Contract consolidation shifts the competitive landscape

As companies prepare for major recompetes of the GSA Alliant vehicles and DISA’s Encore III contract, there are several changes in market conditions that bidders need to be aware of.

In a new report, the market research firm Govini sees four major shifts in the market:

• Merger and acquisition activity mirrors the consolidation of agency contracts
• The use of multiple award contracts grows during the fourth quarter with $66 billion spent in the fourth quarter of fiscal 2015, up 3 percent from the year before
• Small business opportunities are growing on multiple award contracts
• Big data can play a role in identifying the right vehicle, opportunities, partners and competitive position

As government agencies look for efficiencies and a better use of their resources, many have consolidated contracts by moving them onto existing multiple award contracts. In many ways, it is the government version of the M&A trend in the private sector where companies are making acquisitions to add scale and look more efficient use of resources.

According to Govini’s analysis of spending data, multiple award contracts rose to 18 percent of all contract spending in the final quarter of fiscal 2015. Nearly a fifth of all spending happens in the last month of the fiscal year.

Multiple award contracts are so popular because they are easy to use and help contracting officers during the use or lose period at the end of the fiscal year.

The contracts Govini counts as multiple award contracts, or MACs, are SEWP, Alliant, NIH CIO-SP3, OASIS, Army ITES, DISA Encore, VA’s T4 contract, Treasury’s TIPPS-4 and NetCents II.

As agencies use more MAC contracts, GSA has seen its position in the marketplace increase.

If you count the schedules, GSA captures the largest percentage of MAC spending with 49 percent flowing through the agency’s various vehicles. GSA’s governmentwide vehicles account for 8 percent of the total spend, according to Govini.

Alliant is the single top IT services MAC, and as more agencies consolidate contracts, Alliant may grow even larger.

For example, the Defense Health Agency declined to compete the D/SIDDOMS 3 contract and might push a potential $13 billion in work through the Alliant program, Govini said.

Govini recommends that companies use big data tools to identify users of the MAC contracts as well as to identify potential competitors and partners, especially as the scope and requirements under MACs increases.

For example, ENCORE III will offer more cyber, cloud and data services. The contract could be worth $17 billion.

Small business opportunities under ENCORE III will grow because many of the current small businesses under ENCORE II will no longer qualify as small, either because they were acquired or they outgrew the designation.

In either case, small business opportunities will grow under the contract. The same holds true with Alliant II.

Click here to access the entire report.