Analyzing Category Management: Information Technology · PDF fileAnalyzing Category...
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© 2013 Bloomberg Finance L.P. www.bgov.com | @BGOV © 2013 Bloomberg Finance L.P. www.bgov.com | @BGOV © 2015 Bloomberg Finance L.P. www.bgov.com | @BGOV
Analyzing Category Management:
Information Technology Contracting trends and dynamics to watch
MARCH 25, 2015
Director of Government Sales Research
KEVIN BRANCATO
MIGUEL GARRIDO Quantitative Analyst
PAUL MURPHY Senior Data Analyst
Note: Slide 2 updated March 27 with additional source information
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EXECUTIVE SUMMARY
Information technology (IT) is one of 10 primary categories of federal spending
approved by the Category Management Leadership Council (CMLC) » Category management is a strategic approach to increase procurement efficiency
» IT spending reached $64 billion in fiscal 2014, or 14 percent of all federal procurement
» BGOV acquired a draft definition of the IT supercategory from an unreleased government document
Category management of IT has the potential to increase efficiency, benefiting both
government and industry » Agencies use almost 1,400 contract vehicles for IT procurements every year
» The top 100 contract vehicles accounted for 77 percent of all IT dollars in fiscal 2014; the other
23 percent of IT spending was dispersed among 1,254 contracts
» Although almost 75 percent of all annual IT dollars flow through MACs, the vast majority are
agency-specific, indicating that further efficiency gains could be achieved if agencies utilized
more governmentwide MACs for IT procurements
Army, Navy, Air Force and the departments of Homeland Security and Health and
Human Services led all agencies in IT spending in fiscal 2014
The IT market is highly concentrated » The top 10 contractors won 29 percent of all IT dollars in fiscal 2014
Small businesses are winning an increasing share of IT prime dollars » IT obligations won by small businesses increased 17 percent to $21 billion in fiscal 2014
Notes: MAC – multiple-award contract. In this analysis, “IT” refers to the new IT supercategory defined by CMLC. Unless noted otherwise, all figures in this report are based
on an analysis of a draft definition of the IT supercategory from an unreleased government document obtained by Bloomberg Government. The IT supercategory is divided
into six subcategories: IT outsourcing, IT consulting, transport services, software, hardware and secure identity services. The CMLC (previously known as the Strategic
Sourcing Leadership Council) is an interagency body composed of the seven largest and highest-spending agencies in the federal government.
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CATEGORY MANAGEMENT IS A STRATEGIC APPROACH
TO INCREASE PROCUREMENT EFFICIENCY
Overview of category management
Source: Bloomberg Government and Office of Management and Budget
» Category management (CM) is a new approach to government procurement aimed at creating a
more efficient and effective federal acquisition system
• CM will enable the federal government to buy like a single enterprise
• CM divides federal spending on common goods and services into 10 supercategories
such as IT, professional services and transportation
• Each category will be managed by a team of experts with a governmentwide buying
strategy based on improved data collection and analysis
» CM has several objectives designed to increase procurement efficiency and effectiveness
• The primary goals of CM include reducing procurement complexity, fragmentation,
contract duplication, price variability, time-to-award and redundant procurement costs
• Although related to strategic sourcing, CM goes further by implementing strategies to
drive performance, increase transparency, and develop common standards
• CM implementation involves three core elements: buying as one through CM, driving
innovation and strengthening vendor relationships
» The government has set an ambitious timeline for CM implementation in the near term
• Early CM efforts are focused on IT acquisitions, increasing data transparency, reducing
contract duplication and strengthening collaboration with industry
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I.T. SPENDING HAS INCREASED AS A SHARE OF TOTAL
FEDERAL PROCUREMENT IN RECENT YEARS
Spending in new IT supercategory,
by fiscal year Overview of IT supercategory
Note: In this analysis, “IT” refers to the new IT supercategory defined by CMLC, unless otherwise noted
Source: Bloomberg Government proprietary federal procurement database
» Federal IT spending totaled $63.7 billion in
fiscal 2014, an increase of 3 percent from
fiscal 2013
» IT accounted for 14 percent of total
contract spending in fiscal 2014, up from
13 percent in fiscal 2013
» The IT supercategory is divided into six
subcategories:
• IT Outsourcing
• IT Consulting
• Transport Services
• Software
• Hardware
• Secure Identity Services
0%
2%
4%
6%
8%
10%
12%
14%
16%
$0
$10
$20
$30
$40
$50
$60
$70
$80
2010 2011 2012 2013 2014
IT obligations
(in billions)
IT share of total
federal contract
spending
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CATEGORY MANAGEMENT MAY OFFER SUBSTANTIAL
OPPORTUNITIES TO CURB I.T. CONTRACT DUPLICATION
Agencies use almost 1,400 contracts
for IT procurements every year
Concentration of IT dollars
by number of contract vehicles
Notes: SAC – single-award contract (indefinite-delivery/indefinite-quantity or definitive). Number of contracts refers to the count of unique contract vehicles (such as IT 70),
not the count of contracts awarded to companies.
