NIH Contract Creates Buyers' Market

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NIH Contract Creates Buyers' Market

With 45 winners, the National Institutes of Health's Electronic Computer Store II contract promises to put extra pressure on industry to sell hard, keep prices down and give government customers top-notch service.

NIH expects about $400 million in desktops and peripherals to be bought each year through the five-year contract, which is open to all government agencies. NIH announced the winners Sept. 18.

The contract is a follow-on to NIH's highly successful ECS I, which brought in $350 million over two years to its 17 winners, NIH officials said.

The success of the original contract brought an "overwhelming response" from companies when NIH began to recompete the contract, said Patrick Williams, deputy program manager at NIH.

Among the winners were: BTG Inc., Fairfax, Va.; GE Capital Information Technology Solutions, Stamford, Conn.; Hughes Data Systems, Irvine, Calif.; Tracor Information Systems Co., Reston, Va.; and Unisys Corp., Blue Bell, Pa. NIH classified 21 companies as small businesses and 14 as small, disadvantaged businesses. (For a complete list of contract winners, see page 48)

While the winners are champing at the bit to get a piece of the $2 billion pie over five years, the real winner will be the government, said Sam Graber, an analyst with Federal Sources Inc., McLean, Va.

"The increased number of sellers will drive the competition and push prices downward," he said. "This puts the government in a wonderful position."

With one buyer and many sellers, the advantage lies with the larger companies, who can better absorb marketing costs and the lower margins that come from the lower prices, he said.

If not for the small business allocations, the larger contractors would completely dominate procurements like ECS II, except in specialized niche markets, Graber said.

But the winning task orders aren't always about who has the best prices, said officials at both large and small contractors.

Relationships and providing service to customers are an important consideration, said Lawrence Hamm, vice president of marketing for Intelligent Decisions of Chantilly, Va., one of the 8(a) winners on the contract. The company sells desktops and workstations.

"We are going to primarily sell products, but you have to provide the warranties and service," he said. "If [the customers] have confidence in you, there are ample opportunities for small businesses."

Even the big companies such as Unisys, Hughes and Tracor see service and marketing as keys to success in ECS II, especially because many categories of desktops and peripherals such as printers are commodity products.

When several companies can deliver virtually the same products for the same prices, buying decisions are made on factors such as delivery time, condition of the delivery and support afterward, said Joe Santamaria, vice president and general manager of Unisys Federal's information technology division.

"Marketing is more important nowadays than in the past," he said. Relationships with customers become more important. "People buy from people," he said.

"Call it sales or call it marketing, but you have to do it in this post-award environment," said Ken Johnson, president and chief executive of Tracor Enterprise Solutions, Reston, Va., formerly known as Cordant.

Past performance also is very important, said Pete Racine, program manager for Hughes' NIH and General Services Administration programs. "This win will enable us to expand the reach and range of the products we can offer to our federal government customers," he said.

Racine and other officials praised NIH's structure of the contract as one of the reasons for the popularity of the first ECS contract.

"It has a lot to do with its ability to keep pace with pricing, the ease of ordering and delivery," he said.

The new contract might add 30 more companies to the mix, but it will not change the approach of Government Technology Services Inc., a veteran of the first ECS contract, said Kevin Adams, director of civilian programs for the Chantilly, Va.-based reseller.

Many of the new winners will be targeting niche markets in which they already have customers, he said.

"You have to educate your customers on how the vehicle can help them solve their problems," Adams said.

Knowing when and where to market also is important, said Jim Datovech, vice president of global sales for EdgeMark Systems Inc., Silver Spring, Md. Too broad an approach can benefit competitors, he said.

"We have to understand what separates us and what makes us better," Datovech said.