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The Changing Government Game

The federal government is playing "Wheel of Fortune" and it isn't clear which technologies, services and companies will win or lose.

New technologies, such as the network computer pushed by software giant Oracle Corp., as well as new procurement policies, such as the U.S. Navy's IT-21 outsourcing program, are changing the flow of federal money to contractors.

Kicking off the service's so-called Information Technology for the 21st Century initiative are two pilot programs planned this fall in Oahu, Hawaii, and Norfolk, Va. The Navy's initiative will cover computer and telecommunications product purchases and leases for both shore and sea-based operations. That counts in PCs, local area networks, wide area networks, hubs, routers, and voice and video technology.

"For many times in the past, we focused on being world-class in combat. Now, we're looking at how to maximize every dollar and every person in the Navy,'' Cmdr. Steve Vetter, one of the Navy's chief officers overseeing the initiative, tells WT reporter Dennis McCafferty.

Under the initiative, industry will take a greater role in deciding what technologies and equipment are needed to satisfy the Navy's operations requirements. It's a big program that industry watchers estimate eventually could be worth billions of dollars.

That projection and the potential for big changes in the way the government does business are making some members of Congress and others nervous, perhaps with good reason.

Some skeptics say that sweeping procurement reform has unleashed a mad market of anything goes spending that favors the dominant players in the industry.

Indeed, the Navy has already flown officials from several incumbent information technology contractors to its IT-21 pilot project sites in an effort to assess what needs to be done. The Navy's industry technical team includes officials from Boeing Co., Computer Sciences Corp., Electronic Data Systems Corp., GTE, Lockheed Martin Corp. and IBM Corp.

The American Bar Association has weighed in with concerns about procurement changes that could result in unfair business practices. For instance, the association has raised objections with respect to contract updates and elimination of maximum spending limit notices in the Commerce Business Daily.

Pulling industry and government in yet another direction is Oracle chief executive Larry Ellison's highly touted NC, which may reduce the flow of federal dollars to PC manufacturers, and redirect it toward companies such as Oracle.

Oracle executives hope to convince the FBI to buy NCs for its nationwide Law Enforcement Online program, and to persuade Pentagon officials to buy up to 480,000 NCs to help modernize military's hospitals and personnel management, Ed Ferris, Oracle's government sector sales chief, tells WT reporter Neil Munro.

The cost savings touted for the NC may allow the U.S. Congress to cut agency budgets, or it may allow federal agency officials to buy more software. All of this movement puts the onus on corporate managers to choose the right technologies to back. Oracle, Microsoft, Sun Microsystems, IBM, Zenith and others are already plunking down their money and betting on the future as their corporate gurus see it.

Massive outsourcing of government computer operations and business operations - if permitted by the White House or members of Congress alarmed at the possible loss of local jobs - may provide more opportunities for companies such as Lockheed Martin, at the expense of Washington-based resellers and smaller integrators.

But it is hard to imagine this outsourcing trend slowing and easy to foresee it accelerating. Many Republican lawmakers are clamoring for more privatization of the government's work. For instance, Sen. Craig Thomas, R-Wyo., and others have introduced legislation that would require agencies to rely on the private sector for all services that are not part of their core mission. While the outlook for this legislation is unclear, political forces could well drive the outsourcing market beyond the current projections. The market research firm Input's latest projection calls for outsourcing professional services, or federal systems operations, to grow from $1.6 billion in 1996 to $2.1 billion in fiscal year 2001.

If the Navy outsources computer operations at its bases, why not outsource the management of its spare parts, or the wartime delivery of ammunition to bases in the Pacific?

And while we're at it, why not hire a systems integrator to operate strategic command and control networks?

There is usually a good economic case to be made for outsourcing, but usually it is politics that sinks the deal. Thus the proposed Texas state welfare outsourcing deal was torpedoed this spring by the public-sector unions and the White House.

Both the U.S. Navy's IT-21 program and the NC will be closely watched in the days ahead.

Hopefully, both will lay the groundwork for an overhaul of information technology procurement efforts governmentwide and a stronger partnership with industry. Stay tuned.

©1997, Washington Technology. All rights reserved.

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