All solutions go

The road was long, but having traveled it, ITES-2 is off and running

After three years of wrangling, Defense Department and civilian agencies are finally digging into the Army’s Information Technology Enterprise Solutions-2 Services contract.

"More than 6,000 task and delivery orders have been awarded to date with a total amount of awarded orders of almost $1 billion,” said Gary Winkler, the Army’s program executive officer for enterprise information systems.

ITES-2 is effectively a follow-on to the Army’s $1 billion ITES contract, issued in 2003. The original ITES contract was divided into one contract vehicle for enterprise hardware and another for end-to-end solutions. ITES-2 preserves that structure, in a larger form. ITES-2 Services (ITES-2S), worth $20 billion, is a nine-year, performance-based, indefinite- delivery, indefinite-quantity (IDIQ) contract, and its companion, ITES-2 Hardware (ITES-2H), is worth $5 billion and runs for 10 years.

The contract’s success is not limited to the Army, Winkler said. “Customers other than the Army include the Air Force, Defense Information Systems Agency, Interior Department, General Services Administration and Navy, just to name a few.”

ITES-2H also is a hit with customers, said Michelina LaForgia, director of the Army’s Computer Hardware, Enterprise Software and Solutions (CHESS) project. In its first 11 months, ITES-2H sales hit $460 million, she said.

Based on size, ITES-2 already has left its predecessor in the dust. ITES’ cadre of five contractors has grown to 11 large and four small businesses on ITES-2S, and four large and two small businesses hold ITES-2H contracts.

However, ITES-2 owes its high dollar value to its predecessor’s success. Both the services and hardware functional areas of ITES reached their ceilings of $500 million, LaForgia said. “The available ceiling for ITES-1S was severely underestimated at $500 million, which we blew through quickly,” she said. And ITES-2 will soon get larger. A request for proposals for the $400 million IT Services-Small Business (ITS-SB) is expected to be issued by October, LaForgia said. ITS-SB is being handled as an augmentation to ITES-2 rather than as a component.

"The goal for ITS-SB was to establish shorter-term contracts that incorporate emerging technologies as they evolve,” Winkler said. It also provides a vehicle for IT services not offered on other CHESS contracts, he added.

Under DOD’s Enterprise Software Initiative (ESI), the Army must buy all commercial software through an enterprise software agreement (ESA). CHESS is the Army’s software program manager for ESI, LaForgia said. “We don’t award all ESAs through CHESS, she said. “However, all commercial software buys must first be checked against the full complement — all service leads — of available ESAs.”

Every computer, from laptops to servers, that CHESS sells meets Army standards for security, information assurance and interoperability, she said. The good deals available through CHESS ITES-2H and other contracts have created misperceptions, she said.

"People think that because we’re offering such low prices, our contractors are selling obsolete equipment, that they’re moving old inventory. The exact opposite is true, especially on the consolidated buys.”

Consolidated buys are six- to eight-week windows of time during which agencies can add their orders to a volume buy held twice annually. CHESS negotiates lower prices by consolidating large and small buys from many agencies — those buying a handful of servers get the same savings as those buying hundreds. A September 2007 consolidated buy was for almost 130,000 individual hardware and software purchases.

"And we’re hoping to beat that,” LaForgia said. “The end-of-year buys are bigger than the early buys. We’re about to open [a consolidated buy] on July 31. For the first time we’ll be offering boxes with Microsoft Vista operating system on all computers, from laptops to servers. The Army is moving to Vista and off [Windows] XP, and this will be a chance for people to make the move.”

All government agencies may use the buys.

"Army customers are advised to use [ITES-2S] as their primary source for services, but the direction isn’t as ironclad for services as it is for hardware,” she said.

"On hardware or software, we can do a one-to-one comparison,” LaForgia said. “If someone says they can get a commercial license $27 cheaper than we’re offering, we can say, ‘Are you getting software assurance with that?’ And they say, ‘No.’ And we can explain that that means they’ll have to pay for updates, which makes our license a better deal.”

