Use of task-order contracts expands as the Defense's IT vehicle of choice

Despite how they feel about them, government contractors have come to realize that Indefinite Delivery Indefinite Quantity (IDIQ) contracts are here to stay.

The contracting strategy has been around for more than a decade, but defense and civilian agencies are increasingly ditching traditional requirements contracts and using IDIQ, or task-order, vehicles more often to buy services and products from the private sector.

And although signing on to such contracts and adopting new ways of working with the government can be challenging for companies, they don’t want to miss out because agencies funnel billions of dollars of work through them.

“From an industry point of view, IDIQ vehicles are a necessary evil,” said Warren Suss, president at Suss Consulting, which works with government contractors. “There are a lot of trade-offs here, because once you’ve won, it’s not clear what you’ve won except a ticket to play.”

Growing dominance

Single-agency task-order contracts now represent 17 percent of information technology spending, according to market research firm Input Inc. Governmentwide acquisition contracts, on the other hand, have gone from representing 10 percent of IT spending to 6 percent in the past four years.

The Defense Department has some of the biggest task-order contracts in the procurement pipeline, including Rapid Response Third Generation; Operations, Planning, Training and Resource Support Services II; Network Centric Solutions (NetCents) II; and Flexible Acquisition and Sustainment Tool II. Ceilings on those multiple-award contracts range from $5.4 billion to $41 billion. The contracts are the second phases of existing ones that will end in the next year.

Such vehicles are popular in part because the government’s workforce for managing contracts is shrinking, and the approach allows agencies to buy a broad range of IT and professional services through a single contract.

Analysts also say fewer companies protest awards of task-order contracts because a larger number of vendors are selected to compete for work. They also cut down on overhead because agencies don’t have to pay the General Services Administration to manage contracts for them.

Also, because agencies are choosing from a list of preselected companies, task-order procurements are faster — a feature that DOD managers especially find appealing.

Agencies “need access to contractors and [for] solutions to be delivered much faster than the old DOD acquisition cycle,” which could take years, said Sean Mullen, vice president of business development at Northrop Grumman Corp. IT. “You can’t have that anymore. The pace of operations has picked up.”

Greater flexibility

Agencies set up task-order contracts by first defining a wide range of products and services they need or might need in the future. Companies then compete for spots on the contract, and those that win are permitted to compete for the task orders.

The pace of acquisitions can be fast. Analysts say agencies often receive proposals from companies 30 to 45 days after they issue a request. They award a contract and start work soon after. A traditional request for proposals can take six to 12 months as agencies sift through dozens of submissions.

The Army’s Rapid Response is considered one of the most successful IDIQ contracts. The tasks are broad and range from systems integration and hardware fabrication to technology insertion and logistics support. Although the Army’s Communications-Electronics Command at Fort Monmouth, N.J., manages the $23.2 billion contract, any DOD agency can issue a task order through it.

Many of the participants on the current Rapid Response contract — including SRA International Inc., DRS Technologies Inc. and Computer Sciences Corp. — have said they plan to compete for Rapid Response Third Generation, which goes by the acronym of R23G. The contract has a similar set of requirements as its predecessor but a higher ceiling at $41 billion, according to Input.

The contract “is obviously critical because of the volume of sales,” said Mitchell Rambler, president of the technical services segment at DRS Technologies, a defense contractor that has done $1 billion worth of work under Rapid Response. Another successful contract is the Air Force’s $9 billion NetCents, which offers decentralized ordering for network-centric systems and infrastructure. Northrop Grumman, an incumbent on the contract, said it plans to compete for NetCents II, which will be similar to its predecessor.

New strategies

Although task-order contracts are easy for agencies to use, they’re not as easy for contractors. Companies must change the way they compete for government work, and they must invest a significant amount of resources to win spots on contracts and then compete for task orders under them. Some companies have great success with initial contract wins but have trouble getting task orders.

“Many companies spend a lot of money chasing an IDIQ contract, win one and then are not able to generate enough task-order business to justify the cost of the pursuit,” Suss said. “In IDIQs, the volume of business is unknown.”

Companies also have to think strategically about what services they can offer. Some have reorganized their business divisions to compete more quickly and effectively. For example, CSC identified key market areas within its company and consolidated them so it could target DOD’s needs.

“It’s going to make it easier as we develop proposals for Rapid Response Third Generation,” said Mike Gaffney, president of business development at CSC’s North American Public Sector. “It really is a corporate strategy, but it’s perfectly consistent with what we want to do with these vehicles.”

Companies also need to make sure they have the resources to manage subcontractors, which could number in the hundreds, and the ability and resources to constantly compete for task orders. For example, they must keep business development people onboard throughout the life of the contract.

By contrast, “in a requirements contract, once the deal is won, the companies tend to turn it over to their program management folks,” Suss said.

Some analysts say the real winners on task-order contracts are large companies that already have relationships with agencies. Small businesses are at a disadvantage unless the contract includes work set aside for them.

“Task orders are only required to be announced to the people holding the contract,” said Kevin Plexico, executive vice president of operations at Input. “Between that and sole-source contracting, half of the contracting is invisible to the average company.”

But despite the challenges of task-order contracts, companies see winning them as vital to their survival.

“It becomes very important if you want to be in a given market that you be on the team,” said John Gilligan, senior vice president and director of SRA International’s Defense Sector. “We look carefully at each of these opportunities because increasingly there are lots of business opportunities being funneled through these contract vehicles.”

Source: T. Anderson - Washington Technology

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