Last week the Department of Health and Human Services (HHS), National Institute of Health (NIH), released a Request for Information (RFI) seeking industry comments in regards to the next generation contract to support government IT efforts, with a specific focus on health and research IT. According to the NIH, this next generation contract will be the successor to two of the three current GWACs which are hosted by NIH for the purpose of providing information technology to the government. These GWACs are:

• Chief Information Officer Solutions and Partners II (CIO-SP2i)
• Image World II (IW II)

The third GWAC is the Electronic Commodities Store III (ECS III). Since this vehicle does not expire until 2012 it is not expected to be initially consolidated with the others. However, it will be interesting to see what happens with this vehicle once it expires.

Spending on these vehicles is not from HHS, but rather from agencies throughout the federal government on both the civilian and defense sides.

• According to 2007 FPDS spending data only 56% of spending on the CIO-SP2i contract is from HHS, significant percentage attributed to:
  • Department of Homeland Security at 12% utilization
  • Department of the Army with 10%
• According to 2007 FPDS spending data, the Image World vehicle details this to an even greater extent:
  • Department of the Navy is actually the largest user of this contract, accounting for 44% of the total spending with HHS lagging far behind with only 13%

The question that arises with these statistics is whether GWACs will become the procurement strategy of choice across the federal market space?

With the percentage use of GSA Schedules remaining flat over the past five years (about 18% annually) and the drastic increase in the dollars going towards task order vehicles, the development of these GWACs and others needs to be watched closely.

As this procurement methodology for potential GWAC consolidation continues, INPUT will continue to track all potential follow-on activity. Individual opportunity reports can be viewed:

• CIO-SP3
• IW3
• ECS IV

A lack of sufficient security policies and procedures has placed NJ Medicaid participant's sensitive information in jeopardy. The state has failed to adequately monitor access to key personal information in the Medicaid Management Information System (MMIS) which could expose participants to fraud, abuse and misuse.

In a series of three recent audits by the NJ Office of State Legislature, the Department of Health Service's Medicaid program was harshly criticized for inadequate information security planning, auditing, management, edit controls and monitoring capabilities. The most recent audit, released April 24, 2008 indicated that the Department fails to properly monitor access to Medicaid participant's information such as social security, tax identification numbers and birth dates in the MMIS. The MMIS supports the $9 billion program by processing claims for more than one million participants. Previous audits found that individuals earning as much as $295,000 were enrolled in the program which targets low-income populations. Other findings included questionable medical equipment purchases. Recommendations for improvement included an enhanced audit trail, such as a department log to access information.

The legislative reprimand comes as the state is gearing up for a re-bid of the MMIS and will likely have a major impact on the scope of work and system requirements. In particular, emphasis will likely be placed on audit trail capabilities and security measures. The incumbent contract with Unisys is scheduled to expire August 23, 2008. Further information on the MMIS re-bid project from INPUT can be found here.

The NETCENTS 2 procurement cycle parallels the ever-continuing primary election season perfectly: several semi-climatic moments hinting towards an end in sight, yet never reaching final resolution. While being pulled in many directions, the program officials for the competition are faced with mounting challenges:

• Developing an affective and efficient contract vehicle, capable of being the PREMIER vehicle for the Air Force
• Satisfying the requirements of congressional interest
• Providing the vendor community with a prosperous business opportunity worth the fight

As industry and government watch Protests plague GSA's Alliant, it is no wonder many approach the NETCENTS procurement with a skeptic and cautious nature. The most recent request for information produced only 100 responses originally, and a rumored 300 (total) following the extension of the response dates. Some relate the lack of responses to the uncommonly short time period for responses to be submitted; others attribute it to the lack of notification of the extension of the response date. The real issue in industry's mind is: "Should I bid on NETCENTS 2?" This question seems simple in nature; especially regarding the anticipated size in funding, awardees, and importance of the NETCENTS 2 contracts. However, considering the dispersion of task orders in the current NETCENTS contracts, along with the lack of insight into how the recomplete is going to be REALLY different, this "bid/no-bid" decision is a hard one, especially for smaller companies that don't have the resources of a larger firm. Many of these issues prompted INPUT's earlier analysis: Network Centric Solutions (NETCENTS) 2 – Air Force Forges Ahead.

