DATA Act: Open for Business?

Stephanie Headshot 65x85by Stephanie Meloni, Senior Analyst

On April 10, 2014, the Senate (unanimously!) passed the Digital Accountability and Transparency Act (DATA Act). The bill would require the government to standardize and publish financial management, procurement, and related data in electronic formats that can be easily accessed by the public. Open data will give our industry new insights into federal spending, and potentially new business opportunities. The House is expected to vote on the bill later this month, where it is expected to pass quickly.

The DATA Act will be the most powerful transparency mandate since the passage of the Freedom of Information Act in 1966. The goal of the bill is to publish the executive branch’s entire spending portfolio as standardized open data.  The DATA Act will be used to provide visibility into wasteful spending and duplicative programs.

Read more of this post

Top 3 Procurement Priorities for the New Defense Health Agency

Lloyd McCoy_65x85by Lloyd McCoy Jr., Consultant

Those controlling the purse strings within the three-month old Defense Health Agency (DHA) are especially keen on shared services and opportunities to consolidate and are looking hard at chances for eliminating redundancies as it seeks to bring under one roof functions previously decentralized. The agency is also looking for ways to update its antiquated technology to increase efficiencies and cost savings. If you can identify opportunities and offer solutions along these lines, you are ahead of the pack.  Here are the top three procurement priorities for DHA:

1.  Upgrading its electronic health records

Last week, the DHA issued a RFP to maintain and incrementally upgrade its electronic health record (EHR) system, which is the world’s largest. The contract, worth up to $1 billion, sheds light on DHA’s timeline for entirely replacing the massive electronic health record system. The sustainment contract extends through 2018 making it likely DHA’s new EHR won’t come online until 2018/2019. The decision to extend the Pentagon’s current electronic health record for a few more years comes after the VA and DOD agreed last year to stop work on making their legacy systems interoperable. DOD decided it needed to focus on replacing its legacy healthcare IT system first. Both agencies though still plan to make their respective electronic health records interoperable. It’s worth noting that last fall DOD issued an award to continue providing systems integration and engineering support toward the interoperability effort.

2.  Consolidation

Infrastructure, portfolio rationalization, and application consolidation will be especially important over the next two fiscal years (FY14-15) as DHA seeks to bring together redundant IT functions that existed under the old Military Health System framework under its shared services model.  Also, in the absence of a proper integrated Electronic Health Record, the agency is looking for ways to enhance how VA and DOD’s respective infrastructures can better correlate patient data.

3. Mobility

Expect mobile platforms and applications to see widespread use throughout the defense medical complex. There are bound to be a lot of opportunities here given that the agency serves almost 10 million people through about 700 hospitals, clinics, and medical centers, not to mention medical facilities on naval ships. Before DHA dives into BYOD and mobility adoption, mobile security solutions will be of paramount importance.

Shielding Yourself from Sequestration

photo_Chris Wiedemann_65X85- one postby Chris Wiedemann, Senior Analyst

If you had a chance to view immixGroup’s Market Intelligence briefing on sequestration yesterday, you hopefully have a better understanding of what the proposed cuts mean to IT companies.  Tim Larkins summarized the history of this situation – what sequestration is, when it became law, and just how those cuts (which weren’t really supposed to happen) actually arrived. He also covered some of the projected long-term impacts of sequestration on federal spending. This information is all vital – it will help you understand your customers’ pain and better equip you to discuss the cuts they’re experiencing.

Today, though, I want to take a minute to reemphasize some of the key components of Tim’s presentation: what does this mean for federal sales? The “snowquester” is actually a pretty good metaphor for the impact of these spending cuts on the federal IT market: some segments will stay pretty dry, while others may well get buried. So what should we be doing to shield ourselves from sequestration?

First and foremost, when you’re finalizing a deal with your customer, make sure the money is there. That means asking your customers two questions: what activity account is funding the purchase, and is the right amount of money in that account? Remember, while program people are creating demand, they have to request that money be transferred from Treasury into the right activity account before they can actually buy anything. This is the step where the sequestration cuts are actually taking place – think of them as a leak in the cash pipe. That leak could mean that money intended to purchase your products is actually getting lost before it ever lands in the right activity account. Don’t forget: unless you and your customer both know 1) which account is funding a purchase, and 2) whether that account contains the right amount of money, you’re subjecting yourself to potential delays and hang-ups down the road. You might even not get paid.

