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News and Events
November 8, 2011Washington DC-GAO: Feds Spending Much More on IT Than Reported By John K. Higgins CRM Buyer Magazine
"A disturbing new GAO report makes it clear that the federal government has only a loose idea of the money it devotes to information technology. GAO also found that agencies categorize their IT investments in different ways, making it difficult to weed out duplication," said Sen. Joseph Lieberman, I-Conn. A market valued at nearly US$80 billion per year certainly gets the attention of vendors hoping to participate in it. For the information technology sector, the notion that the U.S. government spends about $79 billion per year for IT has gained credence as the figure often cited by the U.S. Office of Management and Budget (OMB), and in references from the federal chief information officer (CIO). However, the U.S. Government Accountability Office (GAO) has faulted OMB for underreporting actual annual federal investments in IT. GAO failed to provide its own estimate of the shortfall in dollar terms, but indicated that the additional uncounted spending was significant."OMB often uses the $79 billion figure in referring to annual federal investments in IT. However, it is important to note that this figure does not reflect the spending of the entire federal government," GAO says in a report released in late September.
The OMB tally leaves out IT spending by the U.S. Congress for its own operations, the federal judiciary system, and intelligence spending, mostly at the Central Intelligence Agency (CIA), the report notes.
"When you figure in the Congress, the court system and intelligence, the annual federal IT spend could be in the range of $120 billion," Deniece Peterson, senior manager of federal industry analysis at Deltek, told CRM Buyer.
"The work OMB does on analyzing IT investments can be very useful, but the final figure should not be cited as the total picture," she said.
The OMB figure "could be 40 to 50 percent higher if you count intelligence of around $10 billion, plus all the IT spending that is not broken out as an 'investment' but rather is just plumbing in other programs of record," Steve Charles, cofounder and executive vice president of immixGroup, told CRM Buyer.
OMB not only leaves out Congress and the judiciary, but also fails to include "the quasi agencies -- like the Postal Service," he said.
Flexible Definitions for IT
The OMB estimate is based on a survey of 26 federal departments and major agencies. However, even within those agencies IT spending can be undercounted. Reporting guidelines are not precise, GAO, notes.
"OMB officials acknowledge that agencies are able to interpret the definition of IT in different ways, but stated that they want to provide agencies some flexibility in deciding what they report on," GAO says.
That situation could frustrate one of OMB's main duties of properly monitoring federal agency spending and performance.
"Until OMB clarifies and enforces its requirement that agencies should be reporting on all IT investments, selected IT investments will not be subjected to the enhanced oversight, and OMB's estimates of federal IT investments will be significantly understated," the GAO report warns.
Flaws in reporting also make it difficult to find out whether agencies are spending funds on duplicate IT systems.
The oversight issue did not go unnoticed after GAO released its findings.
"A disturbing new GAO report makes it clear that the federal government has only a loose idea of the money it devotes to information technology. GAO also found that agencies categorize their IT investments in different ways, making it difficult to weed out duplication," said Sen. Joseph Lieberman, I-Conn.
"This type of loose accounting and wasteful spending is sloppy, lazy, and wrong at any time, but especially when we are trying to squeeze the most value out of every single scarce taxpayer dollar. I urge the Office of Management and Budget and federal agencies to improve their reporting on IT investments and eliminate unnecessary IT systems," he said.
Market Intelligence for Vendors
While critical of much of OMB's effort to assess IT investments, GAO notes that OMB has made good progress in simply setting up a system for tracking and gathering extensive data, called the IT Dashboard, and making its findings available on the Internet. As a result, the report provides some general market intelligence of use to vendors.
For example, GAO reported that nearly two-thirds of planned IT spending for 2011 by the 26 federal entities -- about $54 billion -- was allocated to operation and maintenance, while $24.7 billion was allocated to new IT developments. Of the combined new development and O&M spending, agencies programmed about half for "major" and half for "non-major" projects.
GAO also ranks spending by function, listing 18 expense categories plus an "all other" component. The top five IT spending functions:
- information and technology management, at $35.4-billion;
- defense and national security at $9.3 billion;
- all other at $7.2 billion;
- health at $5.0 billion; and
- supply chain management at $3.3 billion.
