Fields of contracts

Lucrative recompetes rule the landscape as few new programs emerge

A look at federal contracting opportunities
for the next 18 months
suggests that multibillion-dollar
awards from the Defense and
Homeland Security departments
will continue to dominate a still sluggish
government market.

The Army Rapid Response Third Generation
contract, estimated to be worth $34.1
billion, heads a list of 17 major contracts
that research firm Input Inc. believes will be
awarded this year. The Army is expected to
issue a request for proposals sometime this
month.

The top five opportunities on the list
account for 82 percent of the total contract
value of $76.7 billion. The total is based on
the contracts' ceilings, not appropriations.
Federal spending on information technology
has remained almost stagnant for the
past few years, said Arash Ardalan, senior
analyst for federal defense opportunities at
Input. President Bush's fiscal 2009 budget
request includes a modest 2 percent
increase in DOD IT spending. The Army
and Air Force are expected to see 5 percent
increases.

STEADY BUSINESS

"It's been more of a straight line recently, as
opposed to previous years where you saw
huge jumps," he said, adding that he expects
the straight line to continue through the year, similar to conditions in fiscal 2008.

"There's not going to be huge growth ? not
yet," he said. He predicted that a larger IT
budget increase might appear in 2010 or
soon after.

"I don't think it's going to be huge, but
bigger than [the expected] 5 percent" hike
for the Army and Air Force this year, he
added.

For the time being, operations maintenance
dollars are largely supporting current
programs. "You also have a lot of recompetes
coming out, as opposed to new requirements,"
Ardalan said.

Despite the costs of the war on terrorism
and the economic challenges facing the
nation, the federal government continues to
spend more on IT than the president's annual
budget requests. For example, according
to an Input report, federal IT spending in
fiscal 2007 was $65.6 billion ? $1.7 billion
more than the budget request and an
increase of 2.4 percent.

And the $65.9 billion budget request
for fiscal 2008 rose nearly 4 percent to
$68.3 billion.

This year's Office of Management and
Budget estimate of 3.8 percent growth for
fiscal 2009 might also be too low, the report
states.

Although the federal government is in the
midst of a tough fiscal environment ? with
civilian agencies in particular operating for
the third or fourth year with reduced buying
power ? the consistent growth that the contracting
industry experienced several years
ago is slowly beginning to return, said Stan
Soloway, president of the Professional
Services Council and a Washington
Technology columnist.

"It's probably not going to go back to double
digits, but it is still a very consistent,
strong growth market," he said. "And I don't
think that's going to change."

PRIORITY PROJECTS

Continuing federal IT investment is evident
in three of the larger awards on the list: the
$9 billion Air Force Network Centric
Solutions (NetCents) 2 contract; the $9.2 billion
Navy Marine Corps Intranet (NMCI)
Next Generation Enterprise Network
(NGEN) recompete award; and the $1 billion
IT Managed Services (ITMS) recompete contract
to oversee DHS' Transportation Security
Administration infrastructure.

The larger opportunities illustrate a trend
toward consolidation and meeting mandated
small-business goals, Ardalan said. He cited
the network consolidation portion of the
NetCents 2 contract as one example.

NetCents 2 calls for building innovative
communications and information services
and solutions that focus on the Air Force's
network-centric warfare mission. The threepart
award earmarks $5.2 billion for products,
$1.1 billion for IT services to upgrade
network-centric systems and $2.7 billion for
small-business subcontracting services.

Although agencies still have problems
meeting mandated small-business percentage
goals, Ardalan said he has seen a trend
in the past few years toward better efforts to
meet those requirements. "I'm assuming
NetCents 2 ? at least the small-business
portion ? will be a big part of the Air Force's
effort to meet that goal," he said.

Based on new information from the Air
Force, NetCents 2 might bundle small business
into the solutions portion, Ardalan said.
That could reduce the three components to
two.

NMCI PART 2

The NMCI contract expires in a little more
than two years and must, by law, be recompeted.
The Navy plans to upgrade its massive
intranet system to include new technology,
such as wireless Internet access, that
was not available when EDS Corp. won the
original $9.9 billion contract in 2000.

In 2006, the Navy extended NMCI
through September 2010, which added more
than $3 billion to the contract's value. An
RFP for the recompete award is expected
this fall.

The NGEN contract will include several
months of overlap to make the transition as
seamless as possible. Contractors including
General Dynamics Corp. and Alcatel-Lucent
hold other contracts that will be part of
NGEN.

Future additions will build on the NMCI
applications and architecture that EDS has
put in place, John Lussier, deputy chief
information officer at the Navy, said earlier
this year.

The combined NMCI/NGEN framework
will become the foundation for what the
Navy Department chief information officer's
office calls Naval Network Environment
2016.

NMCI has given the Navy and Marine
Corps a robust, flexible, secure and functional
computing and communications platform,
said Randolph Dove, an EDS
spokesman. "It is a solid foundation for the Navy's Next Generation Enterprise
Network."

Asked whether EDS had plans to bid on
the recompete award when the RFP is
released, Dove said, "I think it's safe to
assume that EDS is interested."

FOCUS ON INFRASTRUCTURE

Unisys Corp. holds the $1 billion ITMS contract
at TSA. Input has calculated that the
recompete award ? which will be procured
through the Enterprise Acquisition Gateway
for Leading Edge Solutions contract ? will
be similar in value.

TSA's new ITMS award will concentrate
on network infrastructure to reduce duplicative
efforts at the agency, Ardalan said.

When the ITMS contract expired in
January 2006, Unisys won a three-year,
$750 million bridge contract to continue
work until DHS found an IT solution that
could apply to TSA and DHS. The bridge
award will expire Jan. 1, 2009.

But a report issued by DHS' Office of
Inspector General in November is critical
of how TSA has managed the contract
and cites numerous examples of redundant
operations in IT management and
implementation.

The report also cites a lack of proper integration,
excessive manual processes, and
problems in balancing TSA's technological
goals with the objectives of stakeholders
such as airport operators and airlines.

"There were obvious issues with the
incumbent," Ardalan said. Therefore, TSA is
taking its time preparing the RFP for the
recompete contract because "they want to
make sure they really choose the right [contractor]
this time around."

"I don't want to say [Unisys] won't win
it," Ardalan said. "I would say they have a bit
more of an upward climb towards proving
themselves than maybe some other vendors
would."

David Hubler (dhubler@1105govinfo.com) is
associate editor at Washington Technology.

About the Author

David Hubler is the former print managing editor for GCN and senior editor for Washington Technology. He is freelance writer living in Annandale, Va.

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