Dividing the Pie

Contractors may find federal procurement opportunities less filling in 2011.

Hold the champagne and party hats; the New Year might not be so happy for federal contractors. It took a few years, but it appears the stagnant U.S. economy is finally dragging down the once-booming federal procurement market. Between a proposed three-year spending freeze at most civilian agencies, insourcing of private sector functions and deep cuts aimed at Defense Department service contractors, major industry opportunities will be limited in 2011.

"The biggest theme for the upcoming year is the decrease in spending on contracts," says Ashley Bergander, manager of federal programs at FedSources, a McLean, Va., firm that released a report in October on the 50 biggest contracts to be awarded in fiscal 2011. "The government is doing everything possible to consolidate and spend as little money as possible."

The federal procurement market, which has more than doubled since fiscal 2002, is set to slow down, but it's far from withering. Some industry experts still expect 2 percent to 3 percent growth in fiscal 2011-less than in recent years, but not bad given the overall economy. Even with a net increase in acquisition spending, however, opportunities could shift to different sectors, taking business away from some of the usual strongholds.

Big-ticket items such as warships, aircraft carriers and NASA's space shuttle are likely to take a hit while emerging technology and energy markets could see a boost, says Kevin Plexico, a senior vice president at INPUT, a Reston, Va., research firm. Agencies focusing on health care reform, green building modernization and cybersecurity "are in a good position to have above average market growth while other areas will clearly have to languish with low or no growth," he says.

With few exceptions, most of the largest contracts to be awarded in fiscal 2011 are recompetes of expiring deals in which contracting officials are seeking multiple vendors rather than a single source to perform the work, according to an October report from INPUT.

Rather than relying on systems integration agreements with a single prime contractor, agencies are setting up multiple-award, indefinite delivery-indefinite quantity contracts to pump through individual task orders. Getting a spot on these multibillion-dollar contracts, which serve multiple agencies, could be lucrative for companies.

"It changes the way companies compete," Plexico says. "It increases the need for teaming and increases the risk, if you don't get a particular deal, of being locked out of an agency for at least some percentage of the work."

In early November, for example, the Homeland Security Department issued a request for proposals to recompete its $22 billion Enterprise Acquisition Gateway for Leading Edge Solutions program for information technology services and products. The contract will have three functional categories, down from five during the first EAGLE contract in 2006. And source selections will be divided into two categories of bidders: one unrestricted and the other a set-aside for small firms.

IT contract spending is expected to increase during the next several years, according to industry officials. "Federal agencies are on track to realize the promise of government technology, but will pursue it at a relatively modest pace in the face of uncertain policies and overall budget realities," says Phil Bond, president of TechAmerica, an industry group. "In the face of reducing overseas deployment and federal budget pressures, we expect overall defense spending to drop, with the notable exception of IT programs."

Undersized contractors are expected to be among the biggest winners as agencies introduce more competition to meet their small business procurement goals. The Army will spend $19.5 billion on a small business set-aside for communications and transmissions systems. And the Health and Human Services Department is expected to award its $20 billion CIO-SP3 total small business governmentwide acquisition contract for health and research information technology.

"Industry needs to be thinking more strategically, evaluating where the government has needs to be met and where the money is right now," Bergander says. "It means being open for small businesses to team with large businesses, or to change alliances. They need to get in there and meet the agency's goals."

Defense Department

Despite major cuts to Pentagon service contracting and a move toward insourcing private sector functions, the Defense Department still leads the way in federal contracting. But unlike past years, when the focus was on tanks and aircraft carriers, the big money in fiscal 2011 will be directed to information technology, logistics and communications contracts.

Enhanced Army Global Logistics Enterprise (EAGLE)

The Army Materiel Command's primary contract vehicle for delivering logistics services to warfighters in the field, EAGLE will be among the most lucrative contracts awarded in 2011. The contract includes services such as program management, IT support, training, supply and transportation. And in a unique arrangement, the contract could be open not only to government agencies but coalition partners and foreign governments as well.

Awarding Agency: Army

Estimated Value: $30 billion

Estimated RFP Release: Second quarter of FY 2011

Communication and Transmission Systems (CTS)

A highly anticipated system-of-systems contract, CTS will be the primary vehicle for the Defense Communications and Transmissions Systems product manager to purchase communications equipment and related services. It is planned to have a small business reserve and is now expected to be awarded in fiscal 2012.

Awarding Agency: Army

Estimated Value: $10.5 billion

Estimated RFP Release: Fourth quarter

Defense Language Interpretation and Translation Enterprise (DLITE)

The Army's Intelligence and Security Command is looking for contractors capable of providing comprehensive linguistic support for U.S. forces across the globe in targeted languages such as Hebrew, Pashtu and Farsi. The firm must provide written and oral translation, interpretation and analysis services.

Awarding Agency: Army

Estimated Value: $15 billion

Estimated RFP Release: First quarter

Advanced Pilot Training (APT) Family of Systems Program

The Air Force is seeking contractors for the next generation of operational pilot training. The contract, which will be issued through full and open competition, will cover a broad range of ground and flight training systems, including simulators and computer-based programs. The contract also calls for hardware production, systems engineering and software development.

Awarding Agency: Air Force

Estimated Value: $12 billion

Estimated RFP Release: Second quarter

Source: FedSources, INPUT

Civilian Agencies

While President Obama has called for a three-year freeze on spending at many civilian agencies, opportunities still exist for high-dollar contract opportunities in fiscal 2011, particularly in the information technology and health research sectors.