The agencies surveyed by OMB planned to conduct 7,248 IT investments in 2011, the report notes, breaking out the number of projects for each function. It also breaks down investments within a number of federal agencies.
The GAO report, "Information Technology: OMB Needs to Improve Its Guidance on IT Investments," is also valuable for what it reveals about the federal IT budgeting process as it affects IT procurement.
"The bigger issue out of the report is it shines a light on the fact that the GAO, agencies, and Congress are not on the same page. The issue is far bigger than an inaccurate report," said Charles.
Agencies begin budget planning about 18 months before the actual fiscal year, and the congressional appropriations cycle is not attuned to the planning cycle, he noted. Thus, information based on spending plans may be of limited use.
"Timelines are not in sync for budgeting and appropriations, and Congress has the ability to change a decision after an agency has already budgeted and the procurement is in process," Charles said. "A report like this one can expose other issues it wasn't even looking at."
In the last year and a half, the federal government has been encouraging -- if not requiring -- federal agencies to move to the cloud and implement data consolidation initiatives. The impact of such moves in the future might improve the tracking of federal IT procurements.
"Such initiatives could help the investment-monitoring process since similar investments could be consolidated in a cloud approach," David Powner, director of information technology management issues at GAO, told CRM Buyer.
However, it would again come down to how much detail the agencies would provide about their cloud and consolidation migrations, he said. "An important point here is the transparency of what business functions and associated dollars are moving to cloud approaches."
November 1, 2011 - On Target Group is pleased to announce that Randy J. Rogers has joined the consultancy as Director of Business Development. Randy comes to On Target after several years as Business Development for numerous South Florida Charities. Prior to his work with the Charities he was Vice President of the Roasters Restaurant Chain.
Orlando, Florida- October 1, 2011 - On Target Group is pleased to announce that it has been retained by Kraus Manning one of the leading providers of Construction Management Services in the Southeast to assist them in their government marketing efforts.
Surprise, Nevada- August 15, 2011 - On Target Group is pleased to announce that it has been retained by Stormwater Plans an 8a firm that does Environmental Engineering to assist them in developing and implementing their government market plans.
March 16, 2011, Washington, DC-Lucrative sole source contracts to 8(a) firms now require justification by Robert Brodsky in Government Executive Magazine-Federal agencies that want to issue lucrative sole-source contracts to 8(a) small businesses now must justify the award to the public and to senior management.
In a highly anticipated interim rule change published on Wednesday in the Federal Register, the Federal Acquisition Regulation Councils determined that contracts in excess of $20 million issued to companies in the 8(a) small business development program now must include written justification and approval by a senior agency leader. The approval would then be made public.
The contracting officer's justification must include a description of the agency's needs, a determination that the contract is in the government's best interest, and verification that its costs will be fair and reasonable.
The regulatory change, which was required in the 2010 Defense Authorization bill, could have serious implications for Alaska native corporations, which, along with Indian tribes and Native Hawaiian organizations, are eligible to receive 8(a) contracts of any value. All other 8(a) participants are capped at receiving sole-source contracts of $3.5 million for services and $5.5 million for manufacturing.
Ostensibly, the rule is designed to prevent ANCs from passing most of the work on big-budget contracts through to large subcontractors. While the new provision technically refers to all 8(a) contractors, Obama administration officials concede the rule affects tribes, ANCs and NHOs most directly.
Echoing concerns raised by tribal groups in meetings with the FAR Councils last year, the rule change noted the regulation should not be viewed as a ceiling or a cap on the size of sole-source awards. But according to the council, other 8(a) firms are likely to benefit from the change.
"The rule may indirectly benefit the 9,165 currently certified section 8(a) firms by improving their likelihood of a contract award through increased competition," the notice stated.
Separately, the councils also issued new regulatory guidance on the proper use and management of cost-reimbursement, time-and-material, and labor-hour contracts.
Among the most significant changes, contracting officer representatives now must be designated to oversee all contracts and orders other than those that are firm fixed-price. The contracting officer also must determine the continuing adequacy of the vendor's accounting system during the entire period of contract performance. And, each contract file should include documentation indicating why the particular contract type was selected.
