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KRT Impact Blog

Federal IT Budget Snapshot

The President’s FY2014 budget was released on April 10th. Though there are still many steps left before the budget passes through congress – it is nice to get some ideas around what are the Administration’s major priorities are. I am still running through the overall President’s budget and may share additional findings in a later blog. For this blog I am focusing on a smaller piece of the overall Federal budget – the IT budget. I spent the last week running through some of the data and had a great opportunity to receive further insights on budget priorities when I attended the Federal IT Budget Preview hosted by AFCEA Bethesda last Friday.

The keynote speaker was Steven Van Roekel the CIO for the United States and also included a great panel of senior executives the Office of Management and Budget (OMB), the Department of Homeland Security (DHS), the Department of Health and Human Services (HHS) and the Department of Agriculture (USDA).

If we dive into the keynote delivered by Steven Van Roekel the main Federal Technology Objectives are:

The full presentation is available here.

Some of the interesting things I noticed is that throughout the 2000s IT spending in the United States expanded at a high rate – the CAGR (Compound Annual Growth Rate) of the IT Budget stood at 7.09% in FY2009. If that rate had remained steady the IT budget for the Fiscal year of FY2014 would have been approximately $111B instead – instead of that the CAGR has remained relatively flat at 0.78%. The result is the expected FY2014 budget is only approximately $81B.

The theme for the IT budget that was echoed repeatedly is doing more with less. There are many initiatives throughout the Federal Agencies to focus on cost-savings and cost avoidance measures – and then channeling that money as investment dollars to improve the effectiveness and efficiency of IT programs.

O&M vs. DME

One of the concerns highlighted at the breakfast was the growth of the operations and maintenance costs in IT programs vs. the investment portion also known as Development, Modernization, and Enhancement (DME). The Government executives present stated that the balance of O&M to DME was unsustainable and they needed solutions in the future that would enable them to invest in Information technology while keeping the O&M portion under control.

 

Overall IT Investments

If we take a closer look at how agencies are investing their IT dollars – there are 3 broad categories with the dominant one being Agency Investments. The categories are outlined below:

Spending in Cloud Computing?

One of the buzzwords in Federal IT for the last few years has been cloud computing. This type of investment has been one of the most talked about and the hardest to analyze from a dollar perspective. This is because the traditional spending categorization systems of NAICS and the Federal Supply Groups don’t show any visibility into cloud computing.  Fortunately the Federal Government is exposing this spending through the FY2014 budget – the table below illustrates cloud spending as the Federal Government defines it.

 

Conclusions

Overall the Federal Government has a lot of budget challenges for FY2014 and they will strive to do more with less. The positive here is that there should be plenty of opportunities for companies that can provide innovative solutions and can help the Federal Government find those lucrative investment dollars through cost savings and cost avoidance!

If you have any questions or comments regarding our data or findings – we would love to hear from you! Please reach out to us at contact@krt-associates.com

Security vulnerability for GSA’s SAM Reported

The General Services Administration (GSA) released a letter warning about security vulnerability in their system System for Award Management (SAM) last Friday. Users with administrator rights for their organizations on SAM may want to go to GSA’s SAM security FAQ: http://www.gsa.gov/portal/content/167851

Handling security issues is always a delicate issue when balancing security and the perception of a new initiative, and I applaud GSA for being proactive in reaching out to their end users. 

The full content of the letter is available at the bottom of this post.

What is SAM?

 SAM is a portal/initiative where GSA will be consolidating many of the existing Federal acquisition and award management systems and sites into one unified platform. This PDF provides a great overview of exactly what sites will be consolidated into the system and a rough timeline for consolidation as well. Eventually most of the popular acquisition sites covering everything from Federal contracts to grants will be housed in SAM.

Sites/Systems that will be consolidated in the future include:

IBM won the prime contract for this effort under contract for Architecture and Operations Support Contract (GS-00I-10-AA-C-0046)  awarded on February 3, 2010 by GSA for $74,441,281.04. The period of performance on this contract is 8 years (Three-year base period and five one-year option periods). According to FPDS approximately $31M has been executed against this contract to date.

So far SAM has taken over the functionality for several systems so far including the Central Contractor Registration (CCR) – which as the name indicates is where most contractors house their core business information so they can do business with the Government. The above security alert primarily pertains to the CCR type of data.

SAM like any new large system or consolidation effort has had some issues during its implementation, some which are highlighted in the news articles below:

The idea for consolidation in the many disconnected acquisition systems is one that just makes sense, especially if you have spent time over the years trying to navigate many of these systems trying to find some strands of commonality when conducting research into a Program or trying to support business development or capture efforts. I hope GSA and IBM manage to overcome the other obstacles an effort of this scale is going to have, and we all benefit from having one unnecessary system of silos in the acquisition space.

Content of the Letter:

“Dear SAM user

 The General Services Administration (GSA) recently has identified a security vulnerability in the System for Award Management (SAM), which is part of the cross-government Integrated Award Environment (IAE) managed by GSA.  Registered SAM users with entity administrator rights and delegated entity registration rights had the ability to view any entity’s registration information, including both public and non-public data at all sensitivity levels.

Immediately after the vulnerability was identified, GSA implemented a software patch to close this exposure.  As a precaution, GSA is taking proactive steps to protect and inform SAM users.

 The data contained identifying information including names, taxpayer identification numbers (TINs), marketing partner information numbers and bank account information. As a result, information identifiable with your entity registered in SAM was potentially viewable to others.

