Battle Lines Drawn on FAA Contract
Battle Lines Drawn on FAA Contract
By Nick Wakeman
They can huff and puff all they want, but industry opponents of a Federal Aviation Administration contract won by the Department of Agriculture cannot blow down that agency's victory.
But the Federal Aviation Administration's award for the Integrated Computing Environment- Mainframe and Networking system, known as ICE-MAN, is becoming a rallying cry for a debate over whether government agencies should compete with the private sector for information technology contracts.
On the government side is the argument that such contracts actually create opportunities for information technology companies because more contracts are open for bids. Government officials also maintain that even when an agency wins a contract, there is still a lot of work for subcontractors to perform. In the case of ICE-MAN, bidders such as Computer Sciences Corp. of El Segundo, Calif., and the Defense Information Systems Agency lost out in May to the Department of Agriculture's National Information Technology Center in Kansas City, Mo.
Spending among agencies for information technology services.
|1995 $5.4 billion|
|1996 $5.7 billion|
|1997 $5.6 billion *|
|1998 $5.8 billion ^|
|* (estimated) |
|Source: Federal Sources Inc., McLean, Va.|
But industry officials argue that competition between the government and the private sector is inherently unfair. That's because the government does not have to account for the same costs that the private sector does. Then there are those pesky questions about measuring past performance and what happens when the agency that won the contract fails to perform. Can the contract be terminated, and can one agency take another to court if a dispute arises?
"It all gets pretty complicated," said Harris Miller, president of the Information Technology Association of America, Arlington, Va. "This is going to continue to be a fairly important issue."
The 11,000-member ITAA along with the Professional Services Council, Vienna, Va., which represents about 140 companies that are service contractors to the government, and the Electronic Industries Association have been strong voices against the government competition. Arlington, Va.-based EIA represents about 1,350 U.S. electronics manufacturers.
Protests by these groups sparked a review by officials at the White House's Office of Management and Budget and the FAA of the $250 million contract to the Agriculture Department. The review ultimately determined that the competition was fair.
Sen. Craig Thomas, R-Wyo.
Rep. John Duncan, R-Tenn.
That review was followed by a 20-day protest period that passed without any of the losing bidders filing an appeal.
"It is not surprising no one appealed," said Chris Jahn, a legislative assistant to Sen. Craig Thomas, R-Wyo., who has sponsored legislation banning government vs. private-sector competition. Because the appeals would be heard by the FAA, "it is like the fox being in charge of the hen house," he said.
The ICE-MAN controversy has created more interest in a bill Thomas introduced in February known as The Freedom from Government Competition Act. Similar legislation has been introduced in the House by Rep. John Duncan, R-Tenn. The legislation has garnered 51 co-sponsors in the House and 13 co-sponsors in the Senate.
Senate and House staffers will meet later this month to discuss ways to advance the legislation, said Don Walker, an aide to Duncan.
Until legislation stops the agencies from seeking business from one another, more government vs. private-sector competition can be expected, industry and government officials said.
Kathleen Rundle, acting director of the National Information Technology Center, said the center is stepping up its efforts to market its services. The Department of Transportation is considering hiring a firm to promote its IT services.
The Franchise Fund program, established by the Government Management Reform Act of 1994, also will bring more head-to-head competition among agencies and industry.
Agencies participating in this program, which began in October, are the Environmental Protection Agency, the departments of Commerce, Health and Human Services, Interior, Treasury and Veterans Affairs.
The data centers at these six agencies have given up their operating budgets but recoup their expenses by charging their own agencies and other government entities for the work they do.
But that doesn't mean lost opportunities for the private sector, according to John Koskinen, deputy director for management at the Office of Management and Budget, who oversees the program.
Koskinen estimated that half of the work that will be done by these agencies will be contracted out to the private sector.
"If that is what is going on, then the whole process is pretty strange," Miller said. If a company has a contract to manage a data center for an agency and that agency decides to pursue outside contracts for the data center, the company is unlikely to bid for the work on its own.
"The vendor doesn't bid but can end up with the work anyway if the data center wins the contract," Miller said. "That is a backhanded way of doing business."
The research firm Federal Sources Inc. in McLean, Va., estimates that agency-to-agency information technology work will total $5.8 billion in 1998.
"The money ultimately finds its way to the vendor community," said Robert Dornan, Federal Sources senior vice president. "People got all bent out of shape [about the Agriculture win] but Agriculture doesn't make computers or write software."
While Glen Giles, manager of federal business for Keane Inc., Boston, doesn't really like the idea of the government competing with the private sector, he has accepted the competition as a fact of life. "I don't see the trend reversing," he said.
Keane, a software developer and systems engineering firm, is looking to government agencies as potential partners, Giles said. With the government in the mix, the pool of partners is bigger, he said.
Keane recently explored bidding on a contract as a prime contractor with a government agency as one of its subcontractors, he said. He declined to name the agency or the contract but the company eventually decided not to bid on it.
"Partnering with the government is a strategy we are pursuing," he said. Government agencies have services such as data processing centers that Keane does not have. "It just makes sense for us," he said.
Rundle expects subcontractors to provide software and application development for the FAA contract. The center also will be buying new hardware. "It is not like we are taking all the work in house," Rundle said.
Agencies doing work for each other is not a new occurrence, Koskinen said. But often that work has not been open to contractors outside the government.
But with programs such as the Franchise Fund, OMB wants agencies to look for the most cost-effective way of operating. "There is no requirement to hire [a government data center]," he said. "We wanted to give agency managers a wider range of options."
So agencies that once automatically assigned data processing or financial services work to their own center or a center at a sister agency will have to open that work to competition and that competition will include the private sector, Koskinen said.
But that competition will not be fair if the government plays by the same rules it did in the FAA contract, Miller said.
"If you are going to say, the government can bid anytime they want to or they don't have to show past performance, then that just creates an unlevel playing field," he said.