By Dennis McCafferty
When it comes to hot information technology contracts delivering everything from SEWP to nuts, there's nothing like a sequel. Or an Electronic Computer Store that's wired for business.
Nearly a year after federal procurement reform kicked in, the indefinite-delivery, indefinite-quantity vehicles hauling in the most sales dollars have roman numerals next to their name: The Department of Defense's Defense Enterprise Integration Services II contract, or DEIS II, which has totaled more than $174 million in spending since the Pentagon's award in July 1996; and the National Aeronautics and Space Administration's Scientific and Engineering Workstation Procurement II, or SEWP II, which has taken in more than $57 million since it was awarded in November 1996.
Then there's the National Institutes of Health's Electronic Computer Store, which has generated more than $300 million in sales since it was awarded in September 1995 - tripling the original sales estimate. And the Department of Transportation's Information Technology Omnibus Procurement contract has industry buzzing, with $300 million in sales since it was awarded in May 1996.
But the hottest performer of all may be the U.S. General Services Administration's schedule sales system. Schedules hawking personal computer and software sales have surpassed $1.3 billion. That equals the total of GSA schedule information technology sales for the entire budget year in 1996. By the time the federal budget year ends on Sept. 30, 1997, GSA officials predict that total information technology schedule sales will hit the $3 billion mark, or $1 billion over last year.
With a need to reprogram technology that must comply with year 2000 date-related code changes, the GSA schedule system has taken on the role of information technology services provider. That move has sparked sales.
"We've added services to complement the product line,'' said Bill Gormley, the GSA assistant commissioner overseeing acquisitions. "We feel the volume of services will dwarf the product side of sales in the next couple years, with the year 2000 situation going on and other needs that warrant service sales.''
Then, there's the GSA's marketing of technology lease agreements through schedule sales. GSA has signed on Electronic Data Systems Corp. of Plano, Texas, and BTG Inc. of Vienna, Va., to market lease agreements. GSA officials are considering at least 10 additional leasing deals with various technology companies.
"[The arrangements] will be set up so the government buyer has to get out of the agreement in a certain time frame, so it's just like a car lease,'' Gormley said. "We don't want government customers to be stuck with old technology, so we want it out of there.''
The flexibility of the schedule has companies scrambling to establish a presence. Pleasanton, Calif.-based PeopleSoft Inc. has earned just under $5 million in schedule revenue since it began selling business application software through the GSA in March.
"We think the GSA is the place to be,'' said Jeffrey T. Carr, vice president overseeing federal markets for PeopleSoft. "It's emerging. Its past prohibitions to business are out now. They're less monopolistic and more entrepreneurial than in the past.''
Predictably, Armonk, N.Y.-based IBM Corp. continues to dominate mainframe-related GSA schedule sales, with about a quarter of the market share. On smaller ticket items, North Sioux City, S.D.-based Gateway 2000 and Austin, Texas-based Dell Computer Corp. are both at the top with a 14 percent market share.
Roger Harden, director of marketing for Dell's federal sales unit, said the company has prospered through its direct business model of distribution. Cutting out the middleman distributor, Dell's equipment inventory time is down to about a dozen days in the factory, speeding up delivery.
Dell is now one of the fastest growing companies in worldwide personal computer sales, with revenues commanding a 5.2 percent market share. It's now ranked No. 3, behind IBM and Houston-based Compaq Computer Corp., according to International Data Corp., a market research company based in Framingham, Mass.
"[Direct business] allows us to deliver a better computer for a better price,'' Harden said.
Marco deVito, vice president of enterprise integration activity and the DEIS II program manager for Computer Sciences Corp.
So far, they're knocking last year's leader, Chantilly, Va.-based Government Technology Services Inc., off the top of the chart, but just barely. GTSI has seen its market share of GSA schedule technology sales drop, according to GSA statistics. However, like other information technology companies, GTSI has found that there are many ways to get wares to the government customer.
That's where the agency-market IDIQs come in. Agency World Wide Web pages are getting the word out about governmentwide contracts, with the Internet also used to provide electronic transactions. The Electronic Computer Store is considered one of the groundbreakers in electronic ordering, and the innovativeness elevated the contract's profile among agency buyers.
"It was one of the best vehicles to attract a customer following,'' said E.O. Knowles, president of Hughes Data Systems in Irvine, Calif.
The original DEIS contract, for example, earned 15 percent of its sales from outside agencies. But DEIS II has seen less of a percentage of outside-agency purchases because of competition from the Electronic Computer Store and other contracts, said Mary Sloper, the program manager of DEIS II.
Jim Cassity, program manager for DEIS II at McLean, Va.-based BDM International Inc., agreed that the heightened government competition has taken away sales opportunities with DEIS II.
"I think the overall spending on DEIS II is a little lower than anyone expected,'' said Cassity, whose company is a prime contractor on DEIS II and has totaled more than $35 million in contract sales. "I think the main reason is competition from other IDIQs. And it could be because people aren't spending as much money as they originally thought. There's some speculation that, despite the fact that it's the same [presidential] administration, there are a lot of people changing out from the first administration to the next and that could slow things down. ... But DEIS is still a great contract.''
Said Bob Dornan, senior vice president of Federal Sources Inc. in McLean, Va.: "I see it shaking out that governmentwide contracts - like what the NIH is doing - are going to be under duress for survival. What I envision coming out is a combination of growth of GSA schedules as well as the IDIQ contracts that are focused on the specific agency's needs. When an agency has management and discipline and planning, they'll know what they need and when they need it.''
With the wealth of prime contractors and subcontractors sharing the awards, industry has voiced concerns about the contracts' evolution. Especially because the smaller companies appear to be coming up short.
"There's a general consensus that a proliferation of these vehicles may be slicing up the federal pie too thinly,'' said Larry Allen, executive director of the Coalition for Government Procurement, which represents 300 corporations. "There's a concern that there are too many contract vehicles that can't deliver much in themselves. They can get your product to market, but they can't deliver the bang that they promise.''
ITOP and other aggressive IDIQs "allow task orders to be implemented in rapid fashion,'' said John Warner, executive vice president of systems integration and a corporate board member at Science Applications International Corp., the San Diego-based company that is among the prime contractors for ITOP. "It's important for the government, in reducing paperwork. ... But it does shift the burden to the contractor because you must win one of these vehicles and then you must get the sales. You have to get to the customer and sell the product.''
For sure, the IDIQs aren't going away; there are more sequels in the works. Among them: The NIH is taking in proposals for Electronic Computer Store II.
"The computer store is very successful from the NIH's perspective and our perspective,'' said Joel Lipkin, vice president of business development for GTSI, one of the top prime Electronic Computer Store contractors. "The volumes are good. It's a very flexible contract. Because it's governmentwide, there are many users like the Navy and the State Department. ... The technology insertion happens very rapidly and many people who buy from it see it as a good source.''
Similarly, companies like El Segundo, Calif.-based Computer Sciences Corp. like the IDIQ contracts. After all, Computer Sciences is leading the pack of businesses seeking DEIS II work, with nearly $60 million in sales.
"We're surprised it turned out to be as successful as it has,'' said Marco deVito, vice president of enterprise integration activity and the DEIS II program manager for Computer Sciences. "The first year was an eye-opener for us. We set up an infrastructure then to grow as the contract grew, and we certainly tested that.''