Feds score largest SmartBuy

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

The deal announced last week covers Oracle's flagship database and its customer relationship management and enterprise resource planning software. Product support and professional services also fall within 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 so far, said Karen Evans, the Office of Management and Budget's administrator of e-government and information technology, and 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 signed SmartBuy agreements include Manugistics Group, Novell, WinZip Computing and ProSight.

SmartBuy agreements maximize the government's 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 dramatic price reductions because officials approached the purchase in a strategic manner.

Rex Bolton, the Defense Department's SmartBuy representative in the Office of the Deputy Chief Information Officer, said some Oracle products would be discounted up to 84 percent compared with General Services Administration schedule pricing. Support discounts will be based on net license value. Typically, customers pay a support fee that is 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.

He 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 [take advantage of] the buying power of the entire federal government," said Mark Johnson, senior vice president of Oracle's government operation.

SmartBuy builds on DOD'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, DOD officials, on behalf of the federal government, signed the SmartBuy pact with Oracle 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 the best value. He cited projected savings of earlier SmartBuy deals, such as $57 million in savings produced by the ESRI agreement, $25 million in savings during the Manugistics pact, and $22 million in savings during the Novell deal.

GSA is the executive agent of the SmartBuy program.

SmartBuy, launched in 2003, had a slow start amid vendor concerns about 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 SmartBuy's negotiated terms and conditions will save time and money. GSA officials first released word of their SmartBuy plans for Oracle in January.