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Big Dreams, Big Rewards
Huge Technology Contracts Have Potential to Elevate Companies to an Elite Level in Federal Procurement Sector

By Griff Witte
Washington Post Staff Writer
Monday, May 30, 2005

This summer, Reston-based federal contractor STG Inc. will compete head-to-head against companies that do more government technology work in a month than it does all year.

The odds are long, but the potential payoff is high.

The prize? A GWAC.

An abbreviation only a bureaucrat could love, GWAC stands for government-wide acquisition contract. To the companies like STG that sell to the public sector, GWAC also stands for billions of dollars in potential business, and a foot in the door at every agency in the federal government. Just one win can lift a company from obscurity and make it a major player. A loss can freeze it out of contention for the next decade.

The idea is to give agencies a way to buy goods and services more quickly and, at least in theory, more economically by winnowing the field of possible contractors to a select group that can meet a wide variety of needs.

With several large GWACs up for grabs this summer, contractors big and small are scurrying to prepare proposals, research the opposition and organize alliances, all in an effort to ensure they get a piece of the business.

"It's a challenge, but it's also a growing opportunity," said Dennis Groh, vice president at STG, which has increased its annual revenue to about $170 million after winning previous GWAC competitions. "Plus, these don't come along very often."

They are coming along much more often than they used to, however, as a shrinking cadre of government procurement officials relies on them increasingly as one-stop-shopping sources for their equipment and service needs.

STG, for example, is competing to be one of the 20 companies picked by the General Services Administration to be included in a 10-year, $50 billion GWAC for information technology called Alliant.

"This is one of the most important bids that we have going in the federal sector," said Elaine Dauphin, vice president at Computer Sciences Corp., which is the government's fourth-largest information technology vendor and has 8,100 employees in the Washington area working on federal contracts.

ITS Corp., a California company that plans to expand beyond its 50 employees in the Washington region, has recruited several partners to form an alliance in its bid to be included in Alliant.

Companies also are trying to get part of a major telecommunications contract called Networx, which is also run by the GSA and is valued at $20 billion. While not technically a GWAC, it works in much the same way. As GWACs expand, some contracting experts wonder whether such big contracts really give the government its money's worth.

"When they're good, they're very good," said Eugene Waszily, assistant inspector general for auditing at the GSA. "And when they're misused, they're misused very badly."

Among the problems he cites: a lack of competition after the GWAC has been awarded, and fuzzy contract terms that allow contractors to run up bills.

Waszily said GWACs are intended to narrow the range of potential competitors by screening out everyone except "the best of the best." But once that happens, there are still supposed to be mini-competitions among the winners for individual task-order awards. A recent inspector general review of the results found that one-third take place with only one bidder. And less competition means the government is not always getting the best price, Waszily said.

The inspector general's review also found that specific orders on GWACs were often written in vague terms. That is dangerous, he said, when the work is done on a time-and-materials basis, as it was in about 60 percent of the cases his office reviewed. Under that type of deal, the government has to reimburse the contractor for its labor costs, with a percentage for profit built in. That means the more resources the contractor throws at the job, the more money it makes.

"What we see is the contractors are being used basically as a supplement to the in-house, existing workforce. In some cases, you can't tell who's who without a scorecard," Waszily said. "There's not a lot of incentive for the contractor to be highly efficient."

In the past decade, the government has fundamentally changed how it buys information technology, and GWACs have been part of that. So have other types of arrangements. The common theme is to make the procurement process operate more quickly -- and more like the private sector -- by allowing individual agencies to outsource contract management to other parts of the government for a fee.

Under the schedule system, for example, agencies can buy from a pre-approved list of vendors under terms that have already been negotiated by the GSA. While that service has been around for decades, its use has grown dramatically in the past 10 years -- to more than $30 billion, from $4 billion.

