Feds get Smart with Oracle

The government agencies collaborating on the SmartBuy program unveiled that initiative's biggest deal to date: an enterprise licensing agreement with Oracle.

The deal announced today covers Oracle's flagship database and its customer relationship management and enterprise resource planning software. Product support and professional services also fall into the scope of the agreement. The pact offers federal agencies steep software discounts -- in excess of 80 percent in some cases.

It is the largest SmartBuy deal to date, said Karen Evans, administrator of the Office of Management and Budget's Office of E-Government and Information Technology, it will be the mandatory vehicle for agencies seeking to purchase Oracle’s database.

The first SmartBuy agreement, with geographic information systems provider ESRI, was signed in early 2004. Other companies that have inked SmartBuy agreements include Manugistics Group, Novell, WinZip Computing, and ProSight.

SmartBuy agreements revolve around the government's ability to use its purchasing power to negotiate favorable pricing with major software vendors. David Safavian, administrator of the Office of Federal Procurement Policy, said the Oracle pact yields "absolutely dramatic" price reductions "because we have approached this purchase in a strategic manner."

Rex Bolton, the Pentagon's representative to SmartBuy in the Office of the Deputy CIO, said some Oracle products would see discounts of up to 84 percent compared to General Services Administration schedule pricing. Support discounts will be based on net license value. Typically, customers pay a support fee equivalent to 22 percent of the license value. But under SmartBuy, that percentage can be as low as 16 percent depending on the size of the order, Bolton said.

Bolton said the Oracle agreement provides the best benefit to small federal agencies, noting the absence of a minimum order size threshold.

"SmartBuy will allow for smaller agencies to leverage the buying power of the entire federal government," added Mark Johnson, senior vice president of Oracle's government operation.

The SmartBuy agreement builds upon the Defense Department's earlier Enterprise Software Initiative pact with Oracle. That arrangement has been in place for six years with Oracle and three resellers: DLT Solutions, Mythics, and Northrop Grumman.

Using those companies' GSA schedules as the baseline, Pentagon officials, on behalf of the entire federal government, signed the SmartBuy pact with Oracle on April 18.

Stephen Perry, GSA's administrator, said SmartBuy "marks a fundamental change in the way in which government will be purchasing IT" by allowing the government to aggressively pursue best value. He pointed to the projected savings of earlier SmartBuy deals: a $57 million savings over the life of the ESRI agreement, a $25 million savings over the span of the Manugistics pact, and a $22 million savings through the Novell deal.

GSA is executive agent of the SmartBuy program.

SmartBuy, launched in 2003, got off to a slow start amid vendor concerns over sales volume and other issues. Vendors that provide heavy discounts hope to make up for the lost revenue through increased sales volume.

Government officials, however, said Oracle will benefit from lower sales costs. Johnson said that SmartBuy’s pre-negotiated terms and conditions will save both time and money. GSA officials first released word of their SmartBuy plans for Oracle in January.