Now and the Future
By Dennis McCafferty
The information technology industry in the aftermath of the Clinger-Cohen Act of 1996 has buzzed about governmentwide contracts hatched by crafty agency purchase officers. Industry executives also have responded like Pavlovian dogs every time the latest U.S. General Services Administration numbers have come out.
And guess what? The year ahead promises an even wilder ride. Information technology services and leasing contracts will command a greater presence. "Pay for performance" directives will kick in.
On top of that, agency buyers are just beginning to get their arms around what the Clinger-Cohen Act was all about, said Linda Cohen, who tracks federal government information technology sales for the Gartner Group, a Stamford, Conn.-based market research company.
Agency officials are just starting to understand that the immensely successful contracts available governmentwide are open to them, Cohen said. Industry insiders say among the hottest indefinite-delivery, indefinite-quantity contracts to choose from are the National Institutes of Health's Electronic Computer Store, which has totaled more than $300 million in sales since its September 1995 award, well over the $96 million original estimated value; and NASA's Scientific and Engineering Workstation Procurement II contract, which has an estimated value of $1.8 billion.
"There [were] buyers who still didn't realize they can buy off of other agencies' contracts,'' Cohen said. "I said, 'It's OK. You can buy off the NIH vehicle.' They didn't even know it existed. ... Now, they're really becoming accustomed to not doing [requests for proposals]. At first they thought they were doing something wrong, like a kid who thought he was being bad when he had his hand in the cookie jar. They thought it was too easy.''
Geoffrey Stilley, vice president of federal sales and marketing for CyberMedia Inc.
Meanwhile, GSA schedule sales continue to burst at the seams, with officials predicting $3 billion in IT revenues in the 1997 budget year - $1 billion over fiscal 1996 results. Services will dominate the schedule sales, GSA officials have promised, and companies are flocking to the agency to hawk leasing agreements on their schedules.
This all follows the June 10 announcement that all GSA information technology schedules are merging to further spark business. The move will eliminate the need for agencies and industry to put together multiple contract awards to work out sales arrangements.
"It's one-stop shopping so it should help everybody,'' said Geoffrey Stilley, vice president of federal sales and marketing for CyberMedia Inc., based in Santa Monica, Calif.
Duane Andrews, executive vice president of corporate development for Science Applications International Corp.
Industry leaders say the change isn't huge - just a bit of tweaking from the GSA to make its schedule sales even more enticing.
"The word from the GSA is that they want to do more consolidating,'' said Duane Andrews, executive vice president of corporate development for San Diego-based Science
Applications International Corp. "There's no question that the biggest game in town is the GSA schedule. The question is how long will it last? The pendulum has swung all the way toward the GSA and, in Washington, my experience has been that the pendulum tends to swing back. But, so far, the GSA has gotten it right.''
Teaming arrangements are making sales more of a snap. For Andover, Mass.-based PictureTel Corp., it allows the company to sell its video technology by linking with a prime contractor such as Philadelphia-based Bell Atlantic Corp. to "broker'' deals with customers using the GSA schedule sales system.
"It's one purchase order against three others,'' said Craig Reichenbach, regional director of federal sales for PictureTel, where GSA schedule sales account for 20 percent of an anticipated $60 million in federal-generated revenue.
As everybody who wants to make a living in IT federal sales knows by now, the Clinger-Cohen Act essentially broke open the market like a hammer crushing a piggy bank. The act was the hybrid of two pieces of groundbreaking legislation: The Information Technology Management Reform Act, which went into effect in August 1996; and numerous regulations of the Federal Acquisition Reform Act, which went into effect Jan. 1, 1997.
Passe were rules considered prohibitive, such as maximum order limitations and a requirement that agencies post summaries of intent to buy at least $50,000 worth of goods or services. What Clinger-Cohen really did was put a commercial face on its IT spending practices, and industry generally likes what it sees.
"The distinction between commercial practices and government practices will become fewer and farther in between,'' said Irv Zaks, vice president and general manager of the information systems division of Chantilly, Va.-based GTE Government Systems. "You'll have to take your best practices and make sure they're aligned with commercial practices.''
Scheduled to depart his office in September, the Office of Management and Budget's Steven Kelman has certainly left a distinctive stamp during his four-year tenure as federal procurement policy administrator. And, in an interview late last month, he spoke of changes to come.
Potentially most significant could be the setting of pay-for-performance standards in contracts, in which the vendors' award money will be put at risk if agreed-upon goals are not met. The Internal Revenue Service is now examining this as it seeks to modernize its systems, Kelman said.
Also forthcoming will be a greater handle on using vendors' past performance in consideration of new contract awards, Kelman said. What should evolve is a more centralized system so agency contract officers can access "report cards'' on vendors. But so far, progress has been an evolution, not a revolution.
"It's a work in process,'' he said, echoing industry leaders' disappointment in the progress of this Clinton administration-supported initiative. "We ain't there yet. ... The criticism is absolutely right. The report card system isn't close to being fully implemented yet. A number of agencies - the NIH and the Department of Energy - have developed [World Wide] Web-based products for performance-based report cards. I think that's developing momentum. But we're far away from using past performance in [contract] selection.''
Other developments also are raising caution flags among industry executives. Carl Peckinpaugh, a Washington attorney specializing in government procurement of information technology, said that agency estimations of a contract's maximum value are inflated due to the open market environment, meaning government may not be getting the best price for the product.
Smaller companies also may be cautious about ongoing efforts in Federal Acquisition Reform, especially those that open up agency officers' ability to communicate with companies during the bidding process, said Kenneth Brody, an attorney in Vienna, Va., specializing in government contracts. Such a change could be subject to abuse and cronyism, he said.
"It's no secret that the government agencies have favorites and will do what's possible to award to these favorites to the extent that the rules will allow,'' Brody said.
Most at risk would be smaller companies that don't have the sales resources of the big players.
"There are smaller companies that don't have the resources to know what's going on at all times and they could miss out,'' said Paul Gill, vice president of sales and marketing for Pulsar Data Systems Inc. in Lanham, Md., which estimates that 65 percent of its projected $200 million in revenue this year will come from the federal government. "So it is a concern.''