Schedule sales dominate fed buying

The General Services Administration schedule has become the government's preferred vehicle for buying information technology products and services, with the top 30 vendors racking up more than $800 million in sales during the 1998 summer buying season.

According to figures released this month for sales made in July, August and September 1998, almost all of the top companies capitalized on the growing movement toward the schedule. (Vendors reported the sales figures for the 1998 summer buying season to GSA in October and November. Because the sales are reported in those two months, GSA includes these figures in the total sales for fiscal 1999.)

Dell Computer Corp. continued its dominance of the schedule, reporting more than $208 million for the fourth quarter of 1998, compared with $134 million for the same period in 1997. In fact, during the summer, Dell sold almost half of what it had done in the previous four quarters, when the company racked up $462 million in sales.

Other companies posted similarly impressive gains. Gateway Inc. reported more than $92 million for the summer of 1998 vs. $214 million for the entire previous year; Science Applications International Corp. reported $33 million for the summer vs. $58 million for the previous year; and Bell Atlantic Federal reported $16 million for the summer vs. $25 million for the previous year.

Also reaping the rewards of a successful summer were Electronic Data Systems Corp., Computer Sciences Corp., Litton/PRC Inc. and Sylvest Management Systems, all of which more than doubled their sales year to year.

All told, the schedule grew from $2.8 billion in 1997 to $4.5 billion in 1998, and GSA's Federal Supply Service expects even more out of 1999.

"Our forecast is that we're going to be just over $6 billion this year," which includes the fiscal 1998 fourth quarter, said William Gormley, assistant commissioner of FSS' Office of Acquisition.

BPAs Blossom

Much of the schedule's growth, according to industry and analysts, is from agencies awarding blanket purchase agreements off the schedule rather than traditional indefinite-delivery, indefinite-quantity contracts.

"A lot of agencies are replacing IDIQs with blanket purchase agreements," said Kevin Adams, senior director of governmentwide acquisition contract (GWAC) programs at Government Technology Services Inc.

GTSI sold $63 million in the fourth quarter of fiscal 1998 on the schedule, and the company attributes a large portion of those sales to its growing number of BPAs, Adams said.

"Our GSA numbers stay pretty constant, but our BPA numbers are exploding," he said. After the procurement reforms put in place by the Clinger-Cohen Act in 1996, "our BPAs went from nothing to about 20 percent of GSA schedule business in '97 and over one-third of the schedule business in '98."

BPAs are easier and faster to negotiate, allowing agencies to get the product or solution they need within the shortest time possible outside of buying with a credit card at the local store, said Robert Guerra, president of consulting firm Robert J. Guerra&Associates.

"As we get more and more pressure for results, people start looking at timeliness and price," Guerra said.

And while vendors have realized this for a while, agencies are finally getting the message. "GSA has done a very good job of marketing BPAs as an alternative to IDIQs," Adams said.

Even direct manufacturers have been moving to BPAs. For example, Dell and Micron Computer Inc. were awarded BPAs under the Air Force's Desktop V program last June.

"We've increased our BPA standing at least sixfold, and I've got three that we're working on in-house now," said Harry B. Heisler, vice president and general manager of Micron Government Systems.

In a major reversal, many vendors now view IDIQs with skepticism because the costs to bid them are so high, said Tom Baybrook, vice president at Intergraph Federal Systems. Baybrook said Intergraph would rather focus on the GSA schedule.

IDIQ contracts are not going to disappear though, vendors said. Many IDIQs are still in place in the federal market, and some agencies and vendors may always prefer doing business that way, said Elaine Dauphin, vice president of business development at Computer Sciences Corp.'s civil group.

CSC has a significant presence on the schedule, taking 12th place in Federal Computer Week's ranking of the top 30 vendors after only 18 months in the program. But CSC also does much of its business through IDIQ contracts and GWACs. "Some agencies want cost-and-award-fee contracts," Dauphin said.

Compaq Computer Corp. also has a substantial number of IDIQ contracts, said Gary Newgaard, vice president of the federal region at Compaq. "We take the balanced approach and do business with the customer as they prefer," he said.

Services Soar

Also driving GSA sales growth was the addition of information technology services, which accounted for at least $1 billion of the $4.5 billion reported on the schedule from July 1997 to June 1998, according to FSS' Gormley. Service vendors fared even better during the 1998 summer buying season, with vendors such as CSC and BTG Inc. winning large services deals off the schedule. Other vendors, such as Dell and IBM Corp., added leasing and other financing options to their schedule contracts.

"I think this past year was the breakthrough year for services on [the] schedule," Dauphin said. "I think it's going to be a booming business in the future, and the schedule will offer more and more types of services."

Vendors predict the range of services offered on the schedule will broaden in fiscal 1999. Current offerings range from engineering services to desktop management and information security. SAIC, for instance, recently added telecom and engineering services, according to Eino Huhpala, the company's deputy program manager of GSA schedules.

Other companies are focusing on specialty hardware and services instead of adding services across the board. DLT Solutions Inc., for example, offers IT solutions in only three areas: Oracle Corp. solutions, Autodesk Inc. solutions and storage solutions.

"Rather than focus our business on services or products, we're focused on three solution areas," said Craig Abod, vice president at DLT. And any expansion of the company's offerings on the schedule most likely will take place within those three areas, he said.

Even traditional hardware vendors, such as Dell, Micron, Compaq and Intergraph, are bulking up their service offerings, which can support higher margins.

At the beginning of fiscal 1999, Micron kicked off Micron University, a training program with online classes and seminars offered through a partnership with Ziff-Davis Education. The program has attracted attention from federal customers, including program officers at Robins Air Force Base in Georgia, Heisler said.

Micron University is only one of many initiatives Heisler is working on that will affect GSA schedule sales, he said. "Micron has got a lot of notions about how to provide value beyond the box," he said.