Special Report | DOD becomes an 'IDIQ world'
Defense transformation fires huge contract opportunities<@VM>AKO expands to meet medical data-sharing needs<@VM>Target-rich environment<@VM>Big contracts, big protests
- By Roseanne Gerin
- Jul 21, 2006
"If you look at all the Defense Department opportunities coming up in the remainder of 2006 and into the beginning of next year, there are a lot of very promising opportunities," says Ray Whitehead, General Dynamics Information Technology.
The Hot Defense Contracts of 2006
The Defense Department's drive to transform the way it does business and shift resources to military operations is reflected in a spate of new IT contracts the agency is expected to award in the coming months.
With values ranging from $300 million to $30 billion, the contracts have captured the attention of the largest players in the government market.
"If you look at all the Defense Department opportunities coming up in the remainder of 2006 and into the beginning of next year, there are a lot of very promising opportunities," said Ray Whitehead, vice president of business development at General Dynamics Information Technology. The unit was formed after General Dynamics Corp. bought Anteon International Inc. for $2.2 billion in June.
An analysis done for Washington Technology by market research firm Input Inc. identified 22 contracts that reflect the hottest opportunities in the coming months.
Many of the deals are recompetes or follow-ons to contracts, including the Defense Information Systems Agency's I-Assure contract, the Army's Information Technology Enterprise Solutions-2 Hardware (ITES 2H) contract and the System Engineering and Technical Assistance Research and Development program.
Two new contracts are the Air Force's Enterprise Resource Planning Implementation Consulting Services deal, and the Navy's Broad Area Maritime Surveillance contract.
Executives of several companies that plan to bid on some of the contracts said the offerings reflect trends that are defining the defense IT marketplace.
"The greater emphasis and dependence on multiple-award, indefinite-delivery, indefinite-quantity contract vehicles to procure services and solutions is the primary trend," Whitehead said.
The increased focus on past performance, the squeezing out of midtier companies from the market, and budget pressures are also areas of concern, other executives said.
The new contracts also underscore the Defense Department's overall focus on business transformation, IT security, interagency networking and knowledge management, and outsourcing, said Megan Gamse, Input's manager of defense opportunities.
IT is helping the Army achieve its business transformation initiatives by freeing resources for operations, as well as cutting costs and improving business processes, said Francis Harvey, secretary of the Army. Harvey spoke July 11 at the Armed Forces Communications & Electronics Association, Northern Virginia Chapter's Army IT conference.
The Army wants to better equip soldiers, enhance joint logistics operations and improve its capability for stability operations as part of the Defense Department's overall business transformation efforts.
"It is imperative that we protect information and protect our networks," said Brig. Gen. Jeffrey Foley, the Army's director of architecture, operations, networks and space, speaking at the conference. "It is imperative that we share information with those who we need to share information with."
Task order mania
The most notable trend seen in the new contracts is the prevalence of big, broad IDIQ contracts, the executives said. The Defense Department for several years has been increasingly using these contracts to cover its IT needs, they said.
"It is an IDIQ world out there" for the Defense Department, "and it's becoming increasingly so," Whitehead said.
In April, General Dynamics won one of the 11 contracts under the Army's $20 billion Information Technology Enterprise Solutions-2 Services (ITES 2S) program, a multiple-award IDIQ contract. Although five companies filed protests after the Army selected the awardees, Army officials re-examined the bids and decided in mid-July that the 11 original winners would remain in effect.
The Defense Department either has used large, single-award, winner-take-all procurements or relied on General Services Administration IT procurement vehicles, such as Millennium and Applications'N Support for Widely diverse End-user Requirements.
Lately, the department has shifted toward issuing more of its own large, multiple-award, task-order contracts because they are easier to administer and reduce administrative costs, said Michael Dignam, vice president of Air Force and joint programs at Lockheed Martin Corp.'s IT division.
Lockheed Martin is one of the winners of ITES-2S and will consider a bid on the Army's ITES-2H contract, Dignam said.
"Obviously, in contracts where we are the provider, we are going to be looking to be the provider," he said. Lockheed Martin is a prime on the Air Force's Information Technology Support contract and plans to continue supplying capabilities under ITS3, he said.
Big, multiple-award IDIQs also give the Defense Department the flexibility to quickly deal with emerging requirements by issuing task orders, while getting the good prices already negotiated under the contracts, said Michael Gaffney, president of business development for the federal sector at Computer Sciences Corp.
The Defense Department's shift to its own large contracts was sparked by a Oct. 29, 2004, memorandum from the Secretary of Defense on the proper use of non-defense contracts, Input's Gamse said. That memo directed the military services and defense agencies to set procedures for using non-defense contract vehicles after Jan. 1, 2005, to buy supplies and services for amounts greater than $100,000.