Enterprise Acquisition Gateway for Leading Edge Solutions II (EAGLE II) The most lucrative non-Defense procurement of the year, EAGLE II is a follow-on to the popular Homeland Security Department information technology megacontract. The EAGLE contracts are the primary vehicle DHS agencies use to procure IT services. The solicitation will include two separate and distinct source selections; one is unrestricted and the other a set-aside for small businesses.

Awarding Agency: Homeland Security

Estimated Value: $22 billion

Estimated RFP Release: First quarter of FY 2011

Technical, Acquisition and Business Support Services (TABSS)

A rare new requirement, rather than a recompete, the Coast Guard will use this vehicle to provide technical, acquisition and business support services ranging from engineering and technology to financial management and audit support. The indefinite delivery-indefinite quantity contract will be limited to DHS agencies and will include a portion set aside for small businesses.

Awarding Agency: Homeland Security

Estimated Value: $11 billion

Estimated RFP Release: First quarter

Electronic Commodities Store (ECS) IV

The National Institutes of Health will award a contract to set up, maintain and manage an electronic store providing commercial off-the-shelf IT products. The governmentwide contract will include desktop, laptops, handheld computing devices, workstations, software and network equipment.

Awarding Agency: Health and Human Services

Estimated Value: $6 billion

Estimated RFP Release: Third quarter

Medicare Drug Integrity Contractor (MEDIC) The Centers for Medicare and Medicaid Services is expected to issue a follow-on contract to monitor compliance and oversight of the Retiree Drug Subsidy and Medicare Advantage programs. These entities, known as MEDICs, work with federal agencies, government watchdog groups and contractors to ensure compliance with the Medicare Prescription Drug Benefit program.

Awarding Agency: Health and Human Services

Estimated Value: $4 billion

Estimated RFP Release: Second quarter

Source: FedSources, INPUT

Cybersecurity

Arguably the most active-and potentially lucrative-sector for contractors in fiscal 2011 will be cybersecurity. Protecting federal computer networks from attack has become a top priority for the Obama administration, which established the U.S. Cyber Command in May and brokered a key cybersecurity agreement between the Defense and Homeland Security departments.

Agile Cyber Technology (ACT)

The Air Force Research Laboratory is seeking contractors capable of cyber research and development. The multiple-award, IDIQ contract will emphasize prototype technologies, working solutions and product development. A Top Secret security clearance is required.

Awarding Agency: Air Force

Estimated Value: $480 million

Estimated RFP Release: Second quarter of FY 2011

Global Contingency Operations

The Navy's Space and Naval Warfare Systems Command will issue a follow-on multiple-award contract for engineering, analytical, technical and program support for the global war on terrorism. Among the top functional priorities are information assurance and cybersecurity.

Awarding Agency: Navy

Estimated Value: $249 million

Estimated RFP Release: Second quarter

IT Infrastructure Modernization, Database Architecture and Cybersecurity

The Secret Service is looking to modernize its outdated IT system. The first step is a task order for hardware, along with its installation, configuration and integration into the existing infrastructure. The contract will support the agency's larger IT Infrastructure Modernization, Database Architecture and Maintenance, and Cybersecurity initiative.

Awarding Agency: Homeland Security

Estimated Value: Not released

Estimated RFP Release: Not released

Enterprise Security Audit Trails (ESAT)

The Internal Revenue Service will issue a contract with a major cybersecurity portion as part of its initiative to develop the technology and strategy for an audit trail system. The contractor will help ensure compliance with federal statutory, legislative and regulatory requirements for the confidentiality, integrity and availability of IRS electronic systems, services and data.

Awarding Agency: Treasury

Estimated Value: Not released

Estimated RFP Release: Fourth quarter

Source: FedSources, INPUT

Small Business

After years of feeling shortchanged, small business contractors finally might have reason to smile. Some of the largest upcoming procurements are either set-asides, or include a large portion exclusively for small businesses. The government's aim is to reach its goal of awarding 23 percent of all contracts to small businesses.

Chief Information Officer-Solutions and Partners 3 (CIO-SP3) Small Business

The Health and Human Service Department's National Institutes of Health will award CIO-SP3, one of the largest small business set-aside contracts to support health and research information technology. This follow-on governmentwide acquisition contract will include a host of health and biomedical IT services.

Awarding Agency: Health and Human Services

Estimated Value: $20 billion

Estimated RFP Release: First quarter of FY 2011

Information Technology Enterprise Solutions-3 Hardware (ITES-3H)

A third-generation contract, ITES-3H will be the primary vehicle for the Army's Program Executive Office-Enterprise Information Systems to purchase commercial server, network storage and thin-client products. The contract, part of which will be reserved for small firms, will consist of multiple catalogs for commercial IT products.

Awarding Agency: Army

Estimated Value: $5 billion

Estimated RFP Release: Third quarter

Consolidated Acquisition of Professional Services (CAPS) II The Air Force's Aeronautical Systems Center will issue the second version of its CAPS contract to fulfill needs for technical and acquisition management support for the service's aircraft systems. The contract will be a small business set-aside.

Awarding Agency: Air Force

Estimated Value: $3 billion

Estimated RFP Release: First quarter

FirstSource

The Homeland Security Department will recompete its FirstSource contract for a variety of IT products such as networking equipment, software and voice-recognition technology. The departmentwide IDIQ contract will be a small business set-aside.

Awarding Agency: Homeland Security

Estimated Value: $3 billion

Estimated RFP Release: Third quarter

Source: FedSources, INPUT

CORRECTION: A previous version of this story contained inaccurate information from FedSources about the Communication and Transmission Systems contract. The article has been updated to correct the errors.

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