Watch This!

Technology projects worth keeping an eye on for what they foretell about the future or warn against from the past.

It's not necessarily the biggest technology purchases, or the most successful ones, that hold the greatest lessons. Each year produces some deals that in hindsight turn out to have been trendsetters or harbingers of things to come. A sampling of this year's bellwether information technology projects point up the pluses of combining forces with the private sector, potholes on the road to information sharing, perils and potential of performance-based contracts, and problems along the road to consolidating back-office IT.

If You Can't Beat 'Em . . .

The moment when a collection of similar events cease to be coincidence and coalesce into a trend is not always obvious. That said, the Army Corps of Engineers' June 21 announcement that it would give a $447.3 million contract to a team combining federal employees and the leading Defense Department contractor might be an indication of things to come.

Typically, when agencies decide to competitively source a function not considered inherently governmental, it's civil servants versus the private sector in a showdown to capture the newly contested work. In contrast, in the competition to run domestic information technology systems for the Army Corps, civil servants teamed up with Lockheed Martin Corp. on a joint in-house bid. And they won. (The sole purely private sector bidder in this case, Northrop Grumman Corp., protested the decision to the Army Corps. The agency upheld its procurement decision on Aug. 18. Northrop Grumman filed an appeal Aug. 28 with the Federal Claims Court.)

Public-private teaming is not an entirely unheard-of twist in recent big government competitions for technology jobs. In the summer of 2005, Energy Department civil servants teamed with a consortium of companies called Energy Enterprise Solutions to beat private sector bids to manage the department's information technology services. Earlier that year, Federal Aviation Administration employees joined Harris Corp. to compete to operate flight service stations. (They lost.)

In-house teams preparing large, expensive and complicated technology competitive sourcing bids "may have some holes that can be filled by industry," says Steve Lubniewski, Lockheed Martin general manager of enterprise and application solutions. Private sector partners can only add new functions not currently performed by civil servants when they team to make an in-house bid.

Companies long have joined one another to offer the best possible bids, notes Alan Chvotkin, senior vice president of the Professional Services Council in Arlington, Va. Of course, they're not bound by rigorous laws against un-toward contact between civil servants and the private sector. No one says competitive sourcing teaming is unethical, but controversy does exist around how federal employees select their partners. "You're using federal funds-you don't want them to be arbitrary," says Chvotkin, who sees it both ways. "On the other hand, why do you want to burden them with a process that's more difficult than what the private sector goes through in selecting its partners?" Mini competitions for picking teaming partners could be dangerous, too. Should a company lose that round, Chvotkin asks, "How do you perceive their chances to now compete" against agency employees during the main event? A compromise between a full-out open competition and a hermetically sealed selection process is needed, he adds.

PSC wants the Office of Management and Budget to develop guidance. And OMB might have reason to get going, too. Information technology is one of the most competed job functions, and the trend is toward larger and more complex competitions.

Dead or Alive

A high-profile information technology project in its final death throes is not a pretty sight. Glum federal officials absorb congressional broadsides. Inspector general reports announce that some requirements were not well documented, or words to that effect. So it was last year with the collapse of the Virtual Case File, a much needed effort to modernize the FBI's digital information sharing capabilities. But this year the FBI gamely awarded a new contract to a different vendor to take another stab, this time with a fresh name: Sentinel.

On March 16, Lockheed Martin won the $305 million contract to develop over four years a Web-based system for information sharing, search and analysis. Overall, the effort will cost $425 million, the FBI estimates.

FBI observers noted an interesting feature of the Lockheed Martin contract, however. It is a cost-plus-award-fee contract-the same type of contract for which the FBI was roundly criticized for using with San Diego-based Science Applications International Corp. for Virtual Case File. Cost-plus contracts provide a fixed award amount with the promise of additional fees consisting of a percentage of the project's development costs, doled out on the basis of vendor performance. The method ended up placing the FBI "largely at the mercy of the contractors," according to bureau managers who spoke with Justice Department auditors. An inspector general report (Audit Report 05-07) called cost-plus contracts an "unsuitable mechanism" that placed the FBI at a "significant disadvantage." The inspector general estimates that the FBI will cap Lockheed Martin's cost-plus awards at 12 percent of development costs, a figure neither the company nor the FBI would confirm.