"There is that shift to create in-house-governed contract vehicles" for use throughout the Defense Department, she said.
The Defense Department is stepping away from its use of GSA vehicles and returning to military-specific contracts to get better results, said Ed Faulkner, group vice president and general manager of the defense systems group at Apogen Technologies Inc. of McLean, Va.
"The government thinks it's writing much better statements of work, and therefore can get a better business deal for cost-plus [contracts] or firm fixed-price than it can get with time and materials [contracts]," he said.
Past is prologue
The slate of new contracts and recompetes also reflect that the Defense Department is putting more emphasis on past performance and meeting performance standards, some executives said.
"I don't think it's been as critical as it is now, particularly in multiple-award contracts," said Ron Seward, vice president of corporate development at Artel Inc. of Reston, Va.
Like other federal agencies, the Defense Department increasingly is relying on contractors, because government doesn't have the people to do the work, he said.
Artel will bid as prime contractor on two contracts it is already on: the Defense Information Systems Agency's Management Support Services Global/Network Engineering contract (DNMSS-G/NEC) and the I-Assure contract, Seward said.
DNMSS-G/NEC generates about $6 million in revenue annually for Artel, while I-Assure brings in about $20 million, he said. If selected for the follow-on contracts, Artel could earn up to 20 percent more revenue from DNMSS-G/NEC, depending on how DISA issues task orders, and a minimum of 10 percent more revenue from I-Assure, he said.
Artel also is planning to bid as a prime on ITS3 to try to pick up a contract vehicle with the Air Force, Seward said.
Part of this development is that the Defense Department also has been moving toward a more managed-service approach using performance-based contracting, said Rick Rosenburg, managing partner of the defense and intelligence business for Unisys Corp.'s Federal Systems division.
This entails buying whole solutions based on requirements rather than procuring pieces and parts and paying a company to integrate them.
Unisys is looking at the Defense Financial Integrated Systems Services III, ITS3 and the Air Force's Enterprise Resource Planning Implementation Consulting Services contracts, Rosenburg said. Unisys wants to be a subcontractor on ITES-2H, Global Combat Support System-Air Force and the Air Force's Engineering and Technology Acquisition Support Services, he said.
Stuck in the middle
After reviewing the list of contracts, some company executives said that another defining trend is that midtier firms are getting pushed out of the Defense Department IT marketplace.
With task order and governmentwide acquisition vehicles, the Defense Department believes that "it's a safe choice" to go with large companies to get the "breadth and depth" of what they have to offer, said Michael Williams, Apogen Technology's executive vice president of business development.
The task order contracts favor "big companies with a large footprint," which can easily and quickly respond to Defense Department requirements, Gaffney of CSC said.
But several contracts on the list contain portions for small business or have small-business subcontracting requirements. Two small-business set-aside contracts are the Army's Field and Installation Readiness Support Team Restricted contract and the Air Force's Professional Acquisition Support Services contract.
Because midtier companies, such as Apogen Technologies, don't have the resources that large companies, such as Lockheed Martin and Science Applications International Corp., can offer, they are left with a narrow space to operate in, Apogen's Faulkner said.
"It leaves us basically with a teaming strategy for being in the marketplace as opposed to a priming strategy," he said. About 25 percent of Apogen Technologies' annual revenue comes from defense work. The company provides IT solutions to the federal government.
Most company executives do not expect Defense Department budget cuts and reallocations of money to support the war in Iraq and the global war on terrorism to have much effect on IT contract work.
"What you're seeing is a lot of pressure on IT replacing people as a way for [the Defense Department] to get dollars back for its existing budgets, since it's not going to be growing its budget to the kind of numbers it wants," Faulkner said.
The Defense Department also is looking across agencies to exploit technology instead of buying new systems or starting systems from scratch, said Pauline Healy, vice president of business development for the defense systems group at Apogen Technologies.
"Budget pressures are going to get even stiffer," Lockheed Martin's Dignam said.
Supplemental defense appropriates eventually will come to an end, and IT will become even more important as a tool for controlling costs, he said.
"That's also going to be a market dynamic that's going to be an opportunity for us," Dignam said.
Staff Writer Roseanne Gerin can be reached at email@example.com.A soldier, injured on the battlefield, receives emergency medical attention, and that care is recorded in the soldier's health care file. It may seem an ordinary bit of recordkeeping, but military health care records were hit or miss through the first Gulf War in 1991.
When moving from deployment to deployment, soldiers carried two-inch thick folders of paper medical records. The files often had missing information on surgeries performed and vaccines or drugs given on the battlefield.