"With ITES-2 Services, it’s a little more difficult to do an apples-to-apples comparison, especially if it’s performance based,” LaForgia said. One reason to do performance-based competition is to get innovative solutions, which precludes being able to do such a comparison, she said. “So we encourage customers to do their own comparisons including ITES offerors.”

With the online RFP/request for quotations application on CHESS’ e-mart, an e-commerce Web site, “users can query 16 major Army contract award holders,” LaForgia said. “The pre-award work essentially is done for them. They can do a simple contract very easily, and it even lets them do more complicated contracts. Say they want expedited delivery and they’re willing to pay a little more to get that, [the application] lets them easily do that.”

ITES-2 opened in February 2007, but it wasn’t until late last summer that the first awards started making headlines. In August 2007, the Army Human Resources Command tapped EDS to provide $38.8 million in IT support.

The number of awards accelerated in December 2007. Former protester Northrop Grumman won a task order from the Army to implement a real-time enterprise asset management system to support active Army, National Guard and Reserve forces worldwide. The initial $10 million could grow to $600 million during the contract’s life.

Although traffic on the contract started slowly, “it’s picked up over the last several months, then stayed pretty consistent,” said Bill Cleghorn, director of Army IDIQ programs at small-business contract holder STG. “It’s been a busy time for us.”

At BAE Systems IT, “we’ve seen upward of 200 to 250 requests for proposals over the course of the contract,” said Gerald Gourdain, BAE’s bid and proposal manager.

Traffic on ITES-2 is even heavier than it was on ITES, said John Richters, ITES-2 program manager at NCI Information Systems. “There are very few days when an opportunity doesn’t appear,” he said.

Meanwhile, even heavier traffic is on the way. “Regulations have been written to drive more people to the program,” LaForgia said. “The traffic volume is definitely still arcing up.”

Estimates indicate CHESS fills less than 50 percent of Army sales, she said. So “we hired an outreach firm to assess the way we’ve been communicating within the Army and to assist in rebranding.”

The old name — Army Small Computer Program — didn’t reflect the range of the program’s offerings, she said.

One finding was that the contracting community knew little about the program, LaForgia said. “If a contracting officer doesn’t know about us, and an Army customer needs hardware, they may order off some other government contract.

If they knew about us, they would probably order from us. So we need to target the contracting community.” Even without accounting for such efforts, growth of interest in the contract is following a normal arc, analysts said.

“Most agencies will hold off for a while on a new contract,” said Arash Ardalan, federal opportunity research manager at federal marketing firm Input. “You want to see how it’s performing before you invest your IT budget.”

Conceptually, a contract such as ITES- 2 starts as a good deal for all, said Ray Bjorklund, senior vice president and chief knowledge officer at Federal Sources Inc., an IT consulting firm. “The premise of government setting up a buy because it can negotiate the most favorable set of prices usually does make good sense for agencies. It’s also good for contractors, because under most IDIQ contracts, there’s a guaranteed minimum that at least lets a contractor cover the costs of setting the contract, the sales force and so forth.”

How well the contract works for each agency varies. “It’s up to agencies placing the orders to ask for additional price breaks or other concessions,” Bjorklund said.

Task areas of ITES-2S include business process re-engineering, information systems security, information assurance, IT services, network support, systems operations and maintenance, program and project management, enterprise design, integration and consolidation, and education and training.

The ITES-2H products include servers, PCs, laptop PCs, thin clients, storage systems, networking hardware, printers and peripherals, software, cabling, power supplies, scanners, and videoconferencing products, in addition to original equipment manufacturer hardware and warranty options.

ITES-2 is a reflection of the trend toward ever-larger multiple-award contracts. “There’s a lot of evidence, from where the contract dollars are going, that agencies are turning within themselves when it comes to spending on IT,” Bjorklund said.

Rather than use ITES-2, other agencies, especially those outside DOD, more likely “will take the path of least resistance and use their own vehicles when they have them,” he said.

