The New Deal

he Transportation Security Agency may have made the deal of the century.

In August, the agency awarded a $1 billion contract to technology services firm Unisys Corp. to build and maintain the agency's information and telecommunications network, which will eventually connect TSA posts at airports across the country. The terms of the deal might make some companies squeamish.

If Unisys and TSA both meet deadlines and performance goals, Unisys will get a bonus on top of its normal fees. However, if the company fails to meet any goals, or even if it does meet them but the agency doesn't, Unisys pays money to TSA. That arrangement was designed to put pressure on Unisys to ensure the contract runs smoothly, and company executives admit they're sweating to reach their goals.

That's just what TSA wanted. Now technology officials across government are watching the deal as a possible model for buying homeland security IT.

Traditionally, IT contracts list thousands of requirements that vendors must fulfill. But TSA let companies propose how to build the network, and let the companies craft their own performance goals and bonus structure.

TSA wanted bids only from companies with experience on large contracts. Firms were graded on past performance, as well as how they scored on a rating system known as the Magic Quadrant, designed by Gartner, a Connecticut-based technology research firm.

To narrow the field of bidders even further, TSA issued its contract as an order under an existing Transportation Department governmentwide acquisition contract. Only companies that had previously won places on that contract could compete for TSA's network. There are fewer than two dozen such firms.

TSA officials knew that only two or three firms could meet their contract prerequisites, says Chip Mather, a co-founder of Acquisitions Solutions Inc., a Chantilly, Va.-based consulting firm. Mather designed the acquisition strategy and chose the judging criteria. Ultimately, Unisys and Electronic Data Systems Corp. of Plano, Texas, were the only firms to compete. But even before the companies made their proposals, insiders said Unisys had the inside track.

Unisys had won a contract in August 2001 to provide network services for the Bureau of Alcohol, Tobacco and Firearms. More than a year later, after Congress created TSA, the same officials who oversaw the ATF contract, most notably ATF Chief Information Officer Pat Schambach, took over technology operations at the new agency. Schambach was appointed TSA technology chief. "The stars aligned for us," says Greg Baroni, president of Unisys' public sector division.

TSA moved with dizzying speed to select a vendor. The agency released its request for proposals in mid-June. Proposals were due July 1. The bidders gave oral presentations 10 days later. In just a matter of weeks, TSA had run a competition that would usually have taken most agencies months.

The agency and the bidders communicated constantly during the competition, posing questions to clarify particulars in company proposals and in TSA's request. Baroni asked his staff to forgo their vacations and work weekends.

Bidders were given an unfettered look inside TSA. Each firm received a 10-day briefing about the agency's needs and expectations. Officials gave tours of Baltimore- Washington International Airport, the first to institute new federal security procedures.

The goal of such openness was better proposals, Mather says. Apparently it worked. Mather was with Schambach when the proposals were delivered. He says that after reading them, Schambach declared, "Damn, this is really good."

Baroni recalls the afternoon of Friday, Aug. 2. His employees begged to go home, but he hesitated. Baroni called TSA to see whether officials had further questions about Unisys' proposal. Their reply: "Don't go home just yet." Schambach called later that day with the news that Unisys had won the competition.

But the celebration was muted, because officials at TSA and Unisys still faced a major hurdle. Two weeks earlier, the Office of Management and Budget had frozen funding on technology infrastructure projects for agencies heading into the proposed Homeland Security Department. A week after the award, Unisys executives and officials from TSA and the White House met on a Sunday night in Baroni's office. Schambach made the case for the network. OMB had frozen funds to prevent agencies from building duplicative systems. But there was no network like the one TSA needed, so there was no conflict, Schambach argued.

It took the administration less than 48 hours to OK the plan. Schambach got the news just before addressing a breakfast gathering of technology executives in Northern Virginia. "I'm a happy man this morning," he told them from the podium.

Officials love the TSA deal for two reasons: it was awarded quickly, and it forced the vendor to take a stake in the contract's success. "If the government official is lying awake at 2 a.m. worrying about the contract, why shouldn't the contractor be, too?" asks Mather. The Office of Homeland Security has publicly endorsed the strategy. Now officials are watching closely to see whether the deal works. If it does, homeland security agencies may have found a new way to buy.