Under a government-wide contract, agencies do not have to start from scratch every time they need technology. Instead, they can buy from a master contract that is already been negotiated by another agency, with only the final details left to be decided.

"People want to do things more efficiently and more effectively. When you're using the GWAC, the process is more streamlined," said Barbara L. Shelton, acting commissioner of the Federal Technology Service at the GSA. She said the fact that agencies have been using them more and more since Congress approved their use in the mid-1990s is testament to how well they work in saving the government time and money.

As the government's lead procurement agency, the GSA runs about two-thirds of the government's 15 or so GWACs. Its program has proliferated rapidly in recent years: In 2001, the agency's GWACs were responsible for $1.4 billion in contracting. Last year, they totaled more than $3 billion.

That number is likely to go up sharply with the addition of Alliant and others just entering the marketplace. For example, there is a separate $15 billion in Alliant set aside for about 40 small-business contractors. And there is a $5 billion Veterans Technology Service contract, a set-aside program for small businesses owned by disabled veterans. Alliant, which replaces several existing contracts, has the potential to be the GSA's largest GWAC yet. The contract is expected to go out for bid this summer, with winners to be announced a year later.

Nearly every company with a stake in the government information technology market is taking a hard look at it. Many began preparing bids long ago, even though the request for proposals is not scheduled for publication until July.

Alliant and Networx recently drew scrutiny from House Government Reform Committee Chairman Thomas M. Davis III (R-Va.), who wrote to General Services Administrator Stephen A. Perry to express concern that the contracts "have the potential to drain GSA's limited resources."

Davis also questioned whether the two contracts overlap, writing that he perceived an "apparent lack of management coordination among these disparate but related programs."

Perry responded that Networx and Alliant are intended to complement each other, and that the agency is "aware of the need to sustain high quality service, service continuity, and efficient operations" even as it runs the two contracts.

Davis said last week that the agency's response has not alleviated his concerns. "I want to make sure they have a plan, that they're coordinated and they're not stumbling over each other," he said. "We're looking over their shoulder."

Networx and Alliant have won better reviews from contracting experts who like the fact that the GSA seems to be attempting to consolidate its GWAC program to eliminate confusion. They also point to Alliant's sizable set-asides for small businesses as a step in the right direction.

Christopher R. Yukins, associate professor of government contracting law at George Washington University, said the rise of GWACs is in part a function of a downsized acquisition workforce that needs a faster way to operate with the burgeoning demand for contracted IT services. But, he said, faster is not always better.

With procurement officials limiting themselves to a select few players after the GWACs have been awarded, he said, the officials and the companies can get complacent. The officials "tend to buy last year's model over and over again," he said. "You don't have decisions based on who makes the best product. It's who knows who, and that's no way to run a procurement system."

Valerie W. Perlowitz agrees that GWACs can curb innovation because, with their expansive scope, they favor companies that do everything adequately over companies that do one or two things exceptionally well. Perlowitz, chief executive of Reliable Integration Services of Vienna, said that tends to play into the hands of large contractors and against small businesses like hers.

"There are a few giant companies that really benefit from this system," said Danielle Brian, executive director of the Project on Government Oversight, a nonprofit group that monitors contracting practices.

Some small businesses have had luck with GWACs, though, using them as a catalyst for substantial growth. STG, for example, was able to climb into the middle tier of government contractors because of GWACs, Groh said. And it hopes to use Alliant or Networx to climb even higher.

ITS's annual revenue has to about $60 million, from $5 million six years ago, largely because the company won a GWAC with the GSA. That contract is to expire soon, however, and it will be replaced by Alliant. Like STG, ITS will be up against firms many times its size, but it thinks it has a strong shot at getting one of the awards.

"We're not burdened by layers of bureaucracy. We're flexible. We're responsive," said Rosanne Satterfield, senior vice president.

And if it does not win?

"I would certainly be disappointed should we not win," Satterfield said. "But right now, we believe we will."

© 2005 The Washington Post Company