 Registrants using their social security numbers instead of a TIN for purposes of doing business with the federal government may be at greater risk for potential identity theft. These registrants will receive a separate email communication regarding credit monitoring resources available to them at no charge.

 In the meantime, we wanted you to be aware of certain steps that all SAM users may want to take to protect against identity theft and financial loss. Specific information is available at www.gsa.gov/samsecurity.  If you would like additional background or have questions, you may call 1-800-FED-INFO (1-800-333-4636), from 8 a.m. to 8 p.m. (ET), Monday-Friday starting Monday, March 18. We recommend that you monitor your bank accounts and notify your financial institution immediately if you find any discrepancies.

 We apologize for any inconvenience or concern this situation may cause. We believe it is important for you to be fully informed of any potential risk resulting from this situation. The security of your information is a critical priority to this agency and we are working to ensure the system remains secure. We will keep you apprised of any further developments.

 Sincerely,

 Amanda Fredriksen

Acting Assistant Commissioner

Integrated Award Environment

 

Evolution of Contract Vehicles in Federal IT: TIPSS

One of the “truths” in Federal IT contracting is the increasing importance of multiple award contracting vehicles. The usage and prominence of contracting vehicles as a preferred method for buying information technology solutions, whether it is hardware or software, has been increasing year after year. Now that several generations of evolution have taken place for of thesecontracts, I thought it would be interesting compare them to their predecessors.

For this blog, I thought I would investigate one that I am intimately familiar with and see what has happened to the contract since it was awarded. I’m taking a look at the Internal Revenue Services’ (IRS) Total Information Processing Support Service-4 (TIPSS-4) contract. I was at the Pre-solicitation conference for TIPSS-4 in early 2009 and at the time, the contract was one of the “must-win” acquisitions for many vendors that wanted a significant role in the IRS’s IT efforts.  

TIPSS-4 was the follow-on contract to the highly utilized TIPSS-3 contract vehicle which, along with the IRS Prime contract (held by Computer Sciences Corporation), was the avenue that much of the IT work for the multi-billion dollar IRS Business Systems Modernization (BSM)  was procured through. It has been about a year and a half from the award date of TIPSS-4, and I was curious where the contract was today. Was it the windfall that many contractors had hoped for?

Quick overview of the two contract vehicles:

For comparison, below is the growth of TIPSS-3 since it was awarded (total spending on the contract was about $2.7B)

TIPSS-4 heavily increased its focus on ensuring contractor compliance with process-based methodologies such as the Earned Value Management System (EVMS) and the Capabilities Maturity Model Integration (CMMI) in regards to TIPSS-3.  So with a much higher ceiling, and a longer period of performance to its predecessor how much has the contract been used since it was a awarded a year and a half ago?

According to my research, since the contracts were awarded in January 2011 theTIPSS-4 ITS contract has reported spending of approximately $67M, which appears to be a major decline from the previous contracts burn rate. On a surface level this contract is not looking to be the major windfall that contractors were expecting.

Could the cause be a general slowdown in IT spending by the IRS? Is the IRS switching to different contracting options? (Examples include Unisys’s $139M IRS cloud service win through GSA’s Alliant contract – Source – Washington Technology: Unisys wins $139M IRS private cloud contract). Is there a slow-down in the IRS Business Modernization program that was a driver of much of the IRS’s previous IT spending? Are the TIPSS-4 small business contracts consuming a big chunk of the spending?

All of the above questions warrant much further investigation, but from a spending perspective one can say that the pattern of how IT is being bought at the IRS is in the process of shifting.

Notes:

For any questions or clarifications on any of the information provided, please contact us

If there is interest I will do a separate look at the TIPSS-4 Small business awards in that covers cyber security and Management Business Operation Support Services (MBOSS)

Contract spending data is sourced from the Federal Procurement Data System

Fiscal Year 2013: Reflections from Four Years Ago

It’s been about four years since the last presidential election during November, 2008. That time period like now was full of uncertainty for the Federal market. By September 2008, (the close of the 2008 Government Fiscal Year), major cracks were showing in the US economy and there were some uncertainties that was shadowing the start of FY2009:

Overall, it was a grim time for the American economy, and there was much uncertainty around the role of the Government and what all of these factors would mean for the Federal procurement community.

Now four years on as we prepare for another round of presidential elections and a new fiscal year, we have some interesting new and old realities to deal with:

What is Sequestration?

As a quick-aside Sequestration is a result of the Budget Control Act (BCA) of 2011 and sequestration put in place almost as a doomsday device for congress to agree to terms a $1.5 trillion in deficit reduction. Obviously this did not happen. The Center on Budget and Policy Priorities had good information that provides an overview of the impacts, and more details around sequestration: http://www.cbpp.org/cms/?fa=view&id=3635

“Broadly speaking, for 2013 the across-the-board cuts will mean about an 8.4 percent cut in most affected non-defense discretionary programs, a 7.5 percent cut in affected defense programs, an 8.0 percent cut in affected mandatory programs other than Medicare, and a 2.0 percent cut in Medicare provider payments.“

With the sluggish economy, upcoming election, and uncertainty around the impacts of sequestration, it is an interesting time to be a participant in the Federal acquisition market as both a buyer (Federal Agency) and a seller (Contractor).

In a series of follow up blogs throughout the month of October – we are going to explore some potential trends that we can watch out for in the Federal Market during FY2013.  I look forward to feedback on what you think the next few years will bring us in the federal acquisition world. Reach out to us at: contact@krt-associates.com