Federal Contracting Moves that Will Ripple Beyond 2019

The past year has been long and significant in just about every respect, and government contracting is no exception.

The year was defined by one big, controversial procurement; the ongoing shift to buy more IT products and services through the General Services Administration; that agency’s consolidation of its major contracts on the Multiple Award Schedules; and a new cybersecurity standard that has the defense contracting community holding its breath.

Before 2019 comes to a close, Nextgov spoke with federal contracting experts Chris Cornillie, federal technology market analyst for Bloomberg Government, and analysts at The Pulse of GovCon, a market intelligence firm.

Top of mind for Cornillie was arguably the biggest contract—and upset—of the year. The Defense Department’s Joint Enterprise Defense Infrastructure, or JEDI, contract is projected to be worth up to $10 billion over up to 10 years, as a single provider builds a “war cloud” for use across the services.

The Defense Department started the JEDI contract two years ago, a process stretched out further by bid protests and lawsuits. Constant drama surrounded this contract—including a salacious dossier, a last-minute recusal from the secretary of defense and statements from the president—and the award announcement was no exception.

Despite Amazon Web Services being continuously described as the frontrunner, the Pentagon opted to award the contract to the only other qualified bidder: Microsoft.

“The decision surprised a lot of people in the industry, myself included,” Cornillie told Nextgov. “But hindsight is 20/20, and if you look at a lot of the moves Microsoft made over the last year, it set itself up for a tighter race than many suspected.”

The Defense Department will defend its choice as the legal battle continues, this time with AWS filing suit in protest of the award.

For analysts at The Pulse, the biggest 2019 trend affecting contracting was the dearth of stable leadership across government.

“In the less than three years since President Donald Trump took office, he has had no less than 28 acting Cabinet secretaries and carries more than five acting secretaries right now,” they pointed out. “The turnover rate since this administration has taken office is higher than the last five administrations.”

That instability at the top has trickled down to the federal contracting community as changing, unclear or entirely unstated priorities, the analysts said.

For Cornillie, the biggest instability this year came in the form of funding. Cornillie pointed to the effects of last year’s historic shutdown, which started the calendar with government offices closed for 35 days.

Congress reached a full-year spending deal this year, but it came down to the wire and agencies spent two and a half months in limbo operating on continuing resolutions. 

While agencies struggled through the shutdown and its aftermath, federal contractors bore the financial cost.

“BGOV estimates that the month-long partial government shutdown cost contractors a collective $3.5 billion,” Cornillie said. “It's unclear to what extent agencies were able to make up for lost time and work.”

One major change both analysts agreed on was the Pentagon’s coming Cybersecurity Maturity Model Certification, or CMMC. By fall 2020, all contractors doing business with the Defense Department will need to have their internal cybersecurity posture assessed and certified to ensure the industrial base isn’t an easy target for hackers.

The certifications will undoubtedly mean more work for contractors, requiring time and money to get certified. Those costs will likely be proportionately high for small businesses. But the full effects are unknown, as Pentagon officials admit, producing even more anxiety for the contracting community.

“As the DOD prepares to unveil the Cybersecurity Maturity Model Certification, the hundreds of thousands of firms it will affect will be looking on nervously,” Cornillie said. “The cost of complying with the CMMC will no doubt cause a share of the defense industrial base to exit the market and force others to solidify their supply chains.”

For now, the CMMC program only applies to defense contractors. However, civilian officials are watching carefully, and a FedRAMP-like program that looks at vendors instead of their products could become a reality.

“This is going to be DOD's beta.SAM.gov experience if they don't get their act together,” The Pulse analysts said, referring to GSA’s troubled rollout of its new contract opportunities platform in November.

While GSA was working on the new contracting site, the agency was getting new business from a host of large agencies opting to run their main tech contracts through IT Schedule 70. Major moves include the Air Force’s new 2GIT contract, replacing the in-house NETCENTS vehicle; FBI’s IT Enterprise Contract Services, or ITECS, the replacement for IT Supplies and Support Services, or IT Triple-S; the Homeland Security Department’s EAGLE Next Gen strategy, which replaces its EAGLE II contract with a preference for established governmentwide acquisition contracts, or GWACs; U.S. Citizenship and Immigration Services’ Enterprise Gateway and Integration Services, or EGIS, contract; and the Defense Department’s other billion-dollar cloud contract, the Defense Enterprise Office Solutions, or DEOS, contract.

But Cornillie pointed to another effort that seems to have “flown way under the radar”: GSA’s e-commerce initiative.

The planned platform will work like Amazon for small purchases that fall under the federal micropurchase threshold of $10,000. GSA issued a request for proposals in October and closed bids on Nov. 15.

“The current plan will give a handful of e-commerce providers the chance to build online marketplaces through which billions in open market spending will flow,” Cornillie said. “Amazon will have a huge advantage, especially if the micropurchase threshold is increased from $10,000 to $25,000.”

The Pulse flagged one more significant contracting move this year: the White House’s repeal of Executive Order 13495, known as the “right of first refusal” regulation, an Obama-era order that required federal vendors taking over an existing project to hire nonmanagerial employees working on the old contract.

Trump revoked the order on Oct. 31.

“This obviously could significantly impact the government contracting community,” Pulse analysts said. “But it’s hard to tell by how much as FAR 52.222-17 stays on the books,” they added, citing a clause in the Federal Acquisition Regulation that includes similar language to the Obama executive order.