As a result, when soldiers were diagnosed with Gulf War Syndrome, good quality data were not available to link drugs with the symptoms, said Edward Clayson, an Army medical communications expert. Because of missing data, many soldiers underwent repetitive and unnecessary procedures, while others, with no documentation to back up their claims, were denied benefits for service related injuries.
In response to these problems, a presidential advisory commission in 1997 called for the creation of lifelong electronic medical records for military service members. Congress later passed legislation requiring the Defense Department to create and maintain electronic medical records.
The Army responded with the Medical Communications for Combat Casualty Care program. Clayson is the project manager for this information management system for Army tactical medical forces, which uses electronic records for all service members and offers data on medical situations for operational commanders.
"We're capturing all the health care that's being done on the battlefield," Clayson said. Nearly 250,000 medical encounters have been entered into the database and are available to physicians worldwide, he said.
The combat casualty care program is one of several using IT to move the Defense Department toward network-centric operations and warfare. Together with other recent IT programs and system deployments, it is an effort to cut down on duplicative records and processing, consolidate systems and share information agencywide.
Although the Defense Logistics Agency and the Defense Information Systems Agency use multiple medical systems, intranet portals and databases, the Defense Department wants a single entry point for information for soldiers and commanders. The goal is to create the Defense Knowledge Online portal, a departmentwide, integrated, data-sharing environment.
At the June 26 annual Management of Change Conference in Hilton Head, S.C., Clayson and Larry Wilson, executive director of enterprise solutions in information operations at the logistics agency, were part of a panel discussion on IT's impact on the battlefield.
"There's never been a period of transformation like this one: widespread, massive and persistent, and going pretty well overall," Wilson said.
The Army Knowledge Online portal, which gives employees, retirees and their families secure access to the Army's Web tools and services, will be the foundation for the Defense Knowledge Online portal. It will offer a secured network for deployed soldiers as well as their families.
The first rollout of DKO will combine Army Knowledge Online and DISA databases and the Joint Forces Command portals, said Kevin Carroll, program executive officer for enterprise information systems.
To get DKO started, the Army and DISA will use a contract the Army awarded last year to Lockheed Martin Corp. to refresh and expand Army Knowledge Online's technology. Subcontractors on the seven-year, $152 million contract include Computer Sciences Corp., Internosis Inc. of Greenbelt, Md., Roundarch Inc. of Chicago and Science Applications International Corp.
To bring DKO to fruition, the military and other defense agencies have set up a board of directors comprising chief information officers from all military services and DISA's commander, said Skip Harborth, chief of future operations for Army Knowledge Online. They also have set up a technical board of representatives from various military intranet portals.
"We're going to take the best of whatever portal is out there in developing DKO ? rather than getting a single solution that's just been developed by a single agency," Harborth said.
The Hot Defense Contracts of 2006
A sampling of procurements that several companies are considering pursuing as either prime contractors or subs.
Apogen Technologies Inc.
Computer Sciences Corp.
General Dynamics Corp.
Lockheed Martin Corp.
Northrop Grumman Corp.
Source: Listed companies
The Hot Defense Contracts of 2006
By Dawn S. OnleyAs more agencies turn to large, multiple-award contracts to manage and deploy their IT systems, the incidence of losing bidders lodging protests also has risen.
Defense contracts are no exception.
Five companies that lost bids for the Army's $20 billion Information Technology Enterprise Solutions-2 Services (ITES-2S) contract filed protests that slowed the start of that contract. Protesting companies include BAE Systems Inc. of Rockville, Md., Multimax Inc. of Largo, Md., NCI Information Systems Inc. of Reston, Va., Northrop Grumman Corp., and Pragmatics Inc. of McLean, Va.
Eleven companies won spots on the vehicle, which the Army will use to modernize and maintain its IT infrastructure.
While the Army said it stands by its decision to exclude the five, the Government Accountability Office is reviewing the awards, and has until late October to make a decision on the merits of the protests.
No work will be done under the contracts until GAO's review of offers is finished, officials said.
Services under ITES-2S include business process re-engineering, information systems security, information assurance, IT services, network support, systems operations and maintenance, program management, enterprise design, integration and consolidation, and education and training. The Army, Defense Department and other federal agencies order through ITES-2S by issuing task orders.
Also pending GAO resolution is Gateway Inc.'s protest against the Army regarding its Desktop and Mobile Computing-2 contracts. The Army in April awarded nine contracts, three to large businesses and six to small businesses, under the 10-year, $5 billion desktop and notebook PC contract vehicle. As with ITES-2S, GAO is expected to render a decision on this contract by October.