DISA raises Encore ceiling

DISA Notice of Encore I Ceiling Increase

Last week the Defense Information Systems Agency raised the ceiling on Encore I, a broad-scale information technology services contract, from $2 billion to $2.5 billion, after a surge of orders in recent months.

DISA expects to do about $1 billion in business on its Encore I contract between now and next March, when the agency plans to award the Encore II contract.

Senior DISA leaders attributed the boom in task orders in the past year to policies and directives that steer Defense Department commands and agencies away from the General Services Administration's contracts.

Evelyn DePalma, DISA's director for procurement and logistics and chief of the Defense IT Contracting Organization (DITCO), said orders on Encore I this fiscal year outpaced total orders in the first two years of the contract.

Debi Santoro, chief of DITCO's Network Services branch, said she expected task orders under Encore I to hit the new ceiling by the time Encore II is awarded.

DISA had pegged the total value of Encore II at $10 billion when it issued a draft request for proposals last November, but DePalma said DISA intends to publish a notice soon that cuts the ceiling for that contract to $1.5 billion, based on vendor input.

That's close to the total value of orders placed under Encore I to date, DePalma said. To date, DITCO's Encore I database shows 1,839 task orders with a total value of $964 million spread among nine prime contractors: Analytical Services, Computer Sciences Corp., EDS, Lockheed Martin Integrated Systems and Solutions, Northrop Grumman IT, Northrop Grumman Mission Systems, Pragmatics, TranTech and Unisys.

But DePalma said those figures do not reflect multiyear task orders, which would bring the total value of Encore I to $1.4 billion.

Although other agencies can order from Encore I, she said DOD has accounted for 96 percent of the business, with policies and language in DOD authorization bills driving the increase in orders.

Last October, DOD issued policy guidance that required military agencies to establish procedures for reviewing and approving the use of contracts managed by other agencies by the beginning of 2005.

In a June memo, Deidre Lee, DOD's director of procurement and acquisition policy at the time, wrote that some military commands and DOD agencies interpreted the guidance as meaning that they could not use outside contracts. "These interpretations are incorrect," wrote Lee, who was recently named assistant commissioner for integrated technology services at GSA's new Federal Acquisition Service.

Jim Kerrigan, president and chief executive officer of Colmar, said DOD buyers are definitely moving away from GSA contracts.

Olga Grkavac, an executive vice president at the IT Association of America, said the group's members are concerned about a possible shift away from GSA contracts, but she added that it's not yet clear such a shift is happening.

Encore I also appears to be siphoning business from contract vehicles run by the military services. For example, in June, Lockheed Martin won a $19.7 million Encore order for a complete suite of IT hardware, software and services, including personal computers, local-area networks and videoconferencing systems, at the new headquarters of the Army Materiel Command at Fort Belvoir, Va. — a job that the service's Program Executive Office for Enterprise Information Systems (PEO-EIS) seemingly could have handled.

A spokeswoman said the command looked at a PEO-EIS contract and the Encore contract and decided "the DISA contract best fit our requirement."

"There was a misunderstanding concerning the scope of the Army's Information Technology Enterprise Solutions (ITES) contract regarding the Army Materiel Command task order," an Army IT official said. "The responsible parties now understand the breadth and depth of the ITES contract vehicle."

The Army IT official said ITES continues to generate a lot of interest. The ITES Functional Area-1 for hardware now totals $350 million and the ITES Functional Area-2 for services stands at $100 million but could hit $470 million if all options are exercised.

Ed Newton, Northrop Grumman's Encore program manager, has a simple explanation for why the Encore contract has done so well. Because it has a broad array of offerings, he said, "this is like shopping at Target rather than a boutique."

Frank Tiboni contributed to this story.