Research firm lowers expectations for GSA tech services contract
Report says spending through Alliant vehicle may be only $7.5 billion, well short of its $50 billion ceiling.
The General Services Administration's recently awarded governmentwide information technology contract may not bring in as much business as expected, according to a new report from a market research firm.
The report, released Thursday by Reston, Va.-based INPUT, concluded that major agencies are increasingly meeting information technology needs through their own contract vehicles instead of turning to outside options such as GSA's latest governmentwide offering, called Alliant. Just last week, GSA announced the selection of 29 companies to offer services through Alliant.
INPUT said that over the past five years, spending on GSA vehicles has declined compared to overall spending on contract vehicles. The author of the report, John Slye, said in a statement that Alliant will have done well if it reaches $7.5 billion in value compared to its $50 billion ceiling.
According to the report, given GSA's recent "hemorrhaging business," the agency's IT relevance could be challenged if major agencies overwhelmingly choose not to use Alliant.
"With the declining popularity of GSA contracts, the performance of Alliant will be a critical test and indicator of the direction of GSA's influence in the government technology market," the report stated.
Industry experts said they do not believe, however, that agencies are permanently turning away GSA as a means of procuring IT systems.
"We're going through a new period where agencies and GSA are trying to find their way on GSA's role as the government's contract shop versus the agencies' ability to run their own contracts," said Stephen Charles, co-founder of the McLean, Va.-based ImmixGroup. "The pendulum swings on this issue as it does on all the others."
A GSA official said he feels confident that both history and the strength of Alliant as a program are on the contract's side.
"Trends in IT purchasing tend to be cyclical, and we have every reason to believe that the downward trend in usage of GSA [governmentwide acquisition contract] vehicles has already begun to rebound," said Jim Ghiloni, director of GWAC programs at GSA.
Ghiloni said GSA has analyzed historical data and projected trends in the federal IT market to estimate that Alliant and its yet-to-be awarded small business component will generate about $40 billion in revenue over their full 10-year life cycles. The ceiling for the Alliant and Alliant Small Business contracts combined is $65 billion.
John Okay, a former GSA senior official now a partner at the Vienna, Va.-based Topside Consulting Group, said he doesn't believe Alliant vendors need to temper their expectations of the contract's value, particularly if they were involved in Alliant's predecessor contracts -- Millennia and ANSWER.
"I think most vendors who bid and now, the winners, are pretty realistic," Okay said. "Fifty billion dollars was a stretch goal for GSA in the beginning. Companies that bid, especially incumbents from Millennia and ANSWER, have a good understanding of the market. I can't imagine companies would use $50 billion in their business case."
The INPUT report stated that "part of the onus is on GSA to provide attractive reasons for agencies to choose the contract given that many have made investments in establishing their own vehicles and alternative channels."
Ghiloni cited a number of "unique and innovative" features of Alliant that he believes will draw new customers. Among these were full support for e-government, on-ramp/off-ramp provisions to ensure a flexible pool of vendors over the course of the contract and practical reporting capabilities for tracking IT expenditures.