Source: Bloomberg Government proprietary federal procurement database
» The governmentwide effort to combat
contract duplication has begun to show
signs of progress within IT
» The top 10 contracts accounted for 36
percent of all IT dollars in fiscal 2014, and
the top 100 contracts accounted for 77
percent of all IT dollars
0
200
400
600
800
1,000
1,200
1,400
1,600
2010 2011 2012 2013 2014
MACs SACs
Estimated number of active contracts, by fiscal year
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014
Top 10 contractsNext 20 (#11 to #30)Next 30 (#31 to #60)Next 40 (#61 to #100)All remaining contracts
Estimated number of active contracts, by fiscal year
1,254 contracts (93 percent)
generated only 23 percent of
all IT obligations in FY14
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ALMOST 75 PERCENT OF ALL ANNUAL I.T. DOLLARS
FLOW THROUGH MULTIPLE-AWARD CONTRACTS
IT MAC spending by fiscal year
GWACs are the fastest-growing
MAC type for IT
Note: GWAC – governmentwide acquisition contract
Source: Bloomberg Government proprietary federal procurement database
» IT is one of the purchasing categories with
the highest share of contract dollars
awarded through MACs
» Almost two-thirds of all IT MAC dollars in
fiscal 2014 flowed through non-schedule
(enterprisewide, or agency-specific) MACs
0%
10%
20%
30%
40%
50%
60%
70%
80%
$0
$10
$20
$30
$40
$50
$60
$70
$80
2010 2011 2012 2013 2014
IT obligations
(in billions)
MAC share of total
IT spending
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014
Non-schedule MACs Schedule MACs GWACs
Share of IT MAC obligations, by fiscal year
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» Agencies used almost 1,000 contracts to procure IT outsourcing services in fiscal 2014
OUTSOURCING AND CONSULTING ARE THE LARGEST
SUBCATEGORIES WITHIN INFORMATION TECHNOLOGY
Overview of IT subcategories
Notes: PSC – product service code. The following PSCs are included in multiple IT subcategories: D301: IT and Telecom - Facility Operation and Maintenance; D316: IT
and Telecom – Telecommunications Network Management; D318: IT and Telecom – Integrated Hardware/Software/Services Solutions; D321: IT and Telecom – Help Desk;
D399: IT and Telecom – Other IT and Telecom; J070: Maintenance/Repair/Rebuilding Equipment/ADP Equipment/Software/Supplies/Support Equipment.
Source: Bloomberg Government proprietary federal procurement database.
