New World

NASA recently jump-started a governmentwide trend toward seat management when it awarded the 9-year, $13 billion Outsourcing Desktop Initiative (ODIN) contract to seven vendors. Those companies now are competing for the chance to take over management responsibilities for all desktop computers at the agency's nine major space centers.

The move has the contracting community buzzing. "It represents a whole different paradigm for IT operations within the government," says Tom Sanders, senior vice president for Reston, Va.-based DynCorp, an ODIN awardee. "It's a very, very strategic contract for us in that the way NASA is doing business is changing dramatically."

While most federal agencies are concentrating on streamlining and tweaking their procurement strategies to make their IT programs more efficient, NASA has a more dramatic goal in mind: It wants to get out of the management of its IT operations altogether.

"We want to shift our employees away from doing computer operations and back to our core mission of research and development," explains Lee Holcomb, who became NASA's chief information officer last October. "In that vein, the agency has been on a very aggressive path to outsource as many operations as possible and let the private sector take over the asset management and the risks."

NASA has more short-term concerns, like year 2000 compliance (which has improved significantly and is to be completed in February); Web security (its Mars Pathfinder site took over 50 million hits a day last summer, and such visibility tends to attract hackers); implementing open standards and commercial off-the-shelf products; and streamlining business processes to reduce redundancy and save money.

NASA outsourced control of space shuttle ground operations and processing to United Space Alliance of Houston in 1996.

But NASA's mission extends beyond such highly publicized space operations to the development of advanced technologies. Current projects range from seeking cures for cancer and osteoporosis to perfecting automobile crash avoidance systems.

Its overall mission has become more challenging in recent years because of budget constraints. NASA's annual budget has been dropping, from a high of $13.82 billion in fiscal 1996 to $13.64 billion in fiscal 1998. The proposed budget for fiscal 1999 is $13.47 billion.

NASA's allocated funds for IT are projected to rise from $1.51 billion in fiscal 1997 to $1.84 billion in fiscal 2002, according to Input, a research firm in Vienna, Va. That's a compound annual growth rate of just 4 percent, 1.5 percent lower than average for federal civilian agencies.

The Way of The Future

Outsourcing, Holcomb believes, is the best way to ensure that a budget-strapped NASA continues to have access to the latest and greatest technology and still meet its ambitious space and engineering agenda.

The agency tested its potential in late 1996 when it handed over control of its space shuttle ground processing and operations to United Space Alliance, a Houston-based joint venture between Lockheed Martin Corp. of Bethesda, Md., and the Boeing Co. of Seattle. The 6-year opportunity, known as the Space Flight Operations Contract, is valued at $7 billion.

Meanwhile, in late 1997, the Jet Propulsion Laboratory in Pasadena, Calif., awarded its own exclusive outsourcing opportunity, the 5-year, $200 million Desktop and Network Services contract, to OAO Corp. The Greenbelt, Md., firm initially will manage 7,000 of the facility's desktop computers, currently inventoried at 12,000 plus, and provide services like help-desk support, systems administration, maintenance, software acquisition and upgrades.

As the contract proceeds, JPL computer technicians and managers will have the option of changing their employment status to that of OAO employees, with salary packages equal to or greater than their current salaries. The contract, says JPL deputy director Larry Dumas, "reflects a new emphasis at JPL in partnering with industry to carry out our mission, focusing our work force on one-of-a-kind tasks that are appropriate to a national lab."

Any lingering doubts the industry might have harbored about the agency's long-term commitment to privatize its IT environment were squashed when NASA officials boldly awarded ODIN in mid-June. Winning vendors are: Boeing Information Services Inc., Vienna, Va.; Computer Sciences Corp., Falls Church, Va.; DynCorp, Reston, Va.; FDC Technologies Inc., Bethesda, Md.; OAO Corp.; RMS Information Services Inc., Lanham, Md.; and Wang Government Services Inc., McLean, Va.

Awardees now have the chance to compete for business from nine NASA research and space centers (excluding JPL) plus NASA headquarters in Washington. Each center will place orders exclusively with one vendor, though the first contract up for bid actually involves one winner getting the business of four centers - Johnson Space Center, Marshall Space Flight Center, Stennis Space Center and Kennedy Space Center. More than half of NASA's desktop computers are at those centers. Other individual centers will follow with their own competitions.

