Based on trends for the prior two years, "fiscal 2016 fourth-quarter spending is likely to represent between 37 percent and 40 percent of IT contracting for the year," noted Deniece Peterson, director of federal market analysis at Deltek.
Based on actual business tracked, IT contracting during the fourth quarter of 2016 was "on trend," she told the E-Commerce Times.
Many selections are truly last-minute transactions, with 20 percent of all annual IT contracts concluded in September, according to Lloyd McCoy, manager of Department of Defense analysis at immixGroup.
"There is no reason to think fiscal 2016 wasn't a continuation of that trend because the underlying drivers are the same," he told the E-Commerce Times.
Fourth-Quarter Factors Spur Surge
Several factors come into play for the bump in fourth-quarter spending.
"For one, it can sometimes take months before contracting offices are ready to go through the acquisition cycle, and they often find themselves finally getting around to making an award in the last quarter," McCoy pointed out.
"Additionally, program managers want to ensure funding is available throughout the fiscal year, and they will often be conservative in their spending," he noted.
Also, "when the end of the fiscal year comes around, there is widespread fear that any unused funds will prompt congressional scrutiny and, ultimately, spending cuts for the program -- the use it or lose it psychology. That is one of the main reasons why we see these end-of-year surges," McCoy said.
Whatever the reasons, the pattern has held so far in fiscal 2016. The result was the award of some astonishingly high-dollar contracts to IT vendors in the last three months.
The federal Office of Management and Budget generally has pegged federal IT spending at around US$82 billion per year, but Deltek routinely adds about another $20 billion to its more-comprehensive estimate, which includes spending by intelligence agencies, the federal judiciary and other federal entities. That results in a potential fourth-quarter spending figure that hovers between $32 billion and $40 billion.
Contracts Measured in Billions
The value of major IT acquisitions customarily covers a contracting period stretching out over several years, so funds flow to contractors during the course of the contract term. Such is the case with fourth-quarter 2016 awards, but the total contract values are still impressive. They include the following:
U.S. Commerce Department: The Bureau of the Census awarded a multiyear contract valued at $430 million to General Dynamics for assistance with the 2020 census. The project includes contact center operations, a Web-first approach to canvassing, data collection, use of data accuracy resources, implementation of email operations, and the use of customer relationship management techniques.
Separately, the bureau selected Young and Rubicam to provide broad communications support for the 2020 census, including IT functions such as website development, digital and social media engagement, and research and data analytics, as well as traditional advertising agency services, under a $415 million multiyear contract.
Department of Homeland Security: The Citizenship and Immigration Services Office of Information Technology awarded a $208 million contract to InfoZen. The company will provide DevOps and cloud-based support services to help the office migrate from waterfall and silo operations to the use of modern Agile IT and data management techniques. A key goal will be the use of more efficient and scalable IT operations, along with lifecycle software techniques.
Defense Intelligence Agency: The DIA started to roll out major multiyear task order contract awards on the Enhanced Solutions for the Information Technology Enterprise (E-Site) acquisition vehicle in July. By the end of September, the agency had awarded a total of $1.60 billion in contracts to multiple vendors. The largest single award went to Northrup Grumman for $550 million.
The E-Site program is directed toward "improving integration, sharing information, gaining efficiencies and safeguarding information through a common IT approach," DIA said. The agency expects that the E-Site program will facilitate "a common architecture and consolidated operations, as well as increasing migrations to the virtual and cloud environments," and "will improve mission outcomes." DIA continued to issue contracts on the E-Site vehicle through early October with several more awards totaling $230 million.
Two other mega-contracts are worth noting. In the fourth fiscal quarter of 2016, the Department of Veterans Affairs wrapped up the final awards under its $22.3 billion, multiyear IT contract vehicle known as the "Transformation Twenty-One Total Technology Next Generation," or T4NG acquisition program.
Under the program, the VA will receive contractor-provided information technology service solutions including technical support, program management, strategy planning, systems and software engineering, enterprise network engineering, cybersecurity systems and health-related IT resources. Most of the contractors were selected earlier in 2016, but legal issues delayed some awards. In total, about 24 vendors were selected to participate in the program.
Also, Leidos last month reported that it had received a multiyear contract from the U.S. Army valued at $777 million for the its geospatial information program. Various IT-related resources will be involved in implementation of the contract. Leidos will collect, process, disseminate, store and maintain high-resolution geospatial data. KEYW Corp., Tenax, Neany, Sigma Space, OG Systems, Pixia, and Woolpert will partner with Leidos to fulfill the contract.
One More Time for Encore III and LPTA
For federal IT vendors, the mega-contracts awarded at the end of fiscal 2016 will be followed quickly by another huge contract in 2017. The U.S. Defense Department, through the Defense Information Systems Agency (DISA), last month issued a final request for propsoals for the 10-year Encore III program. The total potential value of the program is $17.5 billion, with as many as 40 vendors to be selected for participation. Bids are due by Oct. 21, 2016.
The RFP seeks the provision of technical solutions for DoD in support of its migration to an integrated and interoperable DoD information network. The capabilities being sought by DISA include enterprise IT policy and planning, integrated solutions management, custom applications, Web services, cloud professional services, and computer and telecom support.
DoD was forced to revise and reissue the solicitation as a result of a decision issued in August 2016 by the General Accountability Office, which partially upheld a protest by CACI and Booz Allen Hamilton. The protesters challenged various aspects of DISA's basis for selecting vendors on several pricing and evaluation requirements, including DISA's assertion that contract awards would be based on a lowest price technically available, or LPTA, basis.
GAO disallowed several of the pricing components in the RFP, but it allowed DISA to use the LPTA criteria. Vendors have objected to the LPTA standard, contending that it emphasizes cost over quality, and the Defense Department has recognized those concerns. Still, the criteria will be used for Encore III.
"Our tracking of the use of LPTA seemed to follow the direction of budgets. As agency budgets contracted, the use of LPTA increased," said Deltek's Peterson.
"The cuts at the DoD have slowed and 2017 may see an increase. With that, LPTA will still be around, but we expect its use to diminish," she added.
Peterson pointed to the following provision in the pending fiscal 2017 National Defense Authorization Act: "To the maximum extent practicable, the use of lowest price technically acceptable source selection criteria shall be avoided when the procurement is predominately for the acquisition of information technology services, systems engineering and technical assistance services, audit or audit readiness services, or other knowledge-based professional services."
Year-End Deals on Track for Federal IT Providers