2012 is fast approaching, and with it comes big changes in the Federal IT industry. WashingtonExec is giving local executives the opportunity to share their thoughts on where they see the government contracting industry headed. Leaders of the industry were asked a series of predictions questions focused on challenging issues such as cloud computing, healthcare IT, defense and so forth.
Today’s insight comes from Shankar Pillai, founder and CEO of OnPoint. WashingtonExec interviewed this entrepreneur earlier this year.
“In 2012, federal contractors will be affected by budget contraction in at least two ways: (1) increased contract consolidation and (2) increased use of Low Price Technically Acceptable (LPTA) procurements.
The first effect, increased contract consolidation, is evident in recent and ongoing procurements such as the State Department’s $3 billion Vanguard contract series, designed to consolidate more than 30 existing contracts for systems and infrastructure support across the department. As a result of contract consolidation, many current prime contractors (both large and small) will be forced to “take a back seat” and participate on other teams as a subcontractor to retain their current work, or worse, risk losing their work altogether. However, agencies should experience cost savings as a result of reduced contract administration and elimination of duplicative contractor management overhead.
The second effect, increased use of LPTA instead of “best value” procurements, will result in a more competitive contracting environment, leveling the playing field for challengers and incumbents. Under LPTA procurements, as bidders are evaluated to be “technically acceptable” and a competitive range is established, price becomes the deciding factor. Incumbent contractors lose the traditional advantages of incumbency that exist under a best value procurement (e.g., low risk, proven experience, incumbent staff), but are still burdened with a typically higher cost structure to retain incumbent staff. As a result of LPTA procurements, competition on recompetes will increase, and the government should experience cost reductions. To maximize cost reductions in an LPTA environment, agencies should start their procurement cycles earlier and share more information with industry along the way. This will enable bidders to provide more qualified bids leveraging innovative technologies and cost-saving approaches. However, agencies should also be prepared to lose a higher percentage of incumbent staff (and their institutional knowledge), as low bidders often cannot afford to retain more expensive incumbent personnel.”