On the Other Hand: A Small Business Boost

The possibilities of great success for the small business community are truly apparent in the Department of the Air Force right now. With efficiency initiatives like Installation Acquisition Transformation (IAT) and the establishment of AFCYBER, it is a great time to break into the Air Force market. The real questions are: can these businesses risk the business development funding chasing the NETCENTS dream and survive the probable protest season and competitive task order environment to follow? Factors that will play heavily in making this decision will be:

• NETCENTS 2 small business goals
• The Acquisition Strategy (e.g. separate small business contract, functional categories, etc.)
• Teaming allowances and restrictions
• NAICS codes

Last night, the Contracting Office released information regarding the upcoming NETCENTS 2 Industry Days on May 21-22, 2008. I anticipate, as all industry is hoping, that these two days answer many questions and help focus vendor resources in anticipation of the coming solicitation period. Whenever that period may be...

Last Friday, The Defense Information Systems Agency (DISA) announced that it had made fourteen awards for their ENCORE II Information Technology Solutions contract for large businesses. Four of the awardees were companies that protested the original awards back in 2007, continuing the trend we have observed lately of companies that protest subsequently receiving awards on those contracts.

Without getting into the details of the merits of individual cases, several questions arise out of this emerging trend of protests on large contract awards:

• Is Protesting Now a Business Strategy?
  Protesting your way onto large MACs seems to be working. But is this a long-term shift in business strategy or a short-term blip? It may be too early to tell. In fact, may likely take years to see what will be the bottom line impact of this emerging trend.

• Can Government Avoid Protests with More Diligence?
  One argument in favor of a protest is that the government has in some way mishandled the competition, resulting in inequitable awards. So if government spends more time up-front to ensure a hyper-clean process will this effectively ward off the filing of a protest (or from it being sustained?) Or have procurements become so complex that protest-proofing a procurement is nearly impossible?

• Do Protests Point to the Government's Human Capital Challenges?
  Is the Award/Protest/re-Award-including-the-Protesters phenomenon really highlighting the human capital issues in government contracting? And will the increased specter of a protest further strain government contracting staff to "get it right" the first time? And what does the future hold as the most experienced staff continue to retire?

• Does the Pressure for Protest-Immune Awards Further Strain Contract Management Performance?
  With the increased scrutiny of how contracts are managed (and several examples of poorly performing contracts in the news,) will the increased pressure placed on government procurement professionals to avoid protests have an exacerbating negative impact on contract management once awarded?

• Will Procurement Reform Legislation Increase the Pressure to Protest?
  Will legislation like the Consolidated Appropriations Act enacted last year limiting competitive sourcing further increase the pressure to get on the large MACs, thus increasing the likelihood of the "protest as a completion strategy" by companies? If the opportunities to win business decrease then the value of winning increases even more.

• Will the Fear of Protest Actually Limit Opportunities?
  Could the fear of a protest actually lead the government to give up and cancel the procurement? When do diminishing returns kick in and it is more advantageous to just cancel the procurement than to try to figure out an acquisition strategy that wouldn't result in immediate protest(s) and/or defections by users of the new vehicle to use another contract?

These questions, and others, underscore the complex environment within which government procurement professionals and industry vendors operate together. And answers to these questions will need to be forged together.

Since the Fort Belvoir Chapter of AFCEA Industry Day in April 2008, vendor interest in Army's Information Technology Services – Small Business (ITS-SB) opportunity has quickly increased. We've seen a dramatic shift in attention and resources by the vendor community. It is safe to assume this is the result of two contributing factors. First, ITS-SB encompasses certain core competencies of the IT market and is being considered a small business augmentation to the ITES contracts within specific task areas. The six (6) Task Areas (inclusive of multiple sub-areas) are as follows:

1. Electronic Product Environment Assessment Tool (EPEAT)
2. Information Assurance
3. Independent Verification & Validation (IV&V)
4. Internet Protocol Version 6 (IPv6) Engineering Services
5. Migration / Integration IT Services
6. Warranty and Maintenance

Second, the anticipated value for ITS-SB effort is $400 Million. While the approximate ceiling value of the ITES contract vehicles is $25 Billion, these small businesses know that $400 million at stake puts them in the "prime vendor" driver's seat.

The Army is looking to small businesses to fill in the gaps left by the two ITES contracts. ITS-SB will supply IT services in the specific task areas missed or limited under the current large ITES-2S and ITES-2H requirements. Even though the Army has trusted Small Businesses in other areas with the massive FIRST contract and more specific SETAC requirements, ITS-SB brings technology services directly to the small business community. As evidence to the necessity of this requirement, contracting officials have released volumes of information and developed an ambitious procurement strategy.

