Dec 31 2009

Make Your Buying Power Count

Roundly criticized for ineffective IT spending, Homeland Security has launched a buying organization designed to make the department a model for federal IT procurement.

Photo: Drake Sorey
"There's an absolute value in having IT acquired by a professional buying command. People who are experienced and who enjoy buying IT do a better job," Homeland Security's Greg Rothwell says.

Under fire from lawmakers to streamline and control information technology acquisitions and spending, the Homeland Security Department recently opened the IT Acquisition Center, a centralized buying command that it predicts will prompt a ceasefire and even kudos.

With the July launch of ITAC, the department now has the processes and people in place to begin consolidating systems procurements. Through a series of buys it calls domain procurements, DHS wants to eliminate duplicative contracts, cut its buying costs, reduce product prices and buy more efficiently.

A stream of requests for proposals "will emerge from the infrastructure transformation that have to do with services: network services, e-mail and directory services, data services, operations—network and data center—services, help desk, and standardization of desktops," Steve Cooper said earlier this year before he stepped down as the department's CIO.

The centralized IT procurement center follows the consolidation of the department itself.

Soon after the Sept. 11, 2001, terrorist attacks, the Homeland Security Act mandated DHS' creation. Almost immediately, lawmakers, the Bush administration and the public pressed for quick results in the war on terror. What slipped by the wayside were the day-to-day details of running such a huge, new bureaucracy.

As early as 2002, Cooper publicly complained that top leadership did not understand what the role of the CIO or IT within Homeland Security could or should be. The Government Accountability Office also has repeatedly chastised the department for failing to weave together its disparate administrative operations, including procurement and IT services.

"It's not uncommon for government agencies, when buying in bulk, to save 80 percent to 90 percent off list price. The savings can be unbelievable." — DHS' Greg Rothwell

A little history is in order to understand why the department ultimately decided to consolidate procurement efforts and create the acquisition center. When Congress and the president signed the law directing DHS' creation, it resulted in a department that combined 22 agencies and added a new one, the Transportation Security Administration. As a result of the merger, the department inherited seven acquisition centers from its constituent agencies and 35 new offices that had no acquisition staffs, says Greg Rothwell, chief procurement officer at DHS.

"Because so many of the agencies didn't have their own procurement organizations, I had to create an eighth, the Office of Procurement Operations," Rothwell says. "Within OPO, one division is ITAC." Eventually, ITAC will handle all of the department's IT purchases, he says.

The agency began forming ITAC late in 2004 by hiring about half a dozen staff members. "We have about 27 people now, but when it's in its second or third year, that'll grow to about 50, we hope," Rothwell says.

"There's an absolute value in having IT acquired by a professional buying command," he says. "It gives you a body of professionals who have had a chance to learn the industry, learn the marketplace and increase their skills in buying IT. People who are experienced and who enjoy buying IT do a better job."

Spend It Now

As DHS has built up its IT procurement staff and organization, it also has been devising a buying strategy for spending much of the $4.4 billion in IT funds in its purse before this fiscal year ends and for doling out the $5.9 billion it expects to spend in fiscal 2006.

The initial legwork for the domain procurements forced Rothwell and his procurement team to get a handle on what he calls DHS' spend management, a true accounting of what each organization within the department spends on IT. "Mastery of these details then forms the basis of planning and enables the government to obtain better deals," he says.

To help flesh out a buying strategy, Homeland Security is working with Acquisition Solutions of Oakton, Va. The consulting company is helping Homeland Security figure out what IT contracts—including what type and how many—are needed, says Chip Mather, an Acquisition Solutions partner who spent 20 years overseeing IT buys for the Air Force.

Figuring out the right contract mix is a significant consideration for any acquisition strategy, Mather says, but nowhere more so than when establishing requirements for IT contracts that will cross 23 agencies.

"There's more commonality than one might expect," he says. "The challenge is to include enough flexibility in each acquisition to be able to accommodate all DHS customers."

