According to recent numbers from the Bureau of Labor Statistics, U.S. governments added close to 77,000 jobs in the first quarter of 2008. The Federal government accounted for 13,800 of those and State and Local governments added 63,000. These new jobs arrived in spite of our country's current economic downturn and a time when spending growth in most states is slowing to a crawl and in some states major deficits are here or on their way.

Perhaps because of the incongruence of these jobs and the setting they have entered, they bring with them a sign of hope. Will state and local governments be the shoulder to lean on during this hopefully brief economic event? The increase in jobs in state and local governments can partially be attributed to the heightened demand for services due to steady population growth. Local governments are heavy on services that often increase in demand as economic times are tougher. This coupled with the much feared mass retirement of baby boomers is leading State and Locals to staff-up. While the new jobs are clearly a positive in the short-term, it is unrealistic to expect sustained growth in the government workforce.

A more realistic expectation for the State and Local workforce, especially in the context of IT workers, is continued moderate growth, the delayed or part-time retirement of Baby Boomers, and an increase in recruitment efforts to attract world-class employees.

This new workforce, along with the citizenry they represent, will demand modern processes and tools to carry out their jobs and to interact with their government. This will drive IT innovation around continued adoption of business management and business process best practices and will be one of the keys to allowing State and Local governments to transition and adapt in a time that may turn in to the largest re-invention of government service delivery.

Recently one of INPUT's Homeland Security analysts appeared on Homeland Security Television in a segment entitled, "Ghosts in the Machine," hosted by Dan Verton. The program discussed the issues surrounding true interoperable public safety communications and predicted the more than 100,000 emergency response organizations across the U.S. would not achieve true interoperability until 2023, almost two decades after 9/11. A lack of standards, federal leadership, intergovernmental cooperation and political will have been blamed, though some improvements have been made.

While technology may be the easy part of the puzzle, it is still important. INPUT forecasted last year that state and local governments will spend over $5.5 billion on public safety interoperable communication between 2007 and 2012. In fact, INPUT is tracking nearly 200 pre-solicitation public safety communications opportunities valued at over $3.4 billion and most of them include some federal funding from various grant programs described below:

Homeland Security Grant Program (HSGP)

State applications for the Homeland Security Grant Program (HSGP) were due last week. This year HSGP includes four interconnected grants and will distribute over $1.6 million in funding for emergency preparedness and response:

Any portion of HSGP that allows equipment purchases in the purpose of the grant may fund equipment in 21 categories on the Authorized Equipment List (AEL), including interoperable communications equipment of the following types:

• Digital cell phones
• Data and messaging services
• Satellite phones
• Satellite data services
• Priority services
• Land-mobile radios and bases
• Bridging, patching, gateways and other related equipment
• Other land-mobile radio equipment
• Wide area networks
• Wire-line communications
• Communications security (COMSEC) support equipment

There are several other grant programs that may be used to fund interoperable communications:

Interoperable Communications Equipment Grant

HB 1, Implementing the Recommendations of the 9/11 Commission, authorized and the Consolidated Appropriations Resolution appropriated funds for the creation of a new grant program dedicated solely to interoperable public safety communications. The objective of the new grant program is to fund demonstration projects that explore the use of equipment and technology to increase interoperability among fire service, law enforcement, and emergency medical service personnel. The grant guidance for 2008 indicates federal funds may be used for planning and management activities, equipment acquisitions and training and exercises and provides detailed functional requirements for the eligible communications equipment and technologies. Like the one-time only Public Safety Interoperable Communications (PSIC) grant, applicants must have submitted a statewide communications interoperability plan to the Department of Homeland Security (DHS).

Commercial Equipment Direct Assistance Program (CEDAP)

This grant program provides federal assistance to enhance regional response capabilities and interoperable communications by providing technology and equipment to public safety agencies in smaller jurisdictions. CEDAP awards are not monetary as DHS provides the equipment or technical assistance directly to the recipient. DHS anticipates the application process for 2008 will begin sometime this month. Interoperable communications vendors will want to monitor the types of equipment governments receive through this assistance program as those jurisdictions will be prospects for additional equipment and services as they continue down the path of true interoperability.

Assistance to Firefighters (AFG)

The AFG program and application guidance for 2008 was released in February. $560 million is available this federal fiscal year and awards will be made in several rounds throughout the year. AFG funds may be used for regional projects designed to facilitate interoperable communications and efficiency among the participating governments.

Edward Byrne Memorial Justice Assistance Grant (JAG) Program

The JAG program is managed by the Bureau of Justice Assistance, Office of Justice Programs, U.S. Department of Justice (DOJ). JAG funds support all components of the criminal justice system including law enforcement, prosecution and courts, prevention and education, corrections, drug treatment and enforcement, crime victim and witness programs, and technology improvement. It is a formula grant program and 40% of the funds must be directed to local units of government. Applications were due to DOJ in January, but 2008 award announcements have not yet been made.

