A look at federal contracting opportunities for the next 18 months suggests that multibillion-dollar awards from the Defense and Homeland Security departments will continue to dominate a still sluggish government market.

The Army Rapid Response Third Generation contract, estimated to be worth $34.1 billion, heads a list of 17 major contracts that research firm Input Inc. believes will be awarded this year. The Army is expected to issue a request for proposals sometime this month.

The top five opportunities on the list account for 82 percent of the total contract value of $76.7 billion. The total is based on the contracts’ ceilings, not appropriations. Federal spending on information technology has remained almost stagnant for the past few years, said Arash Ardalan, senior analyst for federal defense opportunities at Input. President Bush’s fiscal 2009 budget request includes a modest 2 percent increase in DOD IT spending. The Army and Air Force are expected to see 5 percent increases.

STEADY BUSINESS
“It’s been more of a straight line recently, as opposed to previous years where you saw huge jumps,” he said, adding that he expects the straight line to continue through the year, similar to conditions in fiscal 2008.

“There’s not going to be huge growth — not yet,” he said. He predicted that a larger IT budget increase might appear in 2010 or soon after.

“I don’t think it’s going to be huge, but bigger than [the expected] 5 percent” hike for the Army and Air Force this year, he added.

For the time being, operations maintenance dollars are largely supporting current programs. “You also have a lot of recompetes coming out, as opposed to new requirements,” Ardalan said.

Despite the costs of the war on terrorism and the economic challenges facing the nation, the federal government continues to spend more on IT than the president’s annual budget requests. For example, according to an Input report, federal IT spending in fiscal 2007 was $65.6 billion — $1.7 billion more than the budget request and an increase of 2.4 percent.

And the $65.9 billion budget request for fiscal 2008 rose nearly 4 percent to $68.3 billion.

This year’s Office of Management and Budget estimate of 3.8 percent growth for fiscal 2009 might also be too low, the report states.

Although the federal government is in the midst of a tough fiscal environment — with civilian agencies in particular operating for the third or fourth year with reduced buying power — the consistent growth that the contracting industry experienced several years ago is slowly beginning to return, said Stan Soloway, president of the Professional Services Council and a Washington Technology columnist.

“It’s probably not going to go back to double digits, but it is still a very consistent, strong growth market,” he said. “And I don’t think that’s going to change.”

PRIORITY PROJECTS
Continuing federal IT investment is evident in three of the larger awards on the list: the $9 billion Air Force Network Centric Solutions (NetCents) 2 contract; the $9.2 billion Navy Marine Corps Intranet (NMCI) Next Generation Enterprise Network (NGEN) recompete award; and the $1 billion IT Managed Services (ITMS) recompete contract to oversee DHS’ Transportation Security Administration infrastructure.

The larger opportunities illustrate a trend toward consolidation and meeting mandated small-business goals, Ardalan said. He cited the network consolidation portion of the NetCents 2 contract as one example.

NetCents 2 calls for building innovative communications and information services and solutions that focus on the Air Force’s network-centric warfare mission. The threepart award earmarks $5.2 billion for products, $1.1 billion for IT services to upgrade network-centric systems and $2.7 billion for small-business subcontracting services.

Although agencies still have problems meeting mandated small-business percentage goals, Ardalan said he has seen a trend in the past few years toward better efforts to meet those requirements. “I’m assuming NetCents 2 — at least the small-business portion — will be a big part of the Air Force’s effort to meet that goal,” he said.

Based on new information from the Air Force, NetCents 2 might bundle small business into the solutions portion, Ardalan said. That could reduce the three components to two.

NMCI PART 2
The NMCI contract expires in a little more than two years and must, by law, be recompeted. The Navy plans to upgrade its massive intranet system to include new technology, such as wireless Internet access, that was not available when EDS Corp. won the original $9.9 billion contract in 2000.

In 2006, the Navy extended NMCI through September 2010, which added more than $3 billion to the contract’s value. An RFP for the recompete award is expected this fall.

The NGEN contract will include several months of overlap to make the transition as seamless as possible. Contractors including General Dynamics Corp. and Alcatel-Lucent hold other contracts that will be part of NGEN.

Future additions will build on the NMCI applications and architecture that EDS has put in place, John Lussier, deputy chief information officer at the Navy, said earlier this year.

The combined NMCI/NGEN framework will become the foundation for what the Navy Department chief information officer’s office calls Naval Network Environment 2016.

NMCI has given the Navy and Marine Corps a robust, flexible, secure and functional computing and communications platform, said Randolph Dove, an EDS spokesman. “It is a solid foundation for the Navy’s Next Generation Enterprise Network.”

Asked whether EDS had plans to bid on the recompete award when the RFP is released, Dove said, “I think it’s safe to assume that EDS is interested.”

FOCUS ON INFRASTRUCTURE
Unisys Corp. holds the $1 billion ITMS contract at TSA. Input has calculated that the recompete award — which will be procured through the Enterprise Acquisition Gateway for Leading Edge Solutions contract — will be similar in value.

TSA’s new ITMS award will concentrate on network infrastructure to reduce duplicative efforts at the agency, Ardalan said.

When the ITMS contract expired in January 2006, Unisys won a three-year, $750 million bridge contract to continue work until DHS found an IT solution that could apply to TSA and DHS. The bridge award will expire Jan. 1, 2009.

But a report issued by DHS’ Office of Inspector General in November is critical of how TSA has managed the contract and cites numerous examples of redundant operations in IT management and implementation.

The report also cites a lack of proper integration, excessive manual processes, and problems in balancing TSA’s technological goals with the objectives of stakeholders such as airport operators and airlines.

“There were obvious issues with the incumbent,” Ardalan said. Therefore, TSA is taking its time preparing the RFP for the recompete contract because “they want to make sure they really choose the right [contractor] this time around.”

“I don’t want to say [Unisys] won’t win it,” Ardalan said. “I would say they have a bit more of an upward climb towards proving themselves than maybe some other vendors would.”

David Hubler (dhubler@1105govinfo.com) is associate editor at Washington Technology.