Market for governmentwide contracts booms

Purchases made through governmentwide acquisition contracts (GWACs) skyrocketed to more than $13 billion in fiscal 2000, according to an exhaustive study by Fed Sources Inc., a technology market analysis firm headquartered in McLean, Va. GWACs allow agencies to issue task and delivery orders against other agencies' multiple-award IT services and equipment contracts, usually for a fee, instead of initiating new contracts. In essence, GWACs offer agencies a way to avoid the complicated and lengthy process of open competition and contract negotiation. More than a dozen agencies currently operate GWACs. In its study, "Federal Agency Use of GWAC Contracts for Information Technology Procurement," Fed Sources analyzed 95,000 task and delivery orders for information technology placed against 60 GWACs, including those operated by the General Services Administration's Federal Supply Service. The Federal Supply Service's (FSS) technology schedules by far accounted for the biggest slice of the GWAC pie in fiscal 2000. With 60.8 percent of all activity, the technology schedules amassed nearly $8.1 billion in sales. FSS charges agencies a 1 percent fee to use the schedules, and the contracts earned FSS $81 million in fiscal 2000. GSA's new Broadband Distance Learning contract ran a distant second with $1 billion in sales, or 7.5 percent of the total analyzed. The agency's MOBIS contract, which provides agencies with management, consulting and training services, came in third with $879 million in sales, or 6.6 percent of the total. With those contracts controlling so much business, only 12 of the 60 contracts reviewed had sales of more than $100 million in fiscal 2000. Of the remaining contracts, the average business was $25 million. GSA manages five of the 10 most lucrative contracts. NASA's SEWP II contract, which is used to purchase computer equipment designed for open source environments, came in fourth with $451 million, or 3.4 percent of total sales. The major federal players in the GWAC game are nearly all Defense agencies. The Navy, the Army, the Air Force, the Defense Information Systems Agency and GSA accounted for 71 percent of GWAC business last year. Meanwhile, the top 10 GWAC agency users accounted for more than $11 billion, or 85 percent, of the entire GWAC market. On the private side, technology management adviser EDS of Plano, Texas, was the largest single GWAC contractor with $726 million in business, a 5.4 percent market share. Los Angeles-based defense contracting giant Northrop Grumman came in second at $657 million, or 4.9 percent. And technology firm SAIC, headquartered in San Diego, rounded out the top three, tallying $655 million in sales to put it nearly even with Northrop Grumman for market share. Companies not in the top 10 list of contractors accounted for 65 percent of all spending, which amounted to $8.7 billion. According to the study, the top 10 most successful prime vendors have control of more than one-third of the entire GWAC market, leaving more than 1,700 other vendors to account for the remaining two-thirds of business. GSA is also the largest GWAC customer, spending $4.2 billion, or 31.2 percent of purchases. The Navy followed at 13 percent of purchases, or $1.7 billion, and the Army locked up the third position with 12.6 percent of purchases, worth $1.7 billion. GWAC customers not in the top 10 accounted for only 14.8 percent of sales, or $2 billion. The study advised government contractors to consider getting a GSA Schedule contract if they don't already have one. "Companies clearly need a combination of GSA Schedules and GWACs to capture their share of federal business flowing through this popular way for agencies to buy," the report said. The company also concluded that the Defense Department has heartily endorsed GWACs as a preferred method of purchasing, and that it will continue to lead the pack in this market. The 1994 Federal Acquisition Streamlining Act allowed agencies to establish contracts for goods and services open to use by other agencies. GWACs grew in popularity in the mid-1990s, but suffered criticism for allowing contracting officers to repeatedly use preferred vendors, rather than giving all prospective companies the opportunity to compete. The General Accounting Office will look into the allegations of improper contracting later this year and will ask whether or not agencies are properly training their acquisition personnel to conduct competitive bids, a Senate Governmental Affairs Committee staff member told GovExec.com. That committee asked GAO to conduct the review. The report is available for purchase at: http://www.fedsources.com.
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