$0 $25 $50 $75 $100 $125
IT Outsourcing
IT Consulting
Transport Services
Software
Hardware
Secure Identity Services
2010 2011 2012 2013 2014
IT obligations in billions, by fiscal year
FY14
obligations
(in billions)
Percentage
change,
FY13-FY14
Number of
contracts,
FY14
Top PSC
by sales,
FY14
$24.68 ▲5% 938 D399:
Other IT and Telecom
$21.46 ▼2% 718 R425:
Support Professional - Engineering/Technical
$16.51 ▲6% 696 D399:
Other IT and Telecom
$17.23 ▲9% 361 D399:
Other IT and Telecom
$10.04 ▼3% 500
5895: Miscellaneous
Communication
Equipment
$1.52 ▲73% 132
5810: Communications
Security Equipment
and Components
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TOP I.T. PRODUCT SERVICE CODES INCLUDE
ENGINEERING, TELECOM, PROGRAM MANAGEMENT
Top 10 PSCs in IT category ranked by total obligations in past five years
Note: Number of contracts refers to the count of unique contract vehicles (such as IT 70), not the count of contracts awarded to companies
Source: Bloomberg Government proprietary federal procurement database
» Among the top 10 PSCs in IT in fiscal 2014, the fastest-growing were Automated Data
Processing Software (7030) and Systems Development (D302)
IT obligations,
FY14 (in billions)
Percentage
change,
FY13–FY14
Number of IT
contracts, FY14
$12.18 0% 445
$11.05 ▲4% 261
$6.07 ▲1% 270
$4.08 ▲23% 162
$1.47 ▼21% 168
$1.69 ▼9% 99
$1.64 ▲12% 102
$0.47 ▼32% 93
$1.13 ▼25% 135
$1.43 ▼10% 101
$0 $20 $40 $60
R425: Support- Professional:Engineering/Technical
D399: Other IT andTelecommunications
R408: Support- Professional:Program Management/Support
7030: ADP Software
5895: Miscellaneous CommunicationEquipment
D307: IT and Telecom- IT Strategyand Architecture
D302: IT and Telecom- SystemsDevelopment
R414: Systems Engineering Services
J058: Maint/Repair/Rebuilding ofEquipment- Communication,…
D301: IT and Telecom- FacilityOperation and Maintenance
2010 2011 2012 2013 2014
IT obligations in billions, by fiscal year
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THE TOP CONTRACTS IN I.T. INCLUDE SCHEDULE 70,
SEAPORT-E, S3, SEWP IV AND ITES-2S
Top 10 contracts ranked by IT obligations in past five years
Source: Bloomberg Government proprietary federal procurement database
» Of the top 10 contracts by IT obligations in the past five years, only four – Schedule 70, SEWP
IV, MOBIS and Alliant Large Business – are either Federal Supply Schedules or GWACs
IT
obligations
FY14
(in billions)
Percentage
change,
FY13-FY14
Total
obligations,
FY14
(in billions)
IT share of
total contract
dollars, FY14
$6.19 ▲4% $7.47 83%
$3.24 ▲7% $4.94 66%
$0.82 ▼54% $0.88 93%
$2.44 ▲20% $2.55 96%
$1.22 ▼16% $1.29 95%
$0.88 ▼23% $1.04 85%
$1.28 0% $1.36 95%
$1.09 ▼23% $1.09 100%
$0.81 ▼1% $2.54 32%
$2.11 ▲56% $2.64 80%
$0 $10 $20 $30 $40
GSA Schedule 70
Navy SeaPort-Enhanced
Army S3
NASA SEWP IV
Army ITES-2S
DHS EAGLE I
Army AMCOM EXPRESS
Navy CoSC
GSA Schedule 874: MOBIS
GSA Alliant Large Business
2010 2011 2012 2013 2014
IT obligations in billions, by fiscal year
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DEFENSE, HOMELAND SECURITY AND HEALTH AND
HUMAN SERVICES ARE THE LARGEST I.T. BUYERS
Top 10 funding agencies ranked by total IT obligations in past five years
Notes: DISA – Defense Information Systems Agency; USAID – U.S. Agency for International Development. Number of contracts refers to the count of unique contract
vehicles (such as IT 70), not the count of contracts awarded to companies.
Source: Bloomberg Government proprietary federal procurement database
» Each of the top three agencies used at least 375 contracts to procure IT services and products in
fiscal 2014, signaling opportunities to reduce contract duplication and increase efficiency
IT
obligations,
FY14
(in billions)
Number of IT
contracts,
FY14
Total contract
dollars, FY14
(in billions)
IT share of
total contract
dollars, FY14
$12.35 387 $76.58 16%
$10.61 464 $88.11 12%
$6.89 375 $58.86 12%
$4.03 206 $13.25 30%
$4.32 152 $21.17 20%
$2.96 134 $19.20 15%
$2.14 89 $2.91 74%
$2.31 150 $9.12 25%
$1.81 101 $5.40 33%
$1.21 66 $3.84 31%
$0 $20 $40 $60 $80
Army
Navy
Air Force
DHS
HHS
VA
DISA
State
Treasury
USAID
2010 2011 2012 2013 2014
IT obligations in billions, by fiscal year
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TOP PRIME CONTRACTORS IN I.T. INCLUDE
LOCKHEED MARTIN AND NORTHROP GRUMMAN
Top 10 prime contractors ranked by total IT obligations in past five years
Source: Bloomberg Government proprietary federal procurement database
» The majority of the top 10 IT contractors experienced notable declines in IT revenue in fiscal
2014 despite an increase of 3 percent in the overall IT market last year
IT
obligations,
FY14
(in billions)
Percentage
change,
FY13-FY14
Total contract
dollars, FY14
(in billions)
IT share of
total contract
dollars, FY14
$2.82 ▼12% $32.58 9%
$2.01 ▼14% $10.55 19%
$1.99 ▼9% $15.48 13%
$2.18 ▼10% $3.36 65%
$2.55 ▲6% $2.89 88%
$1.76 ▼10% $2.61 67%
$1.80 ▲9% $3.77 48%
$1.31 ▼17% $1.91 69%
$1.16 ▼23% $12.25 9%
$1.13 ▼3% $2.04 55%
$0 $5 $10 $15
Lockheed Martin Corp.
