Air Force cuts quick deals for PC BPAs

In an action that caught many PC manufacturers and resellers by surprise, the Air Force Standard Systems Group (SSG) last week quickly and quietly awarded two blanket purchase agreements for desktop computers and servers to Micron Electronics Inc. and Dell Computer Corp.

The awards mark the end of a string of indefinite-delivery, indefinite-quantity contracts— most recently the Desktop V pact— which SSG used to provide the Air Force with computers and other tools.

"This is a pretty radical change," said Patrick Gallagher, former sales vice president of the now-defunct Zenith Data Systems Inc., which held a Desktop V contract until the spring of 1997. "It could be the end of an era."

The awards were hailed by the winners and roundly criticized by vendors who either bid unsuccessfully or were shut out of the competition, which sources said was open only to manufacturers.

The BPAs, which will serve as ordering vehicles until April 1999, are worth a combined value of $186 million, according to an Air Force memo. They will be replaced next year by the follow-on to the Desktop V program, which may consist of additional BPAs, additional IDIQ contracts or a combination of both.

Industry sources said the Air Force requested bids from three other vendors besides the winners: Gateway 2000 Inc., Compaq Computer Corp. and another unidentified company, which is rumored to be Hewlett-Packard Co. SSG requested information from a larger field and then invited the five finalists to bid.

A day after the awards were announced, integrators and resellers expressed dismay. Alan Bechera, vice president of federal sales at integrator Comark Federal Systems Inc., said he was interested in the BPAs but was not invited to bid.

"Dell and Micron don't give [Air Force users] the options they need, and that is a major concern of mine," he said. "Generally, government customers need more than just a PC."

A source representing a PC manufacturer said he was disturbed by SSG's decision to solicit only five bids and to award only two BPAs. "This was obviously done by an organization that is used to writing the rules and making everybody follow them," he said. "SSG could have provided a rich environment for users by having a lot of BPAs as opposed to telling every airman what to do and who to order from."

Sources said some vendors were gearing up to lobby SSG officials to award additional BPAs.

Kenneth Heitkamp, technical director at SSG, said both BPA vendors have assured him they can meet the support needs of Air Force customers. He added that the three Desktop V contracts will remain in place as an alternative for users if Dell and Micron cannot meet their needs.

"We feel that what we now have available are five sources of supply that are very focused on the Air Force," he said. "That's more than enough."

Heitkamp said SSG officials did not restrict the competition to manufacturers. But he refused to comment on whether any integrators were invited to bid.

An SSG spokeswoman said last week that the group awarded the BPAs to increase the pool of vendors from which Air Force employees can purchase PCs. Although she did not directly criticize the performance of the Desktop V contract, she said additional vehicles were needed to accommodate the service's year-end rush on computer orders and to kick-start price competition and technology refreshment.

Consultant Chip Mather, a former SSG employee who now serves as senior vice president for Acquisition Solutions Inc., said the Desktop V contract had "lost its real value." He said the sole major contractor on Desktop V, Raytheon Systems Co. (formerly Hughes Data Systems), had "lost interest" in the program.

Tom Walters, the Desktop V program manager at Raytheon, said the company was continuing to refresh the contract "with the very latest products and the most competitive pricing." But he added that he was "somewhat disappointed" that the BPAs would be competing against Desktop V under different terms and conditions.

He said the company did not plan to take any action in regard to the awards until officials there obtained more information about how the BPAs would compete with Desktop V for Air Force business.

Heitkamp said SSG officials were in discussions with Desktop V vendors on ways to make their contracts more competitive with the BPAs. He said SSG is offering to remove Desktop V requirements, such as five-year on-call maintenance and three-year software upgrades, to make the contracts less costly to customers.

Bob McFarland, vice president and general manager of Dell Federal, said he believes the BPAs can give Air Force users better service than they have received through Desktop V. "I believe the Air Force can get a faster turnaround and better pricing with this BPA because it allows the Air Force to take advantage of price cuts and new technology as they become available," he said.

But Robert Guerra, president of consulting firm Robert J. Guerra & Associates, said he believes manufacturers such as Dell and Micron may not be able to offer customers the support they could receive from an integrator.

"There is not one single manufacturer that I know of that is going to be responsive to the worldwide locations," Guerra said. "They do not have the in-country points of contact, and that's where you deliver to the mission. The guy in the battlefield is the guy we ought to be concerned about."

Dell will offer its full line of General Services Administration schedule desktop systems, including its OptiPlex and Dimension desktop systems, its Latitude high-end notebook computers and its PowerEdge 2300 servers, McFarland said. He said the equipment would be discounted at different levels below the GSA list price depending on the configuration ordered.

Micron will provide its ClientPro line of PCs, its TransPort Trek 233 notebook and its NetFrame server line. Micron has set up a World Wide Web site for Air Force BPA customers at www.micronpc.com/ssg. McFarland said late last week that Dell was in the process of setting up a Web site for SSG customers.