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Consolidation Is the New Focus Of IT Contracts

Payton Smith, an analyst with Input, said a major portion of the technology budget would be used to develop and implement large systems to provide a backbone for functions running across agencies. This falls under a federal program called the "Lines of Business Initiative," which is managed by the OMB.

The program aims to merge five main government functions: human resources, financial management, grants management, case management and the development of large enterprise networks. The theory is that instead of each agency investing in its own software to run budget analyses, for instance, they should share the technology.

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"I don't think you'll ever get to the point where you're looking at one financial management system for the entire federal government . . . but there are things that every agency has in common," Smith said. "It means that the contractor community is going to have to embrace the idea. . . . The contractors that can conceptually support lines of business will do better than those who can't."

Companies that are able to manage large system installations or provide specialized skills within a team of contractors bidding on a project will have the biggest advantage, Smith said.

Companies in the Washington area, which have traditionally fared well in the competition for federal contracts, will probably remain among the biggest beneficiaries of the new initiative because of their heavy focus on technology. A study by the Greater Washington Initiative that is scheduled to be released tomorrow found that of the $42 billion in federal contracts awarded in the area, about $26 billion worth were for technology products and services.

Huge systems integrators won't be the only winners in the government technology arena, industry experts say. Niche companies with expertise in specific technology categories also are expected to be in demand over the next few years.

Competition among vendors of Internet phone calling and radio frequency identification tags is already heating up as federal agencies begin to adopt the new technologies. Phone service over the Internet, known as voice over Internet protocol, can often reduce costs. Radio frequency identification technology uses tiny tags to track items in supply chains or in storage.

Security remains a pressing item on the government's agenda, so surveillance and authentication technology are expected to be in the spotlight at the FOSE conference.

Lisa Mascolo, managing partner of the federal division of the consulting firm Accenture, said that more of the government contracts that Accenture is bidding on involve some element of security, such as biometric identification technology or wireless network protection.

Large companies such as Accenture are still reaching out to smaller companies with innovative technologies to solve some of the government's remaining security requirements, Mascolo said. By this summer, for example, each federal agency is required to submit a report to the OMB outlining its plans to use secure identification card systems, many of which will contain a biometric signifier, such as a fingerprint reader. Requests for proposals haven't been issued for these contracts, but companies are already lining up teams of technology partners.

"We're coming to a convergence of authentication technology," Mascolo said. "What's missing today is the authentication technology so that the government can know that you are who you say you are" when constituents conduct transactions online.

The information technology budget for Defense Department agencies totaled $28.7 billion in 2005 and is expected to rise to $30.1 billion next year. Much of those funds will be spent modernizing the military's communications system and developing advanced weapons and vehicles. In December, for instance, the Defense Advanced Research Projects Agency awarded contracts to 37 companies to create technology to aid combat soldiers in urban settings.

The Defense Department is also calling on contractors to help with initiative to cull data within the four branches of the military and provide information to the right person at the right time. The goal is to ensure that a soldier in the battlefield, for example, receives exact instructions on the next maneuver, regardless of the commander's location.

The Defense Department "has spent the last three years documenting what are these specific tools that you need" to organize and distribute the data, said Mark Forman, executive vice president of Cassatt Corp. and former chief information officer for the federal government.

The next step is to pull in new commercial products and integrate all the systems. The need for such technical improvements across federal agencies is unlikely to wane anytime soon, Forman added.

"The overall budget is increasing. . . . People really continue to rely on information technology to automate the business of government, which is good," he said.

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