"Increasingly, you see agencies putting out multibillion-dollar contracts for their own use, so they don’t have to go to NASA’s Solutions for Enterprisewide Procurement or some other agency’s contract and pay their fees and higher prices,” Input’s Ardalan said.

Virtually all CHESS hardware and service program contracts, including ITES-2, charge no fee to government customers. “Only ESI software agreements include a 2 percent DOD fee,” LaForgia said.

The more significant deterrent will center on policies, Bjorklund said. “Agencies operate around various statutes, codes, regulations, the Federal Acquisition Regulation. Even to implement the agency supplement to the FAR usually involves policies about using one contract type or the other.”

It’s also uncertain what effect, if any, new guidance from the Office of Federal Procurement Policy will have. The OFPP guidance, issued in June, aims to ensure that agency decisions to use interagency acquisitions are supported by best-interest determination.

For any interagency agreements they enter after Nov. 3, agencies must ensure the agreement includes a checklist of 31 items, such as the legal authority of the agency providing the service, the agreement’s scope and each party’s right to terminate the agreement.

Typically, “hardware and services ordered by other federal agencies results in 2 percent to 4 percent of total CHESS sales,” LaForgia said.

For now, Ardalan said, “I’d expect to see the majority of those using the contract to be from the Army. I’m seeing some good activity from GSA on it; the Navy has done a little, [the Veterans Affairs Department] has done some. But more likely you’ll see other agencies setting up their own.”

Agency-specific MACs also would be expected to have an edge in efficiency, Ardalan said, “because they’re tailored to the agency.”

For example, ITES-2’s expanded definition of support lets providers “analyze requirements, develop and implement recommended solutions, and operate and maintain legacy systems and equipment,” the Army’s Winkler said.

The arrangement is attractive to agencies, letting them avoid the headaches of technology ownership. Instead, vendors can provide “end-to-end solutions to satisfy worldwide development, deployment, operation, maintenance and sustainment requirements,” Winkler said.

ITES-2’s combination of broad offerings and tumultuous history have reduced DOD contracts by at least one. Concern for potential protests — and subsequent delays — helped prompt DISA to announce April 6, 2007, that it would not issue an RFP for its Service-Oriented Architecture Foundation initiative. “We couldn’t take the risk of [the foundation award] being protested, because that would prevent us from reaching Milestone C” of DISA’s Network- Centric Enterprise Services initiative, an agency spokesman said at the time.

The availability of a contract as broad-based as ITES-2 lets the agency safely switch. On Dec. 17, 2007, DISA issued an $89 million contract to ITES-2S vendor Computer Sciences Corp. to support the foundation project.

The extended brouhaha surrounding ITES-2 and its perceived lack of support for small businesses might end this summer with the Army’s anticipated RFP under ITS-SB. The multipleaward, performance-based ITS-SB will run for three years, with one two-year option, and have an estimated value of $400 million, Winkler said.

The contract will be classified under North American Industry Classification System code 541519 for Other

Computer Related Services Contract, restricting winners to companies with annual revenue less than $23 million, LaForgia said.

The Aug. 9, 2007, audit of ITES-2S by Richard Jolliffe, DOD’s assistant inspector general for acquisition and contract management, backed up the perception. Army “contracting officials did not properly consider small businesses for participation in the $20 billion ITES-2S contract award,” the IG report states.

Shortly after the report’s release, the Army began working on ITS-SB.

"There’s been a high degree of interest in ITS-SB, which caters more to what small businesses can offer,” Ardalan said.

With ITS-SB, “I think the Army is trying to diversify the providers and expand the realm of IT services to include some that aren’t being provided on ITES-2,” he said. “It’s going to meet some needs that aren’t being met.”

ITS-SB will cover six task areas for IT services not on ITES-2S: green IT, information assurance, independent verification and validation, IPv6 engineering services, migration and integration IT services, and warranty and maintenance.

"This vehicle will assist the government in ensuring that we are a good partner to small businesses, developing small businesses, and not just partnering with large corporations,” Winkler said. And, like ITES-2, it will be open to Army, DOD and civilian agencies.

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