By now, federal contractors realize that they must own multiple award contracts to compete in the $95 billion federal market. (If we subtract classified spending from this figure, fiscal 2017 IT spending topped $80 billion).
Meanwhile, IT modernization and related initiatives such as strategic sourcing, category management, and Better Buying Power are dramatically shrinking the number of prime contracts. Best in Class (BIC) preferred and mandatory vehicles are further decreasing buying options. If you don’t have the MACs, you simply cannot compete.
If you don’t believe me, look at the numbers. In 2012, according to Bloomberg Government, the federal government spent $6 billion on IT products and services through IT government wide acquisition contracts (GWACs). Overall, by 2017, that figure topped $13 billion with well over 60 percent of IT spending happening through GWACs and other MACs, including agency-specific IDIQs. In that same period, set-aside spending on MACs grew 137 percent.
Examining the Deltek GovWin data on how many IT and how many professional services RFPs are released each year, we see an interesting trend. While the number of professional services RFPs has increased steadily over the past five years, the number of IT services RFPs has decreased 44 percent while overall IT spending has remained steady.
Why this discrepancy?
Because agencies are procuring IT services through other means that fly under the radar. Savvy contractors are influencing their customers to take advantage of Other Transaction Authority (OTA), Simplified Acquisition Procedures (SAP), and/or task order RFPs, which are largely hidden from public scrutiny.
OTAs gaining in popularity
OTAs are not subject to the Federal Acquisition Regulations and may be used by defense agencies to carry out certain prototype projects. The 2016 National Defense Authorization Act Section 845 gave the Department of Defense permanent authority to use OTAs for prototype projects directly relevant to weapons or weapon systems when it is in the government’s best interest to enter into an agreement that is not a contract, grant, or cooperative agreement.
According to Bloomberg Government, DOD OTA spending has increased nine-fold to $412 million in fiscal 17 from $43 million in fiscal 2014. The Defense Advanced Research Projects Agency and the Army issued most of these awards, but the Air Force and the Defense Information Systems Agency are implementing plans to use OTAs as well. The Defense Innovation Unit Experimental (DIUx) also uses a related buying authority called Commercial Solutions Opening (CSO), so far constituting 61 technology buys totaling $145 million.
Use of SAP increasing exponentially
FAR Part 13 allows the use of SAP for simple supply or services requirements. The purpose of SAP is to:
- Reduce administrative costs
- Improve opportunities for small business
- Promote efficiency and economy in contracting
- Avoid unnecessary burdens for agencies and contractors
While the SAP ceiling is relatively small at $150,000 ($750,000 for defense or recovery efforts) for contracts awarded and performed in the United States and up to $1.5 million for recovery efforts outside the United States, the threshold increases for special emergencies or test programs up to $13 million. Remember, all that is needed for a SAP proposal is a quotation, which may even be oral.
According to Bloomberg Government, use of SAP has been increasing over the past six years (to nearly $22 billion in 2017), especially because it is also a way to avoid protests. In addition, SAP favors small businesses as SAP purchases between $3,500 and $150,000 must be set-asides. SAP allows sole source under certain thresholds, therefore providing an easy way for agencies to meet small business goals. Note that most of these actions are never posted to Federal Business Opportunities (FBO.gov) and receive little to no attention.
Task order RFPs
Unless you own a GWAC or other MAC, you cannot obtain RFPs issued under vehicles until sometime after award, if at all. How many IT task order RFPs were released in 2017? There is no way to know for sure, but as captured by the Deltek GovWin database, there were $10 billion in IT services task order RFPs released last fiscal year. Of note, in fiscal 2017, the federal government spent about $61 billion on IT services through 41,000 task orders. The average number of bids received per task order RFP was only three to four, making it a relatively less competitive playing field.
It is also more difficult to protest a task order award. Task order awards under $10 million for civilian agencies and $25 million for defense agencies cannot be protested unless the award was improper because it exceeded the scope, performance period, or maximum value of the underlying contract.
The bottom line
IT companies must change the way they compete. They must steer customers to the vehicles they own and encourage the use of OTAs and SAP as appropriate. Especially for small businesses, owning Best in Class vehicles such as Alliant Small Business 2 and making extensive use of SAP to help customers meet small business goals (in addition to other set-aside advantages) is a way to propel forward to the mid-tier.
Of course, there are no advantages to being a mid-tier company, unless, like your larger brethren, you work to stay behind the curtain through MACs, OTAs, and SAP.
By Lisa Pafe, Vice President at Lohfeld Consulting Group, CPP APMP Fellow and PMI PMP
Lohfeld Consulting Group has proven results specializing in helping companies create winning captures and proposals.
As the premier capture and proposal services consulting firm focused exclusively on government markets, we provide expert assistance to government contractors in Go-to-Market Strategy, Capture Planning and Strategy, Proposal Management and Writing, Capture and Proposal Process and Infrastructure, and Training. In the last 3 years, we’ve supported over 550 proposals winning more than $135B for our clients—including the Top 10 government contractors. Lohfeld Consulting Group is your “go-to” capture and proposal source! Start winning by contacting us at www.lohfeldconsulting.com and join us on LinkedIn, Facebook, and Twitter.