The government’s largest contracts slated for release this fiscal year will be significantly larger than previous years, according to a new analysis.
The top 20 contract opportunities represent a combined potential business worth $160 billion over the contracts’ lifetime, or a 74 percent increase over the $92 billion value of last year’s top contracts, according to a new report by market research firm Deltek.
Request for proposals are expected to start rolling out in January, which should provide some breathing room for agencies to recover from the partial shutdown, said Jennifer Sakole, principal analyst for federal information services at Deltek. Whether contracts will be immune to impacts of the shutdown is unclear, but so far agencies haven’t announced plans to cancel or postpone these contracts as a result.
Sakole noted that while the estimated ceiling values are significantly higher than last year’s top contracts, agencies may end up spending less money under those contracts. A number of the top opportunities are follow-on contracts.
And if reported spending under the current contracts is any indication of future trends, agencies could spend less than the estimated value of those contracts.
For example, the Army’s Strategic Services Sourcing 2nd Generation (S32G) contract for information technology services is valued at $30 billion. Under the incumbent Strategic Services Sourcing contract, reported spending as of this month is only $14.2 billion, with companies like CACI, ManTech International and CSC receiving the bulk of the business, according to the Deltek report.
Defense Department spending accounts for 73 percent, or $118 billion, of the top contracts, which is more than double last year’s value. More than half of those dollars are expected to flow from Army contracts.
“I think you may very well see some decline in the overall spending on some of these large contracts for Army and Air Force but I don’t think it will be massive,” said Ashley Bergander, a research manager for federal information services at Deltek. “Most of these large IDIQ’s [indefinite-delivery/indefinite-quantity contracts] are re-competitions of previous vehicles and therefore will continue to provide similar if not the same services as previous and will likely end up with a similar value to its predecessor.”
Some services may be modified as acquisitions progress and there’s more clarity on DoD’s budget situation, Bergander said. She expects new programs will be more at risk for cuts or even cancellations.
DoD Comptroller Robert Hale late last month said DoD plans to slow spending in anticipation sequester spending caps will continue through 2014.
Hale said DoD will “start at a level below the President's budget in order to conserve resources until we get a better sense of where we're actually headed.”
How that will play out across the services and other defense organizations is unclear, said Todd Harrison, an analyst with the Center for Strategic and Budgetary Assessments. He expects the department will issue further guidance, but the shutdown has likely delayed that.
“How do you give any kind of guidance when you have no appropriations, really,” Harrison said. He expects DoD will be more prudent this year in planning for any sequester-related cuts, unlike last year when Pentagon officials encouraged spending at normal levels.
With regard to the sequester, Deltek’s report notes some contracting offices aren’t sure if their programs will be impacted. For example, the contracting office overseeing the Navy’s Rapid Response/ Irregular Warfare (RR/IW) said it was unsure if the program would be hit by budget cuts. The contract will provide technology and capabilities to detect and disrupt illicit activities and organizations, and the contracting office seems certain the contract won’t be canceled, according to Deltek. But there have been delays throughout the latter part of fiscal 2013.
Overall, information technology contracts represent 45 percent of the top 20 contracts, including the Army’s estimated $30 billion S32G contract and another $25 billion Army contract called Information Technology Enterprise Solutions 3 Services contract (ITES-3S CHESS). There’s also the Defense Intelligence Agency’s Enhanced Solutions for the Information Technology Enterprise (E-SITE) contract.
In a recent draft RFP to industry, DIA increased the value of the E-SITE contract from $5 billion to $6 billion, Sakole said. The contract will provide worldwide coverage for IT requirements and technical support services supporting DIA, the combatant commands, military services and mission needs of the larger intelligence community.
DIA was forced to postpone its E-SITE industry day because of the shutdown.
Several contracts, including the Health and Human Services Chief Information Officer – Commodity Solutions (CIO-CS); Army’s Train Educate and Coach (TEACH) and Department of Homeland Security’s BioWatch Gen 3 Phase II program for acquiring biodetection systems are all top contracts that carried over from previous years, said Deltek’s Sakole. Some contracts were delayed and others are awaiting approval to go forward.
HHS’ was expected to release a solicitation for its ITES-3S CHESS contract last year, but that has since been pushed back to this year. HHS is awaiting approval from the Office of Management and Budget to go forward with its own governmentwide acquisition contract (GWAC).
The GWAC will provide common IT services for security, infrastructure, telecommunications and desktop applications that can be installed on site or as a managed cloud service, according to Deltek.