The Hottest Teams of 1996
Subcontracting opportunities are no longer overlooked by the government's largest contractors
Changes in the federal infotech marketplace brought forth a level of teaming and cooperation in 1996 not previously seen among infotech companies. In the shadow of federal acquisition reform, multiple-award, indefinite-delivery, indefinite-quantity contracts for federal infotech procurements increased in number of deals and in average dollar value over previous years, according to several infotech experts. As a result, prime contractors responded by crafting larger corporate teams than in past years.
The new teaming arrangements have inspired a business culture unlike the traditional relationships between prime contractors and their subcontractors, infotech officials said. With multiple-award, IDIQ contracts on the rise, infotech firms have had to become adept at forging and managing large-scale teams, some of which include 40 members.
The trend toward bigger contracts and larger teams also requires more flexibility and more efficiency among all the players in the game, infotech executives said. "We had to have a shift in egos. We had become so used to being the prime on all our contracts. We have learned that there is nothing wrong in subbing to other firms," said Steve Carrier, vice president of business development at Northrop Grumman Corp.'s Data Systems and Services Division in Herndon, Va.
Although federal agency officials are increasingly turning to General Services Administration schedules for infotech purchases, the IDIQ contract is steadily growing as a channel for infotech purchases. In 1995, federal information technology hardware/software purchases under IDIQ contracts amounted to 43 percent of all federal infotech hardware/software purchases, up from 35 percent in 1993, according to Pat Hall, business development manager with the Government Market Services division of International Data Corp. in Arlington, Va. "You can't be an important player in the federal market without participating on teams," said Harry Quast, executive vice president of business development at CACI International Inc. in Arlington, Va.
Bob Dornan, senior vice president of Federal Sources Inc., a market research company in McLean, Va., said the shift from single-award, fixed-price contracts to multiple-award, large-scale IDIQ contracts has encouraged a teaming culture that favors tactical rather than long-term strategic relationships among companies. Dornan explained that in the past companies partnered with firms with which they already had ties.
The new teaming environment requires that companies take a more tactical approach to partnerships because of increased competition compelled by the multiple-award, IDIQ contract vehicle, according to Dornan. "It makes for strange bedfellows sometimes," he said.
Dornan said tactical moves by companies, for example, are the basis for subcontractors shifting from one prime contractor to another between first- and second-generation contracts, such as Defense Enterprise Integration Services and DEIS II. "The number of subcontractors expanded to 30 to 40 on each of the six teams in DEIS II, and we saw movement of subs to other primes mostly for tactical gain," Dornan said.
He said prime contractors are putting a premium on subcontractors that can perform specialized tasks on large contracts and that have strong marketing capabilities. Dornan noted that subcontractors have more flexibility than single-award contracts because of their freedom to compete for parts of the overall business. "It's different from when the business went to the prime, and the prime decided who would get the business," Dornan said.
In 1996, Unisys Corp.'s Federal Systems Division in McLean, Va., which is considered a leading contractor in the multiple-award, IDIQ contract arena, scored big by winning prime contractor slots in the Defense Department's Defense Information Systems Agency's Global Integration Services/DEIS II program, the National Institutes of Health's ImageWorld program, NIH's Chief Information Officer Solutions and Partners program, the Social Security Administration's Independent Workstation and Local Area Network program, NASA's Science Engineering Workstation Procurement II program and the U.S. Department of Transportation's Information Technology Omnibus Procurement program.
Mark Root, director of communications at Unisys Federal Systems Division, said the potential value of the contracts won so far this year is close to $1.5 billion. "We're close to where we were last year," he said. Root added that Unisys is managing a 70-member corporate team in the DEIS II program.
In the past, Unisys has won praise for its partnering capabilities with small and disadvantaged businesses. Last year, the company earned the U.S. Department of Treasury 1995 Large Business Partner of the Year award for its work with small business contractors. The U.S. Department of Treasury has cited Unisys for having an "impressive outreach and subcontracting program."
