Eyes on the prize

Panel: When budgets are tight, watch the money ? and the policymakers

Migrate or morph

When analyst Ray Bjorklund talks about contractors and the government market, there's a biology metaphor he likes to use: Contractors are like amoebas, and the IT market is a biosphere.

When budget constraints shrink the market, contractors, like hungry amoebas searching for food, must migrate or morph their businesses to survive in leaner times, said Bjorklund, senior vice president and chief knowledge officer at Federal Sources Inc. of McLean, Va.

The federal IT budget for fiscal 2007 is $63.8 billion, only half a percent more than the $63.5 billion enacted for 2006.

"The IT market's capacity is contracting ? still going, but contracting," Bjorklund said. And that contraction is prompting companies to rethink their strategies, he said.
To maintain strong growth, companies must track government buying behaviors, win contract vehicles and sell solutions, not technologies, according to FSI's annual Federal Outlook report. Companies also need a balance of organic growth and strategic acquisitions, the report said. ? Roseanne Gerin

The federal IT budget's stagnant growth is just one of the dynamics that contractors will have to factor into their business strategy in coming years.

A host of policy decisions that influence how government copes with issues as diverse as information sharing and the proliferation of different types of contracts also must be considered and woven into strategies for capturing business.

"Policy drives everything we do in government," said Grace Mastalli, acting director of the Homeland Security Department's Information Sharing and Collaboration Office. She spoke late last month at Federal Sources Inc.'s Federal Outlook Conference in McLean, Va.

IT contractors must be aware of legal issues that may arise as a result of government's emphasis on information sharing between agencies.

"You need to be smart about what's happening in the policy environment to serve your clients," because the policy drivers are the main drivers of the government's IT needs, Mastalli told the audience of federal IT contractors.

For example, agencies such as FBI and CIA have different definitions for controlled "sensitive but unclassified" information, and that affects how information moves between them, she said.

The problem in information sharing is not the technology that transports data, "it's that we don't trust each other ? to appropriately handle our sensitive proprietary information," Mastalli said.

"Unless you address the culture, policy and people, and governance policy, it doesn't matter what the pipes are, it doesn't matter what the technology solution is," she said.

Move to improve

As part of their open government initiative, Reps. Tom Davis (R-Va.), chairman of the House Government Reform Committee and Henry Waxman (D-Calif.), ranking minority member, introduced the Executive Branch Reform Act of 2006. One part of the bill would eliminate unregulated pseudo-classifications such as "sensitive but unclassified" and "for official use only."

The legislation would require setting regulations and standards to govern federal agencies' use of such information controls.

"Every time a new law or rule is enacted, your requirements change," Mastalli said.
The government's culture of not sharing and the lack of common standards for making and handling controlled, unclassified data create data stovepipes, she said.

To address its own information sharing issues, for example, DHS has embarked on the National Information Exchange Model project. NIEM is an interagency initiative that provides building blocks for interoperable information sharing and data exchange.

The project began as a joint venture of the Homeland Security and Justice departments, with extensions to other agencies. DHS will use this standard government system to ensure interoperability and share information with state and local governments, Mastalli said.

Adding confusion to the dwindling government IT market is the diversity of contract types that agencies use, FSI said in its analysis of the federal IT budget.

Agencies are launching new multiple-award task order contracts, while there continues to be a shortfall of government acquisition management skills, FSI said.

Large government programs are struggling to get started, and procurement policy changes to "get it right" continue to evolve, said Ray Bjorklund, FSI's senior vice president and chief knowledge officer.

Contingency contracting, strategic sourcing and interagency contracts present more hurdles in the acquisition process, said Robert Burton, associate administrator of the Office of Federal Procurement Policy.

"The challenges facing the acquisition community today are unprecedented," he said.
With the response to Hurricane Katrina, for example, a major problem was managing contingency contracts, which are awards made during armed conflicts, other military operations and disaster or emergency relief operations, he said. Some of the contracts duplicated the work of other contracts, and the agencies involved were unaware of them, Burton said.

"Generally speaking, we don't need more rules or regulations" in the process, he said. Just deciding on a definition of "contingency operation" took lawyers seemingly forever, he said.

Not so strategic

Strategic sourcing, the contracting strategy based on the concept of government more effectively leveraging its buying power, is another challenge, Burton said. When agencies do it well, they can save 10 percent to 20 percent in costs, he said.

"Yet it's not that simple," he said. "The concept is simple, [but] the implementation and management of the system is much more difficult."

While the OFPP stresses greater governmentwide collaboration to do what's best for the government as a whole, the concept has met with some resistance from agencies that don't want to give up control over their operations, he said.

Interagency contracts, used for contracting in those areas in which government agencies should collaborate and use resources jointly, are another problem spot, Burton said.

Government needs to precisely define its requirements and get them right from the start, he said. Most of the problems in the processes of acquisition and contract management lie with definitions and how the government articulates what it wants, he said.

With so many baby boomer employees retiring from the government's acquisition workforce, there are too few experienced staffers to mentor and train new people, Burton said. Government's goal is to have one acquisition workforce composed of both civilian agencies and the Defense Department, he said.

Another factor complicating contract management is that the General Services Administration's Federal Procurement Data System, which collects information on government expenditures, needs to be improved, he said.

OFPP has asked GSA to appoint a program manager to oversee the initiative to ensure that the agency can "get the data accurate and complete to the extent we can," Burton said.

Staff Writer Roseanne Gerin can be reached at rgerin@postnewsweektech.com.

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