Community-Oriented Policing Services (COPS)

The Consolidated Appropriations Resolution provided over $320 million for several priorities covered under COPS. In 2008, over $205 million will be available for law enforcement technology, which can be used for public safety interoperable communications. The request for applications has not yet been released for this portion of the program. However, the Tribal Resources Grant Program (TRGP) grant guidance was released last month. Applications are due on June 13, 2008. All Indian tribes that are federally recognized by the Bureau of Indian Affairs (BIA) that have police departments are eligible. $15 million is available this year under this comprehensive program that funds officer background investigations, law enforcement training, uniforms, basic issue equipment (such as radios), department-wide technology and vehicles.

Communications Technology (CommTech)

The Communications Technology grant program is managed by the National Institute of Justice. Applications for 2008 grant funds were due last November. Awardees will research develop and evaluate emerging communication technology solutions for criminal justice agenices. The areas of interest are: 1) cellular detection, location, isolation and defeat, 2) locator technologies for personnel and equipment assets, 3) software defined radio (SDR) technology, 4) cognitive radio technology, 5) in-building communications coverage technologies, 6) alternative technologies for interconnection of repeater sites for voice that also enable wireless data services, 7) non terrestrial technologies (satellite and airborne), and 8) mobile hybrid technology for wireless broadband data. Over $54 million was distributed under this program in federal fiscal year 2007.

For more details on the federal grants which may be used to fund interoperable communications acquisitions, state public safety communications governance, state and local program offices and links to statewide communications plans and roadmaps, check out INPUT's Homeland Security or Justice/Public Safety Vertical Profiles.

Yesterday, the Office of Management and Budget released the Annual Report on the Federal Acquisition Workforce (FY2007) announcing a 7% increase in acquisition related employees (1,826 individuals) over the last six years. This report is provided to assist public-sector managers in anticipating human capital related trends and issues. The reality is, in the short term, the acquisition workforce is growing but not as quickly as the volume of dollars spent (see Chart #1 below).

Chart #1

Source: OMB, FIA report, INPUT Analysis

When we apply this information to the shift in acquisition methodology, questions arise regarding U.S citizen's "bang for the buck." Current trends in how the federal government procures include:

• The technology community has seen a 20% decrease in open market competition over the last five years
• This 20% decrease represents a shift of those dollars to task order vehicles, moving from 13% of total spending in 2002 to approximately 33% in FY2006
• GSA Schedule utilization within the technology sector has remained flat at approximately 18% of total spending over the last five-years

The rational heard from public sector administrators for this shift includes; faster acquisitions, decrease in the level-of-effort to procure specific goods/services, increased utilization of lower-cost economies of scale buys as well as more streamlined competition capability. All of these facts, taken together, beg the questions:

1. With a larger workforce today coupled with a more streamlined procurement process, are these vehicles offering the tax payers a more efficient use of the citizen dollar to set-up, administer and use?
2. Is the lack of pre-solicitation visibility to how federal funds are being utilized actually producing the cost saving?

Additional Information can be found in FCW's Article: Report: Acquisition workforce increases

While the trials and travails of the Gibbons marriage may titillate and actually have some legal implications for the governor, Nevada's Jim Gibbons is moving forward on many of his government efficiency and transparency initiatives.

The Nevada press has been full of stories of Jim Gibbons moving out of the governor's mansion to the couple's home in Reno while the first lady, Dawn Gibbons, remains ensconced in the mansion. The Las Vegas Review-Journal reports this may actually be illegal as state law requires governors must "reside at the seat of government." During the turmoil, Gibbons has managed to move forward on government efficiency and transparency.

The governor recently announced the creation of the Nevada Spending and Government Efficiency (SAGE) Commission, which will be tasked with identifying ways the state can streamline its operations, maximize the use taxpayers dollars and improve customer service. An Executive Order formalizing the commission will be signed on May 7.

Last month, by Executive Order, Gibbons required the Department of Administration to "develop the Nevada Open Government Initiative as a free Internet portal allowing citizens to review state financial records to the fullest extent possible by law." The website will include a searchable database of budget information, expenditures, contracts and grants. Since the issuance of the Executive Order, the Nevada Open Government website has launched. It is a work in progress but currently includes the Nevada Report to Taxpayers and state purchasing contracts. Observant people will notice the site currently includes a link to an INPUT B2G Exchange blog post on transparency.

