Schedule 70A sales drop 11 percent

Business in the first half of fiscal 1996 went from bad to worse on General Services Administration Schedule 70A, according to a new report by International Data Corp.

Overall, revenue for Schedule 70A - for Unix workstations and other large systems-related products - dropped 11 percent compared with the same period a year ago, including a 24 percent drop in the second quarter, the report said. Seven out of the top 10 vendors reported a decline in sales, IDC said.

The government shutdown and budget crisis were sources of some lost revenue, but a lot of business was diverted to indefinite-delivery, indefinite-quantity contracts, said Jan Morgan, an analyst with International Data Corp., Falls Church, Va.

"Workstation vendors, in 80 to 90 percent of their shipments for hardware, really tried to put [business] through IDIQs," Morgan said.

Software and software training "are overwhelmingly the majority of what gets bought" off the schedule, Morgan said. In fact, of the existing Schedule 70A contract holders, only Computer Associates International Inc. and Oracle Corp. improved revenue compared with last year.

Government Micro Resourc-es, a hardware and software reseller, entered the top 10 in its first year as a schedule holder.

In comparison, sales of PC-related products on Schedule B/C were up 33 percent for the same period, according to IDC. That surge - which occurred despite the budget crisis - is widely viewed as the result of GSA's steps last spring to make Schedule B/C more flexible to use, including eliminating the maximum order limit.

The same changes did not kick in for Schedule A until several months later. Eventually those changes will result in more business, but that is not happening yet, vendors said.

Agencies approach the large systems purchases more cautiously than PC-

related buys and have not yet taken advantage of the new flexibility in Schedule A, vendors said.

"It really has not been universally accepted yet," said Mike Miller, vice president of sales at Computer Associates' federal office, Reston, Va. "There are still countless contracting shops doing stuff the old way." As a result, many vendors have been directing business to other vehicles, Miller said.

The agencies know the changes have happened, but "they are using it more on the B/C schedule than on the A schedule," said Kathy Sadler, contract relations adviser at IBM Worldwide Government Industry. "They are more likely to try [the new procedures out] on smaller [purchases]," Sadler said.

IBM, the top Schedule 70A reseller, saw its business drop 12 percent in the first half from the same period last year. IBM did not discuss the specifics of its business, but about two-thirds of its revenue came from software maintenance and training, according to IDC.

Most vendors expect to see increased use of Schedule 70A in the coming year. However, that may be tempered by the continuing proliferation of government-wide acquisition contracts (GWACs), vendor sources said.

"Federal buyers are aware of the GWACs, and they are doing cost comparisons," said John Leahy, group manager for government affairs and communications at Sun Microsystems Federal Inc., Vienna, Va. "Whereas in the past, if they just had small quantity buys, they went automatically to GSA schedule," Leahy said.

The conflict between GSA schedules and IDIQ contracts in the workstation arena reheated up last month when GSA approved NASA's request to reopen the highly successful Scientific and Engineering Workstation Procurement (SEWP) contract to non-NASA buyers.

"If they want the schedule to be stronger, why would they reopen SEWP, unless GSA is really not as competitive?" Morgan asked.

NASA had closed off SEWP in the fall of 1994 after sales from outside agencies exceeded the 20 percent set-aside. The program was very popular with the Defense Department and other agencies because it offered workstations, peripherals and networking gear from a wide array of vendors.

Such competition raises questions for GSA because it funds itself with the 1 percent surcharge it applies to schedule purchases, Morgan said. "I know GSA is very concerned with funding themselves with their 1 percent industrial fee," Morgan said.