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GSA schedule sales slump

May. 5, 2010 - 06:00AM   |  
By DAN DAVIDSON   |   Comments
Steve Kempf, acting commissioner of GSA's Federal Acquisition Service (FAS), which oversees the schedules program, says the program's market share is increasing at a "relatively static pace."
Steve Kempf, acting commissioner of GSA's Federal Acquisition Service (FAS), which oversees the schedules program, says the program's market share is increasing at a "relatively static pace." (Tom Brown / Staff file photo)

Hewlett-Packard saw a 10 percent uptick last year in its federal business but not from contracts it has in the General Services Administration's federal supply schedules program. That part of the company's federal business dipped 12 percent from the previous year, from $580 million to $510 million.

Same with Science Applications International Corp. (SAIC). Its federal supply schedules business declined 6 percent, from $1.0 billion to $959 million, even though its overall government sales increased.

The reason, company officials and experts say, is that the GSA supply schedules increasingly must compete with other government contracts for business.

"The work has not left us but has migrated to other agency IDIQs [indefinite-delivery, indefinite-quantity contracts]," said Kitty Klaus, HP's senior program manager for government-wide acquisition contracts. "Three or four of our task orders moved this year."

Other large companies are seeing the same thing. Some of the largest companies that have done considerable business in recent years through the supply schedules have seen their sales fall in 2009, in some cases significantly.

"Northrop Grumman is down 3 percent, SAIC is down 6 percent and Lockheed Martin is down 23 percent," said Ray Bjorklund, senior vice president and chief knowledge officer for FedSources, a market research firm based in McLean, Va., which compiled the Top 250 GSA Vendors list for Federal Times. "IBM's sales on the schedules are also down, and so are those of L-3 Communications Corporation and General Dynamics.

"We're scratching our heads over what this means," Bjorklund said. "We don't know if this is a further decline in the popularity of the schedules or if there is a shift to other procurement vehicles or if it is the choice of the companies themselves. But I think it is a combination of the first two possibilities."

The slump is most pronounced in the information technology sector. Federal purchases on GSA's IT supply schedule the largest of all schedules actually dipped slightly from the previous year, from $15.8 billion to $15.6 billion, according to FedSources analysis.

One likely reason, said Dianne Tolliver, SAIC's senior vice president of the company's government contract support center, is that the Defense Department "has created a lot of generic IT contracts."

Whether GSA continues to face competition from other interagency contracts could depend on the results of Office of Management and Budget efforts to consolidate overlapping and redundant interagency contracts. Daniel Gordon, administrator of OMB's Office of Federal Procurement Policy, said last month that the government needs to consolidate its buying power to get the best prices.

"To industry, government often seems like dozens of medium-size customers, instead of one large customer," Gordon said.

Federal supply schedule sales reached $37.5 billion in fiscal 2009, up a modest 2 percent from $36.6 billion in 2008, according to FedSources' analysis completed for Federal Times. It was the fifth year of slow growth. That compares to an annual growth rate of 22 percent in 2004.

"At some point you get to your market share, and I think we are there," said Steve Kempf, acting commissioner of GSA's Federal Acquisition Service (FAS), which oversees the schedules program. "We have a consistent market share and are increasing that at a relatively static pace of 2 to 3 percent a year. Some of the schedules have seen significant increases; others are flat."

FAS' goal as the government's buyer is to provide its customers and ultimately the American taxpayer with best-value products, services and solutions, Kempf said. "This will not change," he said. "We will continue to work closely with our customers to anticipate, identify and respond to their needs in the most efficient and cost-effective manner possible. Additionally, FAS, in collaboration with our government partners, is committed to learning about industry's unique and state-of-the-art solutions to meet our customers' mission-critical needs."

While the IT side of the federal supply schedules is sagging, other non-IT segments are doing well, said FedSources' Bjorklund. The schedule offering financial services (Schedule 520, Financial and Business Solutions) saw sales climb 7 percent; the schedule offering management and professional services (Schedule 874, Mission Oriented Business Integrated Services, or MOBIS), registered a 9 percent increase. Both supply schedules have expanded their offerings and MOBIS especially has made itself more convenient to buyers of different services, Bjorklund said.

"Because the other schedules are more services-oriented than say, IT [Schedule] 70, it is easier to adapt the scope of the services-driven schedules to complex and unusual requirements," Bjorklund said. "That's easier on the customer and the contractor."

Companies that may have benefited by this spurt in buying through these particular schedules include Booz Allen Hamilton Inc., which saw its sales on the schedules climb last year. Booz Allen sells a wide range of professional services to the government, most notably program management and support services, engineering and technical services, and applied research-and-development services. Some of its biggest customers are the Air Force, Army, Navy and the Homeland Security Department.