Ray Davis, a program manager at Unisys Federal Systems Division, said Unisys has been aggressive in recruiting 8(a) and other small, disadvantaged companies onto its corporate teams. Of dollars Unisys spent on goods and services in 1995, 37.2 percent, or nearly $400 million, went to small businesses, 6.5 percent to small, women-owned businesses and 6.2 percent went to small, minority-owned businesses.
Davis, who manages Unisys' DEIS II program, said his company looks for technically skilled and aggressive small companies with which to partner. Success with the large contracts requires that prime contractors build teams that can respond quickly to job orders, and demonstrate flexibility and resourcefulness, Davis said.
Davis noted that Unisys exceeded its small and disadvantaged business requirement on the previous DEIS I contract with a team of 14 small business partners, which included a total of seven small, disadvantaged businesses and 8(a) companies. Davis said all the DEIS I small business partners are participating in DEIS II.
Lynn Bateman, managing editor of the Alexandria, Va.- based Government Contract Advisor publication, said success among teams in the new teaming culture requires maturity and experience on the part of the prime contractor. She said the risk for hardware and software installation mistakes have increased because coordination among prime contractors and their subcontractors has grown more complicated. "A tiny software glitch in some of these systems can hold up a multimillion dollar project," Bateman said.
Bateman said the prime contractors that traditionally have worked well with their subcontractors prior to the widespread use of the multiple-award, IDIQ contracts should be successful in the new teaming culture.
Todd Stottlemyer, senior vice president, investor relations, for BDM International Inc., said BDM has become proficient at forging and managing corporate teams. In 1996 alone, the McLean-based company won prime contractor slots on three multiple-award, IDIQ contracts. "This has been a significant year for us," he said.
A prime contractor on the DEIS I program in 1993, BDM was able to leverage its success to win a prime contractor's slot in the $3 billion DEIS II program, according to Stottlemyer. Stottlemyer said BDM is currently managing a 33-member team on the DEIS II program. BDM is also leading teams on the NIH CIOSP and Justice Department's Information Technology Support Services programs, according to Stottlemyer. "[The multiple-award, IDIQ contracts] are very important to our business because of the fairly wide scope of the business that's available. A company like us has to differentiate itself by its ability [to assemble] a first-rate team," he said.
Stottlemyer said after winning a large chunk of the prime contract work on the $900 million DEIS I program, several subcontractors working with other primes, including American Management Systems of Fairfax, Va., gravitated to BDM for the DEIS II program. Collaring $247 million in business, BDM was second only to Computer Sciences Corp. of El Segundo, Calif., on the DEIS I program. "There was some movement by firms to re-position themselves for DEIS II. We attracted new members to our team," Stottlemyer said.
Steve Baldwin, vice president of business development at BTG Inc., Vienna, Va., said BTG is participating in "close to a dozen" multiple-award, IDIQ contracts including the Transportation Department's ITOP program. "The IDIQ contracts are a critical part of our business," Baldwin said.
Under ITOP, which was awarded earlier this year, BTG leads a team of nine companies. BTG, which had revenues of $213 million in 1995, expects to generate $350 million in sales in 1996, according to Baldwin. He estimated that BTG does 90 percent of its business with the federal government. "It's made us a little better as a company because of the heightened competition," Baldwin said of BTG's participation in multiple-award, IDIQ contracts.
Northrop Grumman's Carrier said the company has kept its overhead costs low because it relies more on its team partners to complete task orders rather than trying to do it all itself. He added that Grumman's overall win rate on contracts has gone up as multiple-award contracts have become popular. "With the multiple-awards, you've got to split up the pie. But getting 30 or 40 percent of something is better than nothing at all," Carrier said.
Among the companies that Grumman is subcontracting to is Soza & Company Ltd., an 8(a) firm in Fairfax, Va., and BDM International Inc. Grumman is active on four multiple-award, IDIQ contracts, according to company officials.