The FBI and its contractor say it'll be different this time. "I don't think there's necessarily a correlation between cost-plus contracts and failure," says Lockheed's Lubniewski. A positive outcome depends on proper management and a clear sense of objectives, he says. The FBI has carefully documented its requirements and they're doable "within the time and cost constraints," he adds. In a written statement, the FBI said Lockheed's fee "is directly tied to successfully delivering a product," adding the contract is actually performance-based and makes use of a cost-plus "fee structure to ensure delivery of a quality product to the FBI."

So far, the FBI has funded Sentinel through a $97 million reprogramming request Congress approved in November, a move that raised eyebrows at the bureau and with the inspector general, who noted that the funds are being diverted from areas such as the counterterrorism and cyber divisions. For fiscal 2007, the FBI wants $100 million in outright appropriations to fund the project.

"I'm quite confident that we're on the right track with Sentinel," FBI Director Robert Mueller assured senators during a May 2 hearing of the Senate Judiciary Committee.

Lining Up Business

In past years, a federal contract purchasing five years' worth of Oracle financial management software services for $5.3 million would have garnered scant attention. But this year, the lines of business campaign-the Office of Management and Budget's effort to outsource agencies' administrative information technology systems to a handful of private and public service providers-is heating up. So the Labor Department's March 22 deal with Oracle reseller Mythics Inc. of Virginia Beach, Va., became Exhibit A during a congressional oversight hearing. "Does OMB not require agencies to contract with designated service providers?" asked Rep. Todd Platts, R-Pa., during a June 28 House Government Reform Subcommittee on Government Management, Finance and Accountability hearing. OMB has conferred the "designated" title on four federal agencies, but says it will not do likewise for any private sector company.

Private sector representatives at the hearing complained that OMB's draft lines of business guidance emphasizes the importance of contracting with designated service providers. Without an official approval process that includes them, too, "the very real fear is [companies] will be subjugated to subcontracting for the primes, which will be federal agencies across the board," says Jim Krouse, acting director of public sector market analysis at INPUT, a business intelligence firm in Reston, Va. Government officials at the hearing said agencies, not OMB, must determine for themselves whether a private company deserves the sobriquet of "service center."

In any case, Platts wanted to know, what of the Labor Department? It signed its outsourcing contract before OMB finalized its guidance clarifying what exactly a service center-officially named by OMB or not-need do for an agency. "It seems that [Labor] has contradicted the whole intent here, which is to migrate to a center with certain requirements," Platts says.

Labor officials say they couldn't have waited for the official OMB guidance-and at any rate, they already had outsourced years ago the functions that Mythics now provides. No federal jobs were affected by the Mythics contract; from their perspective, all they did was change from one industry provider to another. And OMB fully supported the move, says Valerie Harris, Labor's acting associate deputy chief financial officer for financial systems. For one thing, Labor's experience will spawn helpful pointers for others to follow when it comes time to choose service centers. The larger question, Harris says, is whether Labor should take advantage of the higher level, end-to-end financial management services OMB says service centers can offer. "We're not contemplating that," she adds.

Mythics, for its part, acknowledges receiving extra attention, but company officials say they're just focused on making their deliverables. "We know there are things that are going on around the contract that are completely out of our control," says Mythics account executive Zeb Mellett. But it's been business as usual, he says, and the contract is off to a successful start.

Can You Hear Me Now?

Here's how performance-based contracting is supposed to work: Have the government ask industry to supply the results it needs, rather than get bogged down writing detailed specifications. Set up measures to gauge industry's effectiveness at meeting clear federal objectives, promise the vendor incentives to spur further good behavior, and watch the contract bloom.