Northrop Grumman Corp.
General Dynamics Corp.
SAIC
Hewlett-Packard Co.
Computer Sciences Corp.
Booz Allen Hamilton
Harris Corp.
Raytheon Co.
CACI International Inc.
2010 2011 2012 2013 2014
IT obligations in billions, by fiscal year
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THE INFORMATION TECHNOLOGY MARKET IS HIGHLY
CONCENTRATED
Distribution of annual IT dollars by number of prime contractors
Notes: Rankings based on annual IT obligations
Source: Bloomberg Government proprietary federal procurement database
» In fiscal 2014, the top 10 prime contractors won 29 percent of all IT dollars, and the top 100
contractors won two-thirds of all IT dollars
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014
Top 10 contractors Next 20 (#11 to #30) Next 30 (#31 to #60) Next 40 (#61 to #100) Remaining contractors
Share of IT obligations, by fiscal year
6,655 prime contractors
(99 percent) generated
only 33 percent of all IT
obligations in FY14
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FIXED-PRICE CONTRACTS DOMINATE I.T.
PROCUREMENTS ; T&M FALLING OUT OF FAVOR
Contract type usage varies within
IT subcategories Fixed-price orders on the rise
Notes: T&M – Time-and-materials. T&M includes labor hours.
Source: Bloomberg Government proprietary federal procurement database
» Fixed-price contracts accounted for 61
percent of all IT obligations in fiscal 2014,
up from 52 percent in fiscal 2010
» Most tech equipment is procured through
fixed-price contracts, while most tech
consulting services are procured through
cost-based contracts
0% 20% 40% 60% 80% 100%
Hardware
Software
Transport Services
IT Outsourcing
Secure Identity Services
IT Consulting
Fixed-price Cost-based T&M Other
Share of IT obligations, fiscal 2014
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014
Fixed-price Cost-based T&M Other
Share of IT obligations, by fiscal year
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SMALL BUSINESSES ARE WINNING AN INCREASING
SHARE OF I.T. PRIME DOLLARS
Small-business performance varies
within IT subcategories
Annual IT obligations won by
small businesses
Note: Number of contracts refers to the count of unique contract vehicles (such as IT 70), not the count of contracts awarded to companies
Source: Bloomberg Government proprietary federal procurement database
0%
10%
20%
30%
40%
50%
$0
$5
$10
$15
$20
$25
2010 2011 2012 2013 2014
SB IT obligations by fiscal year
Value (in billions) SB share
of IT obligations
» IT obligations won by small businesses
reached $21 billion in fiscal 2014, an
increase of 17 percent from fiscal 2013 IT subcategory
SB IT
obligations,
FY14
(in billions)
SB share of IT
obligations,
FY14
Number of
SB IT
contracts,
FY14
IT Outsourcing $8.04 33% 510
IT Consulting $6.21 29% 317
Software $5.95 35% 194
Transport
Services $4.58 28% 380
Hardware $3.83 38% 239
Secure Identity
Services $0.42 28% 69
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ABOUT THE ANALYSTS
Miguel Garrido is a Quantitative Analyst with Bloomberg Government.
Before joining Bloomberg, he was an economic consultant for Edgeworth
Economics, where he analyzed legal disputes and regulatory matters.
Garrido graduated from Princeton University, where he majored in
economics and studied political economy.
+1 202 416 3514
@MGarridoDC
Paul Murphy is a Bloomberg Government Senior Data Analyst. He has
30+ years of experience analyzing contract spend data for his former
company, Eagle Eye Publishers, and since 2010 for BGOV. He brought
the first desktop contracts database to market and authored analyses
for the U.S. Small Business Administration that led to billions of dollars
in increased awards to small businesses. He creates hundreds of
custom reports annually for BGOV clients and colleagues.
+1 202 416 3452
@PJMUR55
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