The FAR Councils on Wednesday published several other interim rules changes.
One officially establishes parity among each of the small business socioeconomic subcategories. The priority among each of the categories was thrown into turmoil in 2009 when the Government Accountability Office, and, later, the U.S. Court of Federal Claims, determined that a decades-old statute mandated that Historically Underutilized Business Zone contractors were at the top of the procurement pecking order.
The 2010 Small Business Jobs Act re-established parity among small businesses operating in a HUBZone, or owned by an 8(a), service-disabled veteran or women-owned small business contractors;
A second mandates enhanced competition for orders placed under multiple-award contracts, including the General Services Administration's Federal Supply Schedules.
For orders above the simplified acquisition threshold of $150,000, agencies must inform all other qualified vendors of their intentions to issue an award and provide them a fair opportunity to submit offers. When such notice is not provided, the agency must obtain offers by at least three vendors and submit in writing that no other qualified contractors were identified.
The councils are accepting public comments on each of the proposed rule changes through May 16. Comments can be submitted through Regulations.gov, or mailed to the General Services Administration, Regulatory Secretariat; attention Hada Flowers, 1275 First Street N.E., 7th Floor, Washington, D.C., 20417
March 10, 2011, Coral Springs, FL-Greg Warrick the CEO of On Target Group in cojunction with the Broward County Government provided South Florida business owners with a two hour presentation on doing business with the federal government. The seminar showed business owners and executives how to develop a B2G marketing strategy, create a government marketing plan, register on the CCR, and how to conduct key word searches on government sites. The presentation also informed the participants on what products and services are on the GSA Schedule and helped them determine if a GSA Schedule is right for their business.
January 14, 2011, Washington, DC-Hardware Distributor Agrees to $6.25 million false claims settlement by Robert Brodsky in Government Executive Magazine-A national hardware distributor has agreed to pay $6.25 million to settle claims that it overcharged the government on a General Services Administration Multiple Awards Schedule contract, the Justice Department announced on Thursday.
Fastenal Co. of Winona, Minn., was facing a federal false claims lawsuit for failing to provide the government with the best possible price on a hardware contract first signed with GSA in 2000. The company discontinued the contract in 2005.
GSA's inspector general had accused Fastenal of failing to provide agency contracting officials with current, accurate and complete information regarding its commercial sales practices, including discounts for nongovernmental customers. To be granted a Multiple Awards Schedule contract, companies must agree to disclose their commercial pricing policies and practices. 02/12
"Misrepresentations during contract negotiations undermine the integrity of the government procurement process," said Tony West, assistant attorney general for the Justice Department's civil division. "The Justice Department is acting to ensure that government purchasers of commercial products can be certain that they are getting the prices to which they are entitled."
The investigation was prompted by a 2005-2006 post-award audit by GSA's inspector general looking into allegations that Fastenal was providing better discounts to its other customers, in violation of the price reduction clause of its GSA contract. The clause requires companies to give the government at least as good of a price as its best commercial customer.
The settlement also resolves allegations that Fastenal improperly assessed delivery and sales tax charges, causing the government to overpay. In addition, prosecutors accused the company of violating the 1979 Trade Agreements Act, which prohibits businesses from selling products to the government that were manufactured in nations without a trade agreement with the United States; in this case, China.
Last July, Justice told Fastenal that it planned to file a federal false claims suit if Fastenal did not pay $9.5 million. The company countered with a $750,000 settlement offer, which the government rejected at the time, according to documents Fastenal filed with the Securities and Exchange Commission in 2010.
"This case is another demonstration of the value of OIG audits in helping to uncover fraud on government programs," GSA Inspector General Brian Miller said.
Fastenal, which sells a host of hardware, electrical and plumbing supplies, denies the allegations.
"We continue to believe that we complied with our obligation under the GSA contract in all material respects," the company said in a statement. "However, we felt a continuation of our dispute with the DOJ and GSA was not the best use of our resources."
The Justice Department secured $3 billion in false claims settlements and judgments from civil lawsuits in fiscal 2010, most often involving companies attempting to defraud the federal government, according to data the Obama administration released last November. The financial recoveries were the second highest in the nation's history and represented a 25 percent increase from fiscal 2009.
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