But it didn't do so well at the Transportation Security Administration. In late December, TSA climbed down from an ambitious performance-based approach, announcing on Jan. 4, 2006, that it had awarded a contract bridge to Unisys for its Information Technology Managed Services contract. Originally awarded to Unisys in August 2002 to provide TSA a telecommunications and information technology infrastructure, the contract had become by last year a poster child of wasteful procurement. "We were given a hodgepodge of $20 Radio Shack sale rack phones" with no hold, transfer or redial buttons, grumbled a TSA manager to Homeland Security Department auditors (OIG-06-23). TSA and Unisys had managed to spend 83 percent of the $1 billion contract ceiling in less than half the allotted time without receiving many of the deliverables. Although TSA decided not to exercise the ITMS contract renewal option, it awarded Unisys the bridge-worth up to $750 million-while noting that the agency would gradually transfer the remaining work to other contracts. While the bridge also is performance-based, it takes a less inventive approach, making use of more conventional service-level agreements.

"Whenever you're blazing a new pathway, there will be many people to stop you along the way," says Greg Baroni, president of Unisys' Global Public Sector in Reston, Va. Unisys set up an advanced performance-based model whereby the infrastructure work it performed was rated according to the extent TSA achieved its mission objectives, Baroni says. The idea was to "be a co-partner with TSA in the running of their technology, which involves not just standing up their infrastructure, but tuning it and optimizing it" according to business needs, he adds.

But that approach didn't sit well with existing procurement culture at TSA, Baroni says, adding that contract personnel and auditors need more instruction in performance-based contracting. "There's a tendency to want to look at a statement of objectives as the same as a statement of work," he says. But the former should provide top-level objectives while the latter is a more traditional specification of re-quirements. Baroni recommends the government develop a statement of objectives preparation template and train civil servants on using it.

Critics say performance-based contracting is a good idea that's barely doable in the real world. It could work for something simple, like janitorial services or grounds maintenance, says Vernon Edwards, a Portland, Ore., procurement consultant. But "these massive, billion-dollar gigantic procurements-they can't specify the results they want in clear, specific and objective measurable outcomes at the time of the award," he says. Those acquisitions are too big, IT is too fluid and its business support functions are too much in flux for any agency to be able to specify outcomes at the onset of a long-term contract, he adds. Plus, if it really worked, the government wouldn't need to set goals requiring its use, he says, alluding to an Office of Federal Procurement Policy mandate that 40 percent of federal contracting dollars be spent under performance-based terms. "This has been the most overblown, exaggerated policy in the history of government contracting," he adds.

TSA says it's working to switch the remaining infrastructure work onto the Enterprise Acquisition Gateway for Leading Edge solution (EAGLE) multiple-award contract won by 25 big companies on June 29.

Border Blocker

The Homeland Security Department unveiled in 2005 a new effort to secure America's porous perimeter, promising it would be different from its antecedents. As part of the overall Secure Border Initiative, DHS in April issued a performance-based request for proposals for SBInet, the technology backbone. The statement of objectives calls for the "absolute detection, identification, response and resolution to unauthorized border entries."

SBInet "is not about simply buying gizmos," Michael Jackson, DHS' deputy secretary, told an industry audience in Washington earlier this year. "We're asking you to come back and tell us how to do our business." Jackson also placed vendors on an aggressive time frame: DHS says it will make a contract award by Sept. 30.

Telecommunication insiders say SBInet likely will piggyback on other open procurements. The SBInet solution could use the General Services Administration's coming Networx telecommunications contract for ground and land line infrastructure, and perhaps use the Justice Department-led Integrated Wireless Network procurement for land mobile radio and wireless data needs. After a period of apparent inactivity, IWN came to life when the program office announced on June 9 that it had winnowed industry contenders to General Dynamics Corp. and Lockheed Martin.

The two now must craft by the first week of November detailed proposals for implementing interoperable wireless communication and high-bandwidth data transmission along the Mexican border. Ultimately, IWN is intended to serve 80,000 federal law enforcement personnel located along U.S. land and sea border areas, major metropolitan areas and highways, ports of entry and federal Native American lands. An industry source, who spoke on condition of anonymity, predicts the government will award a final contract for up to 15 years and up to $10 billion in early 2007.