But what is troubling, Bjorklund said, is the decline in GSA schedule sales that so many companies have experienced.

Lockheed Martin, for example, saw schedule sales fall to $332 million in 2009 from $429 million the year before. This shift occurred despite the fact that Lockheed, the government's top contractor, saw overall federal sales increase to $38 billion in 2009, up from $35 billion in 2008, according to USASpending.gov.

"Our business is fluid from one year to the next and our work will vary between GSA schedules and non-GSA contract vehicles," Joseph Wagovich, Lockheed's program communications director, said. "There are many different vehicles available to agencies and they will use the vehicle that represents the best option for them for each opportunity."

Many of the top 250 schedules contractors saw their sales figures increase, of course. SRA International saw its schedule sales rise by about 4 percent to $313 million last year, following previous healthy increases.

"We are up 47 percent since 2007," Stan Sloane, SRA's president and CEO, said. "We don't know if we will continue to grow at the same rate, but we expect it to grow."

Even so, Sloane said that SRA, like other companies, has noticed in recent years a move toward other agency purchasing vehicles. The sales are like a pendulum, Sloane said, "they swing back and forth from GSA to agencies. I don't see a long-term trend, but in the past few years there has been a trend toward agencies."

That trend, he said, amounts to a "significant amount" of revenue for SRA.

Push to improve sales

Nonetheless, most company representatives who spoke to Federal Times applaud GSA's efforts to improve sales.

"They are very open to change and are continuing to make improvements on their e-Tools platform," which provides industry and customers a range of online interactive capabilities to conduct business, SAIC's Tolliver said. GSA brings industry on to test products and make changes to, for example, GSA Advantage, an online shopping and ordering tool, and E-buy, where contractors respond to requests for quotes, Tolliver said. "We are in the same room kicking the tires," she said.

In addition, GSA is promoting cloud computing, which allows agency customers to share computers and computer-related equipment instead of buying their own. As this evolves and the security needed for it evolves, it may mean that some agencies will not need their own data centers, Tolliver said.

SRA's Sloane praised GSA's work in streamlining the application process by introducing automation online and standardizing the templates that contractors use, and by standardizing bid inputs. "It's a lot easier to deal with GSA schedules than it used to be," Sloane said.

But other observers say GSA should do more to push sales on the schedules.

"The schedules program has been almost in neutral the past couple of years, and they need someone to put it in drive," said Larry Allen, president of the Coalition for Government Procurement, an industry advocacy group. "GSA faces two significant challenges: First, there is a lack of continuity in the program. Second, there is an absence of a senior-level advocate in FAS who is senior enough to drive the continuity and the marketing."

Allen said his organization has advocated that FAS have a program management office, such as the Office of Acquisition Management, which in the 1990s was responsible for both policy and program responsibilities. Those responsibilities have since been split up.

"It is time to bring both of those parts together so you have one person with dominion over both," Allen said. Some of FAS's problems, he said, are "just a function of management structure and organization."

Bjorklund, likewise, said GSA must "step up the intensity and focus of its marketing. If it does, it can be a big help to its industry partners in making federal, state and local governments bigger buyers."

Greater sales growth is expected with state and local governments, though GSA's Kempf said that "is not a strategic focus for us."

Kempf cites other improvements, such as its rapid addition modification, which will allow contractors to modify their offerings with more ease, and plans to move to a Web 2.0 environment, which will upgrade its e-Tool platform, making it easier to search Advantage, for example, and permit live Web chats between customers and industry.

And with the greater emphasis on the greening of federal buildings, Kempf expects to see sales of green products and services increase. There already been a 7 percent increase in the number of firms making such offerings, he said.

For Schedule 899, Environmental Services, alone, the number of contractors as of March 30 was 822, up from 809 a year earlier, Kempf said. Sales are nearly $200 million, compared with $179 million a year earlier.

Two schedules Schedule 03FAC, Facilities Maintenance and Management, and Schedule 871, Professional Engineering Services offer green solutions, in addition to other services, he said.

Meanwhile, a number of mergers means some of the largest of the top 250 schedules contractors will be even bigger next year, as a matter of simple addition, Bjorklund said. For example, Oracle has acquired Sun Microsystems, Affiliated Computer Services is now a subsidiary of Xerox, and Perot Systems operates as a subsidiary of Dell.

Whether those companies will also see more sales is a definite possibility, he said.

View the data (links open PDF files)

Top 250 GSA vendors.

GSA sales slowdown.

Top-selling schedules

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