners and losers,” said Ray Bjorklund, chief knowledge officer of Deltek.

He was reacting to comments made by his two co-panelists, David Wennergren, assistant deputy chief management officer for the Defense Department, and Richard Spires, CIO of the Homeland Security Department. Their panel was the kick off for Deltek’s FedFocus event.

Wennergren and Spires led off the panel with reviews of some of the major IT and management trends at their respective agencies.

“We are really seeing spending pressure from two directions,” Wennergren said. First are the changes in technology that are creating what he called “radical new ways for the government to do business.”

Second is the fiscal reality that the government faces.

Some of the major technology changes that Wennergren and Spires described included cloud computing, standardization, open architectures, and the increasing use of modular contracting.

Although none of those concepts are new, they are gaining momentum as agencies face budget pressures and look for ways to become more cost effective and efficient.

DHS is embracing the cloud, both private and public, Spires said. “We see it as a real game changer in how we develop systems,” he said.

For example, DHS has 32 human resources systems. “We are going to get that down to a relatively small number,” Spires said. “We’ll go from having virtually none that go across the enterprise to where the majority do.”

The move will drive cost savings and the process will be repeated with other functions across DHS, he said.

There is an opportunity for contractors to help agencies take on these kinds of projects, but the goal of consolidation is to save money and eventually that means fewer dollars for contractors, Bjorklund said.

Wennergren and Spires also emphasized that more agencies are making smaller, quicker purchases. Enabled by standards, wider adoption of open architectures and cloud computing, agencies can build a cloud-based platform that can then be used to build applications more quickly, they said.

“Our procurements are moving to a more modular feel. We want results in six months,” Spires said.

“We are moving away from the one big IT solution,” Wennergren said.

In other words, say goodbye to the traditional big systems integration projects, several speakers said.

In this environment, contractors need to be ready to take on smaller projects that show quick results, which creates pressure for them to be more flexible and agile, Kevin Plexico, vice president of research and analsysis for Deltek.

“This requires that companies change their business development and proposal operations,” he said. “You need to make bid or no bid decisions rapidly and develop your proposals more quickly.”

The themes around flexibility, agility and modular projects were repeated often during the morning long conference. Other presentations included upcoming opportunities in the defense and civilian sides of the market with comments often balancing the gloom of budget cuts with the areas of opportunity.

“When it comes to austerity, we ain’t seen nothing yet,” Bjorklund said. “But it is still a very exciting market to be in.”

Many of the recommendations that were presented focused on the importance of protecting incumbent contracts, building strategic partnerships with other companies and maintaining a deep understanding of your customers needs.

One segment of the market that is expected to see growth despite budget cuts is cybersecurity because all agencies face threats to their networks. But it won’t be indiscriminate spending.

“The winners will be the contractors who can show how security helps get the mission done,” Wennergren said.