Other government agencies will be able to buy from ODIN contractors through the General Services Administration, which recently awarded an outsourcing contract of its own worth $9 billion over 10 years.

Under ODIN, Holcomb notes, seat management finally takes the spotlight. Unlike most outsourcing contracts, which pay on a time-and-material basis, seat management pays a firm, fixed price for each computer user, or "seat." NASA determines the computer and communications needs of each user, and then "purchases" a particular bundle of hardware, software and communications equipment for that user. The vendor then will estimate an annual fixed price for that seat.

Thus, contractors will not only provide the actual hardware and software but other communication and server services as well, including administrative radio, public address systems, telephone services, local video and fax service, Web servers, application database servers, computational servers and file storage servers. The vendor then is responsible for maintaining, repairing and upgrading the equipment.

"They're basically buying the use and service of the equipment, much as when people used to buy telephone service from the telephone company, which still owned the phones and all the wiring," says Dave Ziobro, vice president of NASA programs at Computer Sciences Corp.

Value and Anxiety

For NASA, the benefits are manifold. Besides losing the headaches associated with buying and overseeing desktop operations, the agency will be able to standardize its IT environment and get a better handle on its computer-related expenditures, according to agency officials.

Holcomb says NASA also hopes to save up to 25 percent over current procurement and management outlays over the life of the contract, although previous studies of outsourcing in commercial and government environments have not always shown clear cost savings. However, with one set of contracts providing desktop services across the entire agency, he said, it will be much easier to track costs and budget those expenses accordingly.

That benefit may actually guard against one criticism leveled against the ODIN program and similar outsourcing opportunities by end users.

"We're hearing grumbling within the agencies themselves that if funding should somehow go away, so, too, will their computers," says Andrew Sung, a senior research analyst at Input. "And if NASA can't pay its bills, the company certainly has every right to come in and take back their equipment. People feel very insecure about it."

But company officials involved with the ODIN contract note that NASA's ability to turn a variable expense into a fixed one makes that scenario highly unlikely.

"ODIN is giving them a better management tool because they'll be able to predict costs more definitively in the future, which will help them deal with budget cuts," says Ziobro.

The refresher clause is another built-in protection against users losing their desktops. Vendors are asked to determine a price for a variety of technology refresh times, currently set at 18 months, three years and five years. In the event of a tight fiscal period, officials could push back refresh dates on all or a portion of NASA employees.

To Outsource, Per Chance

Holcomb believes once NASA centers begin awarding delivery orders this fall and the outsourcing effort begins in earnest, such concerns will be eased. The agency, meanwhile, is gearing up for more outsourcing opportunities.

A companion activity to ODIN, the Consolidated Space Operations Contract, will be awarded to the private sector this summer. The 10-year opportunity, being bid on by Lockheed Martin and Boeing, calls for a single firm to manage the data collection, telemetry and communications operations for all space-related activities at the Johnson Space Center in Houston.

The contract could be worth more than $5 billion.

In the next two years, Holcomb expects to look at possibly handing off many of its midrange IT products at various centers, including the NASA Consolidated ADP Center, which does midrange mainframe-based computing.

Another potential target is NASA's Integrated Financial Management Project. KPMG Peat Marwick, Washington, the contractor, is taking all NASA budgeting and financial management programs and consolidating them into one enterprisewide application.

The contract is valued at $186.3 million and is to be completed in July 1999.

In fact, most of the new IT contracts involve preparation for eventual outsourcing.

This includes streamlining processes or equipping systems with commercial, off-the-shelf products.

Another step toward outsourcing is a new NASA trend for performance-based contracting, which is opening communication lines with contractors, some of whom may become on-site managers of actual NASA IT operations.

The new emphasis on outsourcing operations promises a big change in the way contractors must approach their future dealings with NASA if they are to be successful.

"It's even more important than ever that you understand their culture," says Greg Donley, director of information and engineering services at Northrop Grumman Data Systems, Herndon, Va.

"You have to really know the details of their business, because you're going to be down in the trenches," he says.