SmartBuy opens its doors for business

Bush administration officials believe they have found the right approach to creating enterprise software licensing deals that give agencies a price break without undermining the business model of software vendors.

As originally conceived, the SmartBuy program will sign licenses with vendors for software that agencies can then buy. The theory is that these enterprise licenses will allow agencies to consolidate purchases, thereby allowing the government to take advantage of its buying power.

Vendors have balked, though, for reasons that range from concerns about sales volumes to worries that certain companies will become the de facto government standard and lock out competitors.

The first license, announced last month, works as an additional discount for agencies. Signed with ESRI of Redlands, Calif., a developer of geographic information and mapping software, the license requires individual agencies to first negotiate a contract with the company to purchase software, with a five-year volume guarantee. The negotiated SmartBuy discount then applies to the purchase.

The ESRI agreement will provide a potential cost savings of $57 million during the life of the contract when compared to nonvolume purchases using the General Services Administration's schedule contracts, GSA officials said.

Earlier this month, the Office of Management and Budget issued a memo to agencies outlining the next steps they should take.

According to the memo from Karen Evans, OMB's e-government and information technology administrator, agencies must submit a list of their 2003 software acquisitions to OMB and GSA by April 15.

The lists must start with 10 potential SmartBuy categories, as outlined by OMB. They must include the names of the

software, the number of units purchased, the lowest and highest prices paid, the average price paid and the total cost for the year.

GSA officials will use the information to negotiate software contracts, according to the memo. When GSA officials are close to awarding a SmartBuy deal, they will alert agencies to postpone further purchases until the deal is final.

GSA officials acknowledge that the program has been more difficult to get off the ground than they expected. Marty Wagner, associate administrator for GSA's Office of Governmentwide Policy, blamed agencies' inability to evaluate software needs and predict them over several years.

"We've actually concluded from the work to date that there's a lot of improvements to be made on the government's software asset management," he said.

GSA made the ESRI deal with three agencies that already use the company's software and three more that want to, said GSA's Kathy Beasley, who is serving as contracting officer on the deal. The Agriculture Department, Census Bureau and Interior Department can use the license now, while the National Security Agency, the Environmental Protection Agency and the National Geospatial-Intelligence Agency plan to join soon.

Other SmartBuy arrangements will not necessarily resemble the ESRI license, he said.

GSA and OMB officials will need to give the program strong leadership if it's going to be successful, said Mark Forman, Evans' predecessor at OMB who now works in private industry.

"There are a lot of conflicts of culture in SmartBuy," he said. "That's not the way the government buys today. They can't take advantage of economies of scale because they're not set up to."