Today Congress passed a bill -- by remarkably bipartisan 414-1 and 95-0 margins -- that will likely boost national efforts to create Electronic Health Records. The bill prohibits the use of genetic information by health insurers or employers to determine rates or eligibility for coverage, benefits or employment related matters. Depending on the strength of the ultimate protections and remedies, this prohibition on genetic discrimination should alleviate to some extent individual privacy concerns, which were one of the main challenges to widespread adoption of Electronic Health Records.

In 2004, President Bush issued an Executive Order that established a Health Technology Agenda, with one goal being that all Americans should have electronic health records by 2014. This agenda calls for the creation of a National Health Information Network (NHIN), which now falls under the auspices of HHS's Office of the National Coordinator for Health Information Technology.

In a recent report, INPUT forecasted that the Health IT Market will grow to $4.5 B in 2013 from $3.2 B in 2008, a growth rate of 7.1%. This legislation is likely fuel to that growth.

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.

With the appropriations process just underway on the 2009 budget and the 2010 budget request due just three weeks after the new President is inaugurated, agencies will have to wait until 2011 for a new President to kickoff major new initiatives and reshape the budget to reflect his or her priorities.

Let's start with the 2009 budget. President Bush submitted his budget in February as scheduled. Congress is coming off completing a budget resolution that establishes the framework for the appropriations work on the '09 budget. As in prior years, industry should expect delays carrying the negotiations well into the 2009 budget year.

For the 2010 budget, the President has informed agencies through an OMB Memorandum that they will not be required to submit a formal budget. Instead, steady state figures will be provided to the new President and be left to square it away once in office. This most likely means that the President's budget request for 2010 will not be submitted by the February deadline traditionally established for the President's budget. Further, due to the time constraints and the time required to transition to a new Administration, the new President will not have time to bake in his or her major initiatives.

That brings us to 2011. This is the first budget cycle in which the new President will have the opportunity to recast the budget to reflect his or her priorities. As a result, agencies and the vendors that serve them will have to manage to the status quo for some time to come.

Yesterday, OMB released an Updated Report on Information Technology (IT) Spending for the Federal Government for fiscal 2009. This updates the February release of this data and restates the overall federal IT budget request for fiscal 2009 down slightly by $198 million (-0.3%) to $70.7 billion from $70.9 billion in February.

Key Changes in the April Update

Defense: This April update includes line-item investment data for the Defense agencies and service branches whereas the February release provided only top-line numbers for each branch. This additional data give us much more insight into where the Pentagon is going with their specific IT initiatives.

Second, the sheer number of investment lines for each branch in the April update dwarfs the number of investment lines in the February release. A quick look at the DoD Agencies breakout revealed over 500 investment lines (with corresponding investment data) in April where February contained in the twenties (and without detailed investment data.)

Defense Highlights

• Overall down 0.1%, or -$39 million
• USAF down 3%, or -$215 million
• Army down 0.3%, or -$22 million
• Navy up 0.8%, or +$59 million
• DoD Agencies up 1.3%, or +$139 million

Civilian: By contrast, the February release had much more complete data for Civilian than for Defense and the April update "delta" is much less dramatic. Both releases contain detailed line-item initiative investment dollar data and of the 27 Executive-level Civilian agencies included in the Ex. 53 just over half of those agencies had no change in their FY09 request between the February and April releases.

Civilian Highlights

• Overall down 0.4%, or -$159 million
• USDA up 0.7%, or +$16 million
• Commerce up 1.4%, or +$31 million
• HHS down 1.3%, or -$76 million
• DHS down 1.7%, or -$90 million
• Justice up 3%, or +$81 million

My fellow federal analysts and I are pouring over this updated data as we prepare for our 6th Annual Federal MarketView Conference where we will discuss our five-year IT forecast for the federal government as well as explore what we see within the various Defense/Civilian segments, agencies and technology sectors.

While a Federal Gas Tax suspension for the summer and an end to AMT may have gotten more attention, Senator John McCain announced that he would halt the growth of discretionary spending for one year while the government performs a "prompt and thorough review" of the budgets of all Federal Agencies except the Department of Defense and the Department of Veterans Affairs.

These budget politics could play havoc with discretionary spending. If Congress is unable to pass agency budgets for FY09, we would likely go the route of either an omnibus bill as in FY08 or continuing resolutions. We should note that the FY08 Omnibus increased Federal spending by 8.1%, while continuing resolutions keep spending at the prior year's level.

This proposal, along with President Bush's announcement that he will be submitting only a current services baseline for FY10, increases the pressure on the current Congress to pass FY09 budget legislation this year if they want to have an impact on budgetary priorities in the near future. If McCain is elected, he could put his plan into effect by vetoing appropriations bills, which would have the same effect of the pause unless overridden. In any case, absent action from Congress, the hastily passed FY08 Omnibus Budget could be the beacon for spending for several years to come.

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.