Opportunity Status

Moving quickly, the ITS-SB procurement has completed Phase I – market research and Phase II – vendor comments and market evaluation. Phase I included filling out of small business questionnaires to help the Program officials gauge the market's size and capabilities. Based on the submitted questionnaires, the Contracting Office was able to develop an acquisition strategy. Phase II, which ended May 2, was industry's chance to provide INPUT (pun intended) regarding the acquisition strategy through Corporate Qualification Packages (CQPs). As the procurement moves forward, the Program officials are anticipated to review the submitted information in preparation for an Industry Day in June and ultimately the release of the RFP also currently expected in June 2008.

Even though Colorado is one of 23 states that are projecting revenue shortfalls in 2009, Governor Ritter's signs a budget bill that raises state spending by 6% and adds 1,334 new employees to the state payroll. Building Blocks for Health Care Reform gets funded as do several other technology projects.

Yesterday Governor Bill Ritter signed the fiscal 2009 budget into law. It increases general fund spending by 6%, or $431 million, and adds 1,334 new state employees. Meanwhile, legislative economists predict a decrease in revenues of $693 million over the next 5 years.

Several lawmakers seemed unhappy with the process this year, which included much partisan bickering, but little change. Rep. Cory Gardner (R-Yuma) said, "I think it's time we upgrade the budget process, Colorado Budget 2.0." The Joint Budget Committee spend months putting the budget together but the House and Senate have only two weeks to debate and pass the budget bill. Gardner suggested moving to a biennial budget cycle.

So what's in it for technology vendors?

• Department of Corrections -- $54,369 to enable the Parole Board to convert its paper-intensive decision process to electronic documents which can be security signed and transmitted.
• Office of the Governor -- $349,353 to acquire components and software to mitigate critical network security risks through centrally managed firewalls, intrusion detection systems and antivirus protection.
• Department of Health Care Policy and Financing -- $5.5 million to begin the process of centralized eligibility determinations that will streamline the Medicaid and CHP+ application process.
• Department of Public Health and Environment -- $654,000 to operate and enhance the Colorado Immunization Information System (CIIS).
• Department of State -- $749,846 for information security related activities, $900,000 for administering voting systems certification and $520,000 to replace the department's outdated accounting system to better process applications received electronically
• Department of Personnel and Administration -- $7.9 million for the Digital Trunked Radio System so that counties on the Western Slope can obtain needed software and system upgrades.
• Department of Public Safety -- $1.2 million for the new Alamosa Troop Office Regional Communications Center. Part of this capital expanse will be used to relocate and update the existing radio infrastructure.
• Department of Revenue -- $7.8 million for the Colorado Integrated Tax Architecture (CITA), which replaces the current tax system with a single, integrated system.

Also included in the budget was $25 million for the governor's Building Blocks for Health Care Reform package, which includes several technology initiatives including centralized eligibility determination for Medical and CHP+, the state's Children's Health Insurance Program (CHIP) and the web-based Report Card on Health Insurance Companies.

Still to be enacted is the the Colorado IT Consolidation Plan, which is SB 155.

Remember in elementary school when the teacher used to write a name on the board for disruptive behavior as a public facing deterrent? As a common recipient, I remember this well. So, when the Office of Management and Budget (OMB) releases its Management Watch List (MWL) for programs weak in certain management areas, I can understand both the motivation to do so and the motivation to correct the program. Late last week, OMB released the first list of programs since the MWL totals were published in February and found a 19% reduction in listed programs. Presumably, these federal officials had acted quickly to correct the weaknesses and effectively, their names had been erased off the federal blackboard. And, even with many other oversight bodies affecting federal programs (Congress, Government Accountability Office and the Inspector General,) OMB manages to ensure that the Management Watch List and High Risk Lists are taken seriously.

What's more, the two lists are related and, according to OMB, impart a sense of urgency as "federal agencies go to great lengths to resolve" the noted weaknesses. Any program still on the MWL at the end of the fiscal year will graduate to the High Risk List for a full year. This has two main deterrents; first, the High-Risk List carries quarterly reporting on program's project management and earned value management (EVM) status, and second, the increased public visibility means the agency or program manager is now considered a member of the federal "Hall of Shame."

