Government buying is moving, shaking

GORMLEY: Sales last year for IT were $2.8 billion and this year through May 22 are $3.2
billion. We feel we’re probably going to do at least $4 billion in sales this year.

I think what we’re seeing is that while we increased buying by about a $1 billion
last year, we’re seeing that the addition of services to the IT Schedule is starting
to really kick in.

The movement to blanket purchasing agreements is being viewed and really experienced by
the customer as really putting the customer into an almost commercial environment—at
least as close as we feel we can get at this time in government.

If a customer’s requirements change or the technology changes, the government
benefits from that in a real-time environment. Historically, the perception of government
has been as a large buyer and has been identified as buying old technology. That’s
changing very rapidly to the government now having the ability to get the latest
technology as it’s available commercially. We’re pretty excited about being able
to offer that.

Services are the fastest growth part of the schedules program. We feel that the IT
Schedule as a whole will reach $10 billion by 2004, and a lot of that will be the growth
of services.

GCN: There have been questions
about whether reforms are squeezing out sales by small businesses. How is GSA addressing
that issue?

GORMLEY: We’re happy to see the tremendous growth in the number of small
businesses. Some people felt that when we added services, that would result in a decrease
in small business participation or sales. Our experience has been the opposite.

For all of fiscal 1997, small and woman-owned businesses did $27.5 million in business.
In the first six months of this year, they’ve done $33 million. We expect to be at
more than $1 billion this year.

In the schedules area, about 77 percent of our contractors are small businesses, so
they are the primes. The schedules are a very low-cost entry for small businesses to get
into the government market.

In getting through the negotiations and the contracting process, the companies and
small businesses are able to emulate a lot of their commercial practices.

GCN: One of the issues that I
repeatedly hear from vendors is that they like what they hear from you and Frank Pugliese,
GSA’s FSS administrator, but they believe it doesn’t get down to the level of
the contracting officers. Is that a fair criticism, and, if not, how do you deal with that
perception?

GORMLEY: I think if you were to go to the corporate world, those negotiations can get
very pointed and very direct. Ours aren’t far off from that. That’s the
contracting officer’s job—to negotiate a fair price for the government.
Contracting officers have a lot of additional potential reviews after they sign a
contract. So they have to be behind their determination.

I’ll be addressing this issue with the inspector general. What we’re looking
for is for the IG to treat us like a CPA company treats its client. There’s a
perception that when contractors make a decision, they’re second-guessed. Some of
that creeps into the negotiations side about whether they are getting a good deal or not.

We want to leave a profit on the table for the company. We understand that. Probably
for everybody that has said they’ve had a bad experience, we’ve had a lot of
folks under their own initiative say how professional we’ve been. Some people say
they must have gotten away with something. I hate to think that.

With 1,400 vendors, I’m sure there will be situations, and, when we identify them,
we’ll work with them. But the productivity of our contracting officers is up 40
percent over last year, so I think what they’ve done is nothing short of phenomenal.

We’re trying to bring in some resources; we’ve brought in six folks within
the past four months. That should also help take some of the pressure off everyone, which
we as management should be trying to do. It’s just hard to hire in government right
now.

GCN: Let’s talk about GSA
Advantage. I’ve heard Pugliese say that he wants it to improve. Where are you looking
to take it, and how do you want to get it there?

GORMLEY: He has assigned GSA Advantage to Ed O’Hare, who is the deputy chief
information officer, which I think is a good move.

What they’re looking to do is making it faster and easier. But we’re into an
environment where no one has any history.

If there is a way to change how the data is put into Advantage, that is one of the key
initiatives. We need to know how a customer will be able to search for that data and how
it will be laid out on the screen as people go shopping.

We’re seeing a steady increase in acceptance throughout government. Government
employees are no different than people anywhere else and acceptance of the Internet is
becoming greater from the standpoint of ordering.

I don’t think we should be intimidated by the Internet. I think we need to find
ways to make it easy and find ways to allow electronic commerce to be utilized throughout
government, and that’s what we’re trying to do with Advantage.

GCN: How have companies reacted
to Advantage?

GORMLEY: Some companies are excited about it. Some people view it not as an opportunity
but as an additional cost.

GCN: Each IT Schedule contract
mandates that the vendor make its ordering and product information available via
Advantage, doesn’t it?

GORMLEY: It doesn’t mandate it now. It strongly encourages them to use it.

We like to use the carrot, not the stick. We’re relying on Adam Smith’s
theory that greed will come along and once folks see their competition on Advantage, there
will be a move by other companies to get on there. We’re at about 400,000 products
right now.

GCN: There is an ongoing debate
about the number of contract vehicles available to agencies right now. A year ago you told
vendors that they should choose their contracts more carefully. Do you get a sense that is
happening?

GORMLEY: If we had different vendors in the schedules program than agencies have in the
indefinite-delivery, indefinite-quantity side, then I think there would be merit to that.
But I think we’re reaching a point where the government is saying, “How many
contracts should we have with the same company for the same thing?”

When we talk to customers, we find there are less IDIQs going on, and the next step
will be what happens with the governmentwide acquisitions contracts.

The administration’s Mayflower Agreement had good intentions as designed by former
Office of Federal Procurement Policy administrator Steve Kelman. I think the intent of
Mayflower—and even the GWACs—was for agencies to open up their contracts
governmentwide based on the fact that they had the resources and could handle the
resources.

I’m not quite sure where we are with all that. I think that is something Deidre
Lee will deal with as the new OFPP administrator.

I would say in two years, you will see a whole different landscape. Some have said that
GSA will be a monopoly. I hate to have it referred to as a monopoly. We don’t view it
as a monopoly. GSA is around to be the acquisition arm of government.

To be fair to everybody, for a while GSA wasn’t being responsive. We basically
created a lot of the IDIQs because we weren’t supporting the customer so they had to
go out and do it themselves.

But I think over the past few years and through all the changes that we’ve made,
we’re setting up the best contract vehicles for our customers to use. They have
established sources of supply.

The acquisition folks in the agencies still have a responsibility when they buy off the
schedules. I think over the next few years, the market is going to play that out.