Giants Battle Giants for DoD Dollars


Giants Battle Giants for DoD Dollars

Scores of subcontractors will also share the wealth

By Nick Wakeman

A handful of Defense Department requests for proposals on the cusp of being announced will spell billions of dollars for the winners, most likely the industry's 800-pound gorillas.

RFPs expected in the coming months include two projects to complete the U.S. Department of Defense's Defense Information Systems Network. Market watchers Input, Vienna, Va., and Federal Sources, McLean, Va., estimate these projects will be worth $500 million and $2 billion.

The projects are likely to involve multiple awards and scores of subcontractors. One of them involves building transmission services in the Pacific region; the other is for troops in Europe. Both RFPs are planned for release in March.

Another project certain to attract multiple bidders is the second-
generation Defense Medical Information Management/Systems Integration, Design, Development, Operations and Maintenance Services contract, better known by its alphabet soup designation: D/SIDDOMS II.

Work on the contract will primarily be for the Defense Health Affairs Office to support medical information support systems needs. The contract is expected to be worth about $1 billion, and other defense agencies can use the contract for work to support health care needs. The RFP is expected out this summer.

These and other upcoming defense-related opportunities are indicative of the high stakes associated with many Pentagon procurements and the continuing evolution of doing business with the Pentagon.

One area the Defense Department will increasingly turn to in the future is outsourcing, said Pat Ways, vice president of business development for Computer Sciences Corp., El Segundo, Calif.

He noted that the civilian side of the government is further along in its use of outsourcing than the military. However, industry officials have long criticized the government of foot-dragging on the issue of outsourcing.

Defense officials must relinquish some control, he said, which will be difficult. "But after a few successes, it will take off," Ways said.

One of the first targets of defense outsourcing will be large data centers and base operations. The U.S. Navy has been more aggressive than the other services, he said. The Pacific Fleet is looking at an outsourcing pilot for infotech and networking.

Outsourcing for base operations could mean billions in business spread over several contracts, Ways said.

The medical information system integration contract is an example of the changes the defense market has undergone over the past several years, industry officials said.

The contract combined two earlier ones held by single winners Science Applications International Corp., San Diego, and Electronic Data Systems Corp., Plano, Texas. When the contracts were combined in 1995, DoD added two more companies, American Management Systems, Fairfax, Va., and PRC, McLean, Va., as prime contractors for the lion's share of work under the contract, which had a ceiling of $400 million. That ceiling was reached in 18 months, leading to the latest competition.

The government underestimated the amount of work that would be done under that particular contract, said Richard Haddock, corporate vice president and project manager for SAIC. "A lot of new work was brought to the table," he said.

Because the four primes all had subcontractors, the government had a wide range of services and new technologies it could purchase, Haddock said.

The new contract likely will have a wider scope, including functional analysis and consulting as a fourth area companies can bid on, said AMS' Debra Del Mar, vice president of the Defense practice.

"Clearly, we are looking at sustaining and enhancing our current position," she said.

The new work area will emphasize demonstrable knowledge of the system, Haddock said.

At first blush, it might seem that incumbent bidders such as SAIC will have the advantage. Not so, according to SAIC's Haddock.

"The downside is that some new company can provide new perspectives," he said. "I don't think being an incumbent is a decided advantage but it does require a new company to do its homework."

The Defense Information Systems Network contracts are adjuncts to a 1996 contract won by Boeing Co., Seattle, to build the backbone of a global information network. Because Boeing won that portion, it cannot bid on the other parts, said Dennis Groh, vice president for business development for Boeing Information Services, based in Vienna, Va.

To win that $2 billion contract, Boeing beat teams headed by companies such as CSC and Lockheed Martin Corp., Bethesda, Md., and GTE Corp., Stamford, Conn., and Booz-Allen & Hamilton, McLean, Va., Groh said.

"That is indicative of competition you see [on the large defense contracts]," he said. "It is giants battling giants."

Greater use of teaming is just one of the growing trends companies are seeing as the government increasingly uses large indefinite-delivery, indefinite-quantity contracts with multiple award winners, officials said.

More questions are being asked by industry about how contracts are structured than what the actual size is, said Mary Freeman, manager of market research for AT&T Government Markets, New York. She was the 1996 chairman of Electronic Industries Association's five-year forecast of federal market opportunities.

Procurement reform efforts have pushed the government to buy more commercial, off-the-shelf products and to structure contracts so there is a faster turnaround time for new services, said Michael Solley, president of Huntsville, Ala.-based Nichols Research Federal Division.

Nichols will be watching for an RFP to come out in February or March for the Air Force's Rome, N.Y., Laboratory. The contract is to build a virtual tool set for intelligence systems. Using off-the-shelf products will be part of that contract. "It is less expensive for the government," he said.

"We haven't seen the end of the changes but I think people would like to sit back and see how things work before more adjustments are made," Freeman said.

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