Since February 2008, some agencies have had greater success removing troubled programs from the Management Watch List. As the deadline is the end of the Fiscal Year, it stands to reason that the number of programs on the list will continue to drop until September 30, 2008 when the lists are finalized. In 2QFY08, only one agency, the Department of the Interior, increased the number of programs on OMB's MWL list (+ 4). As many as 11 agencies decreased the total programs included on the MWL. The top five agencies with success in removing MWL programs year to date include:

1. Treasury with the removal of 37 programs
2. DoT with the removal of 16 programs
3. Education with the removal of 16 programs
4. HHS with the removal of 14 programs
5. DHS with the removal of 10 programs

To be removed from the MWL, the program must satisfy all the MWL criteria which include categories like: project management, security, enterprise architecture and certification/accreditation. Out of 810 Major IT Investments, 585 were included in the OMB's MWL in February 2008. The number is currently 473 and is expected to continue to decrease as program officials try to correct weaknesses prior to the start of FY09.

Below are a few examples of programs which remain on the MWL:

• Next Generation Air Transportation System (NextGen)
  • Agency: Transportation
  • Status: Umbrella Program
  • Summary: With many component RFPs and requirements, NextGen is anticipated to provide solutions in areas like information assurance, navigation systems and even weather modeling.

• Medicare Integrity Program Safeguard Contractor Recompete (MIP PSC)
  • Agency: HHS
  • Status: Umbrella Program
  • Summary: This CMS program was assessed to be weak in several areas including security and the procurement for these services via geographical Zone is on-going.

• Detention and Removal Operations Modernization (DROM)
  • Agency: DHS/ICE
  • Status: Umbrella Program
  • Summary: As OMB evaluates this ICE program, program leadership is also planning to fulfill component requirements throughout FY08.

• Western Hemisphere Travel Initiative (WHTI)
  • Agency: DHS/CBP
  • Status: Awarded
  • Summary: With all the aspects of WHTI and other federal agencies involved, DHS has had weaknesses in evaluation criteria and practices as well as program management problems according to OMB.

• Defense Integrated Military Human Resources System (DIMHRS)
  • Agency: DoD/BTA
  • Status: Awarded
  • Summary: Awarded to Booz Allen in 2007, DIMHRS houses a high volume of sensitive information on DoD and military personnel.

• Net Enabled Command Capability (NECC)
  • Agency: DISA
  • Status: Pre-RFP
  • Summary: As DISA prepares the much anticipated and carefully crafted NECC requirement, the OMB evaluates all aspects of the program's management and reporting. NECC was included for both program specific and agency-wide criteria.

• Defense Message System Sustainment (DMS-S)
  • Agency: Air Force
  • Status: Awarded
  • Summary: OMB evaluated this DoD-wide program which is operated by Lockheed Martin through a ten-year, $750 million contract with the Air Force.

Often times, programs which have already been awarded and are under performance require OMB's attention as though are the programs most in need of management review and recommendations. These are just a few examples of the many programs which are currently attracting program leader's attention in an effort to lower the number of vulnerable programs.

The pressures of being short-staffed are likely drivers for government agencies electing to have an external entity with expertise and sensitivity to specific project requirements provide an initial advertisement via a Request for Information (RFI). What are the upsides and downsides of anonymity?

Some state and local agencies seeking to remain anonymous during the informal RFI period due to time constraints are using other outlets. An upside of anonymity for government entities during the RFI process is that external consultants can field and filter questions and inquiries from the vendor community. This can also prevent biases prior to the release of a formal solicitation on a publicly accessible government procurement website. Subsequently after external assistance, the government entity can compile the information gathered to develop an RFP and then release that formal bid on a public government procurement website. An upside for the vendor community is that while the government entity has not placed the RFI on their website, there still has been an effort to better understand vendor solutions prior to releasing a detached RFP. Further, stereotypes and business practices often develop in certain regions, states and localities and this is a method of preventing these potential downfalls from creeping into proposed solutions.

The downside of opting for anonymity during the RFI process for the government community is there is a potential disconnect between the project plans and the proposed solutions. The lack of communication establishes a certain distance between the two primary stakeholders, government and vendors; when really these two groups should be working towards fostering a strong relationship. The downside of anonymity for vendors is that there is an inability to tailor initial responses to the needs of current systems, system-interfacing requirements and so forth. This leads to intensified efforts during the RFP phase to tweak proposals and provide regionally-sensitive solutions in a historically short turn-around time. Further, most vendors are unable to respond to all RFPs so therefore must pick and choose projects and tend to select regions in which there is already a strong presence, relationship and expertise. Anonymity would therefore impede this typical selection process in the initial phase.