A few more points that I want to emphasize:

  • Although the long-term impacts of these deficit cuts will probably be minimal, we are going to feel the pinch in the short term. Federal IT spending will decrease overall this year, particularly in DOD, where they have been spending as though the sequester would not be implemented.
  • Most of the cuts to IT spending will probably be felt by systems integrators and services contractors, both large and small. All the language coming out of OMB and other government sources indicates that there are many duplicative or otherwise unnecessary IT services contracts that will probably be descoped (or cancelled outright). This is bad news for small business subs on large contracts, but is actually good news for the COTS community, since government will need to buy more tools to perform the tasks that they used to outsource.
  • Keep your audience in mind. At the executive level, demonstrating cost savings and value is going to be more critical than ever – if you can’t demonstrate real ROI within two years of purchase, your customer likely won’t be interested.
  • At the end of the day, there is still a mission that has to be met, and government customers won’t be able to use sequestration as an excuse not to do their jobs. If you or your clients can help them meet that mission, you will still find a willing audience.

As always, if you have more specific questions, I urge you to reach out to the Market Intelligence team. Good luck and happy hunting.

Sequestration. It’s Here, So Now What?

photo_Steve-Charles_65x85by Steve Charles, Co-founder and Executive Vice President

Like so many of our clients and partners, I’m scanning the news almost hourly to see what will happen with sequestration. As I’ve advised earlier, it’s important to filter out the politics ⎯ admittedly that are getting more heated and unreal-sounding ⎯ from the underlying reality.

That reality centers on two points worth repeating.

First, the math. For the civilian side of the government, cuts of $42.5 billion represent 6 percent or so of overall spending, but the effect is magnified by the fact that the fiscal year is nearly half over. The cuts aren’t horrible, but they are real. On the Defense side, it’s more like 9 percent, and this on top of budget limitations worth hundreds of billions over 10 years agreed to last year.

Remember, Sequestration is a “hold-back” of a specified percentage on all accounts of a similar type. For instance, the hold-back percentage on Discretionary accounts is higher than Mandatory accounts, and some accounts are exempt. But all “sequesterable” accounts of the same type have the same hold-back percentage applied, so an agency can’t completely cut a program, rather, all programs, theoretically, are subject to equal pain and suffering. The Sequester Order expected March 1 should include all these details.

This requires a careful, tactical approach by your sales teams to focus on the real opportunities, analyzing each by understanding which budget line item is potentially funding each individual opportunity. February 27 guidance to agencies from Comptroller’s office (M-13-05) emphasizes use of furloughs, hiring freezes, travel bans and so on to meet the hold-back percentages on sequesterable accounts without damaging mission performance. The memo does not mention freezing planned expenditures on technology purchases.

So opportunities to continually improve government performance and cybersecurity are still out there. Understandably, program managers are being very careful about allocating funds until there is more certainty that the fund-certifying official can sign off on the disbursement–all of which must happen before Contracts can work on the procurement.

Second, go back and review those areas most likely to keep going during the sequester. These are spelled out in guidance from the Congressional Research Service issued in January. It’s called Budget Sequestration and Selected Exemptions and Special Rules. Note that word: exemptions.

Among the areas the White House has the discretion to exempt:

  • Military payroll accounts for uniformed members, which of course pulls along all of the support products and services related to troops.
  • Veterans medical benefits, which also pull through supplies and services.

These two have already been “rescued” by the administration. Other possible exemptions that relate to the sales of products and services:

  • Unobligated balances carried over from prior years from nondefense programs.
  • A dozen direct benefits programs. Normally the administrative expenses related to these programs would be subject to sequester. But here’s a crucial point. CRS reports that OMB has decided that discretionary administrative expenses for exempt programs would not be sequestered. The reasoning is convoluted, but that exemption from the sequester could be your ticket to continued sales.

Bottom line? It’s no longer enough to ask whether the customer has money. Now we need to get into the details at the budget line item level and find out how sequestration applies to that account. This is a big job. There are many thousands of accounts.

And don’t forget, there’s a continuing resolution behind the sequester. It expires March 27. So far no plan has emerged from Congress on how to avoid a government shutdown. In their caution, your customers are thinking about how to avoid stumbling into an Antideficiency Act violation. Will the CR simply be extended, or will Congress us it kill some programs and plus-up others? Anything could happen as Congress and the President wrangle over finalizing the way the amounts cut by the sequester actually happen over the longer term.

%d bloggers like this: