The Federal Integrator Survey

The federal budget impasse is over, and the government shutdown is history, but integrators are still dealing with the effects of both crises.

About two-thirds of the respondents to Federal Integrator's third annual prime contractor survey reported that the budget situation is having some impact on their operations. Difficulties cited ranged from lost revenue to delayed requests for proposals. Deferred spending on indefinite-delivery, indefinite-quantity contracts has emerged as a particular obstacle at some companies.

"Funds which would normally fuel many of our IDIQ contract vehicles have been delayed," said Irving Zaks, vice president and general manager of GTE Government Systems' Information Systems Division. "These delays have stressed our ability to shift resources to other programs, retain key talent and our corporate operating expenses."

"We have experienced a slowdown in awards of contracts currently under bid," said Peter A. Bracken, president and chief executive officer of Computer Data Systems Inc., Rockville, Md.

"We have also experienced a longer payment schedule for invoices, with a resulting impact to cash flow and higher short-term borrowing," Bracken added. "Otherwise, things are almost back to normal."

James F. McGuirk II, president of Unisys Corp.'s Federal Systems Division, said the continuing-resolution environment hampered agencies' ability to "plan ahead and purchase the information technology they need to help them accomplish their mission. This uncertainty has a ripple effect on vendors."

Other integrators noted that the 1996 budget crisis has led agencies to back off important information technology initiatives.

"Today we still see some lingering effects, principally a reluctance [on the part of civilian agencies] to get as aggressive with their programs as they have been in the past," said Ralph W. Shrader, president of worldwide technology business at Booz-Allen & Hamilton Inc.

"We experienced a significant amount of lost momentum on several key sales campaigns," a spokeswoman for Wang Federal Inc. noted. She said government clients, to some extent, have changed focus from "what to do next" to "how to preserve what they've got."

A spokesman for Electronic Data Systems Corp. noted that the company is concerned that some programs may "lose momentum and effectiveness" due to budget uncertainty.

But a few integrators reported shrugging off the effects of the budget. "PRC didn't even break stride" on existing contracts and in its pursuit of new business, said Austin Yerks, senior vice president and general manager of business development at PRC Inc.

Steve Cooker, vice president of defense, transportation and marketing at NCR, said the primary impact of the budget problems is felt by the citizen.

"It's a Catch-22 when an agency, whose mission is to provide better service to the citizen while improving cost-effectiveness, has budgetary constraints that require [it] to modify...programs designed to improve [its] efficiencies," Cooker said.

Optimistic Nonetheless

Despite the budget hassles, integrators remain optimistic, although guardedly so. Seventy-one percent of the respondents said they were somewhat optimistic regarding their companies' business prospects, and 29 percent reported they were strongly optimistic.

The continuing resurgence of the Defense Department market may be one cause for their optimism. An IDC Government Market Services study revealed that DOD's professional services spending is increasing and represents 55.7 percent of all such spending in government.

Accordingly, 82 percent of the integrator respondents identified DOD among their most active buyers.

Outlook

Looking into the remainder of 1996, integrators cited generating revenue from existing contracts and recruiting personnel as their top two concerns. Two-thirds of the respondents identified those areas as key issues. The integrators' weighting of recruitment was much higher than last year, when 25 percent of the respondents cited that topic. Their increased concern may stem from competition for technical personnel in such fields as object technology and World Wide Web programming.

Looking further into the future, the majority of integrators polled predicted increased business in the state and local government sector and in commercial off-the-shelf integration. Seventy-one percent of the respondents said they planned to expand their work in the state and local market, and 76 percent predicted that the COTS content of their integration business would increase over the next five years.

Federal Integrator distributed questionnaires to executives at 25 integration companies. Seventeen companies responded.