Waiting for the Spending Boom

n the past year, the federal technology market has flown where others have fallen. But the flight hasn't been smooth.

Several high-profile contracts worth billions of dollars experienced some major hiccups. The rollout of the Navy's new communications network, known as the Navy Marine Corps Intranet, was delayed because a huge number of old databases and systems had to be modernized. The FBI accelerated its Trilogy project to update antiquated technology systems after Senate oversight hearings revealed the bureau is still in the technological Dark Ages and can't even move basic information electronically from one field office to another. And the Defense Department became embroiled in a months-long struggle to award a $450 million high-speed information network contract after its top choice, Global Crossing, filed for the largest bankruptcy in telecommunications history.

The turbulent year was marked most dramatically by the terrorist attacks of Sept. 11, which had a severe effect on an already weak commercial technology market.

The federal technology market seemed a potential oasis for starving firms. President Bush called for a 15 percent increase in technology spending, reflecting a new emphasis on fighting terrorists, protecting national infrastructure, and equipping federal, state and local agencies with new communications tools. While this rush to secure the homeland held big promise for would-be contractors, by March it was clear that the flood of dollars wouldn't let loose until fiscal 2003. So recession-stricken technology firms looking for quick sales will have to wait. Established contractors, with whom the government has done business for years, will hold the dominant position in the slow-moving federal market.

Large contractors such as Lockheed Martin, Northrop Grumman and Computer Sciences Corp., which lead teams of other companies on the biggest technology contracts in government, exert even more influence over the procurement process than they did before Sept. 11. The attacks have spurred agencies to invest heavily in updating old databases, improving information network security and building new lines of communication among agencies. For now, the agencies are relying heavily on trusted vendors with proven track records. Such prime vendors are now acting as scouts, fielding promising technology firms to become government contractors. Most of those new entrants will come in as subcontractors, rather than working directly with agencies on their own.

At the same time that the federal market is booming with new spending, the contracting process is under fire from White House officials, lawmakers and some industry lobbyists. Angela Styles, head of the Office of Federal Procurement Policy at the Office of Management and Budget, has railed against the improper use of governmentwide technology contracts, popular deals that are pre-awarded to companies and then opened up for all agencies to use. Styles says that contracting officers need to relearn the "acquisition basics" after reports by some agency inspectors general found that acquisition personnel often don't conduct full competitions on the contracts. Congressional overseers and technology industry representatives also question whether having so many contracts on the market forces businesses to spend too much time and money competing for them. Many of those contracts sell the same firms' goods and services to the same pool of agencies.