One example of an external entity assisting and advertising RFIs for government entities is the Public Health Foundation Enterprise (PHFE). Currently on the PHFE website there are three RFIs posted: a Public Health/Clinical Case Management Information System, an Environmental Health Information System and a Fiscal/Accounting Services Information System. INPUT confirmed that if RFPs are released as a result of these RFIs the government entities would make themselves known and release the RFP on a publicly accessible government procurement website, as well as PHFE listing the RFP.

Alliant, GSA's $65 billion Government Wide Acquisition Contract (GWAC) vehicle, has been delayed again and does not look to be taking off with agency task order requests for close to year after it was intended to begin. GSA is scrambling to re-evaluate the same proposals in an effort to lessen the chance of sustained protests. However, unless GSA awards a contract to every vendor that submitted a proposal; the next round of awards will very likely be protested again by one or more of the deemed unsuccessful vendor(s). Inevitably with a program of this size and potential value, further protests could delay the start of task order competition just a bit longer.

As for a tactical strategy, federal contracting shops are now looking for ways to procure existing requirements during Alliant's delay. There are a few options. First, the obvious answer being GSA's Millennia and ANSWER contract vehicles that will eventually be swallowed up by Alliant. Vendors both small and large who do not hold prime contracts on these vehicles should look for teaming opportunities with the vendors that have established themselves in each of these vehicles; primes can add new subcontractors throughout the life of the contract. Second, there is always the old stand-by - GSA Schedule 70. And last but not least, the plethora of IT-related GWACs offered by GSA, NIH, Commerce, and NASA.

But larger than the 'what to do now?' question, exists the overall purpose of establishing a GWAC in the first place. GWACs are massive contracts utilized to fulfill IT requirements whenever, wherever and whatever while offering up to a decade of peaceful ordering for federal agencies. However, giant contracts often have to endure years of market research, requirements definition, procurement, source selection, protests, other rounds of source selection, and a multitude of protests before a final award, ultimately costing the tax-payers millions of dollars to finalize. Is the massive struggle to finalize these gargantuan contracts overshadowed by the following years of convenient and efficient ordering?

As the scope, length and value of GWAC/ multiple award contracts (MACs) grows, so too will the importance and tension surrounding the procurement and selection process. As this streamlined procurement methodology becomes more common, government should be prepared for increased oversight, protests and positioning for final contract awards; these vehicles are accounting for an increased percentage of potential government-to-business contracting dollars. Similarly, for future vehicles, vendors should also be prepared for a repeat of this "Giant-Alliant" type long, arduous process prior to final task order competitions.

Like many of the claims cried on the various campaign trails recently, the Department of the Air Force seems to have jumped onto the same bandwagon. Currently the department is experiencing an aggressive and radical transformation in the areas of acquisition transformation and supply chain management. With initiatives like the Installation Acquisition Transformation (IAT) and additions like the AF Global Logistics Support Center (AFGLSC), there is no doubt that change is the main focus for the Air Force at this time.

In a new Analyst Recap, INPUT takes a deeper look at the 2008 Hill Air Force Base (AFB) Symposium focusing on how these changes effect specific installations like Hill AFB and the Department enterprise-wide.

The requirements and initiatives of today are starting to shape the business practices and procedures for the Air Force of tomorrow. Officials are beginning to realize that a change in mentality towards organizational structure and strategic sourcing procedures is necessary to combat a shrinking workforce and tightening budget. By pursuing an enterprise-wide mindset, the Air Force is specializing the role of component organizations, like Hill AFB, and increasing the vision for satisfying the war fighter requirements. In this new mindset and structure, the vendor community is in a unique position to greatly affect these future policies through strong relationships with government. The key conclusions for industry are:

• Air Force is moving towards a more enterprise focused mindset specifically in the areas of acquisition and supply chain management
• Reform and centralization is a top priority, involving component organizations like Hill AFB
• Understanding Hill AFB's role and priorities can improve success in business opportunities
• Industry partnerships both regionally and Department wide are growing more vital

Air Force efficiency reform is only the beginning for the Department of Defense, and these initiatives and programs may impact the future of agency transformation for the entire Department of Defense. The main pain points for the Air Force, such as a shrinking workforce and budgetary tightening, are echoed through the Department of the Army and the Navy. Change is in the air at the Department of Defense; and industry must align with these changes to catch the wind.