The challenge is to include enough flexibility in each acquisition to be able to accommodate all DHS customers. — Acquisition Solutions' Chip Mather

No single set of requirements is likely to satisfy every customer 100 percent, Mather says.

"But an 80 percent solution will cover the majority," he says, provided DHS makes the contracts "mandatory for consideration. Agencies have to consider using it, but if they have a valid reason for not using it, they can document why they need to go somewhere else."

Domain and Conquer

"The most strategic way to buy IT is by consolidating purchases," Rothwell says. "This is where domain contracting comes in. Now, the whole concept is still under evaluation, but current thinking is that we'd have three types of acquisitions."

The three categories would cover:

  • Managed services. Basically, these deals would let DHS lease rather than buy end-user systems and would also provide for desktop PC support.
  • IT support services. These buys would cover a wide range of needs but particularly focus on help-desk services for users departmentwide.
  • IT commodities. This set of contracts would give agencies quick access to basic hardware—items such as handheld devices and desktop PCs, for instance—and software.

    The staff at ITAC would manage the domain procurements and the ensuing contracts.

    "There's a value in having a set number of contracts involving both large and small businesses," Rothwell says. "You set up those contracts and then allow them to perform for you."

    But the contracts will come and go; it is the center that will make the greatest difference in IT buying at DHS, he says.

    Greg Rothwell's Tips on Savvy IT Buying
    Centralize IT procurement. To leverage buys for savings of up
    to 90 percent and track and control spending.
    Develop a specialized IT acquisition staff. To create
    a cadre of experienced professional IT buyers who know the market and the technology.
    Design a portfolio of contracts. To simplify contract management and decrease dependence on sole-source deals.
    Centralize information on the Web. To keep vendors in
    the know about contract opportunities and department programs.

    "I think ITAC is going to yield tremendous productivity and savings," Rothwell says. "It's not uncommon for government agencies, when buying in bulk, to save 80 percent to 90 percent off list price. The savings can be unbelievable."

    The buying team also expects another benefit from the use of domain contracts: helping DHS reach its small-business procurement targets.

    "By breaking out contracts to focus on a narrower array of skills, we'll be increasing the opportunities for small businesses," Cooper said in April.

    Through ITAC, the department also is creating requirements for performance-based contracts that will be available to small businesses as well as large systems integrators, Acquisition Solutions' Mather says.

    More than a decade ago the government mandated that agencies use contracts that tie payment to performance.

    The belief was that such deals would transform federal contracting and services. But the strategy failed to deliver, and today many acquisition experts suggest that as a contracting strategy for government, performance-based buys have yet to live up to the hype.

    "I have seen quotes that performance-based contracting isn't working," Mather says. "I would have agreed two to three years ago. Even though performance-based acquisition has been mandatory since 1991, we were seeing mostly malicious compliance—inserting the words into a contract, but for name only, not to designate intent—rather than real compliance.

    "But that's changing. I know this because I'm seeing more cases of big government contractors reorganizing around delivering it and saying: 'I can respond to the increasing demand and make it a strategic advantage.' "

    Just in Time

    The changes DHS is making in the way it buys IT could not come at a better time. The department's IT budget is slated to increase by a whopping 34 percent for 2006, but such increases are unlikely to continue indefinitely.

    The Reston, Va., IT research firm Input predicts spending on homeland security will grow over the next few years, then level off.

    "Although homeland security will remain a budgetary consideration, we will not see the frantic spending on these initiatives that we have seen over the past three years," says Payton Smith, Input's public sector analyst. "We will then see IT spending return to levels of normalcy as two things happen: Homeland Security becomes ingrained in each responsible federal agency's mission, and the Office of Management and Budget exercises more control over IT expenditures."

    Homeland Security will be ready, and more specifically ITAC will be ready, Rothwell says. "In a few years, it'll just be another highly recognized, best-in-class government buying command, like that of the Defense Information Systems Agency."