Saturday, March 21, 2009

Focusing on How to Spend Stimulus Funding

Many of us in the federal acquisition arena understand the issues around spending for 2009 American Recovery and Reinvestment Act. The issues include how the money will be spent, how the money will get reported correctly and quickly on, and how the funds will be adverse to waste, fraud, and abuse. Oversight and contract management will be critical areas of scrutiny for effectiveness of the Act.

The research firm IDC, in a new report (fee required), is claiming that billions in stimulus funding will be in the form of IT, and that the money will not be spent via traditional channels. NextGov also reported on the story:

NextGov, March 19, 2009:

"This once-in-a-lifetime flood of new technology money requires a new way of finding and following opportunities," the report states. "Due to the aggressive timeline, success will not come from the traditional business development via relationships and requests for proposals."

Most of the estimated $101.2 billion in technology spending that IDC says agencies will spend during the next four years will be focused on the energy and health sectors. IDC estimates $78 billion will be spent on implementing more efficient alternative energy technologies and agencies will spend about $21.1 billion on health information technology. The act also sets aside $2.5 billion for individual IT projects in federal agencies.

The IDC report claims much of the money will be distributed in the form of grants and “accelerated acquisition contracts,” which IDC claims will lead to innovation in procurement and government engagement. The report also advices potential government vendors to focus on those identified objectives and not be focused on the means of distributing the stimulus funds via the procurement process.

"Vendors should be promoting their ability to add value to those industries, not so much chasing the dollars, but solving the problems the stimulus is supposed to solve," said IDC analyst Thom Rubel. "It's mission-focused IT procurement. The old way is not good business strategy. It tends to focus on dollars instead of the outcome the government is trying to achieve."

Although I have not seen the IDC report (a $4500 price tag for 13 pages of research), it is encouraging to learn that agencies have already created a foundation for knowledge-based acquisition, by developing an outcome- focused approach to stimulus spending acquisition planning in the form of objectives, cost savings and benchmarks of success in critical programs.

Not encouraging is the apparent recommendations by IDC for vendors to not focus on the dollars and the procurement methods. As I have stated before, agencies will be under enormous pressure to spend stimulus funds. As the already overburdened contracting community gets squeezed for action, there is a risk of increased contract bundling, and unjustified sole source awards for large contracts and to large contractors, specifically for energy, healthcare, and IT. The General Services Administration (GSA) should see a subsequent increase in use of GSA Schedule awards, and the use of already established Blanket Purchase Agreements (BPAs) and Government Wide Acquisition Contract (GWACs). Vendors, especially small business, will need to focus on these procurement methods to allow for increased competition and small business participation in the Recovery Act.

Vendors will focus their solutions on their respective value propositions and to fill needs across government. That is their priority in answering solicitations and expectations of receiving stimulus awards. In other words, that is why they are in business. However, advertising their contract vehicles available to purchasing agencies is the other side of the equation. I am not sure that not helping government recognize the solutions and vehicles available to them is a prudent strategy.

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