As the public sector changes the way it does business, private firms see new opportunities.
Taking a cue from the commercial sector, the U.S. government is changing the way it provides support to its agencies and departments. It is loosening restrictions on where and how these organizations may buy products, and the federal sector is becoming more competitive as procurement and supply offices begin to offer lower costs and better service.
Acquisition offices within the government have become more businesslike by pursuing customer satisfaction and relying on service fees instead of appropriated funds. Conversely, because federal entities are not required to buy exclusively from the government or selected vendors, private businesses are entering the arena with new services and solutions.
The General Services Administration (GSA) is an example of how the government has redesigned itself. Since its founding in 1949, the GSA has been the pre-eminent government services organization, meeting almost all federal agency support and infrastructure needs such as building rentals and leasing, equipment purchases, maintenance and construction. With an annual budget of $16 billion and more than 14,000 employees, the GSA negotiates contracts accounting for $40 billion in goods and services bought annually from the private sector.
According to GSA Administrator David J. Barram, the organization changed its internal culture to emphasize customer service. The alterations range from changing employee attitudes toward work to using a combination of communication technologies such as e-mail and videoconferencing to keep all levels of management informed about operational decisions. Also, the GSA is giving front-line personnel more authority in conducting agency business. “We realize this is a dramatically changing world and that people are expecting the government to change. If we’re going to do that, we might as well be excellent because it’s pretty silly to just change if you are not going to be good,” Barram says.
The GSA receives few appropriated funds from Congress. Instead, fees charged for services are its primary source of operating revenue. This requires the agency to perform because its clients are no longer locked into exclusive business arrangements with it. “If a federal customer can buy a computer cheaper from Joe’s Computer shop, he should do it. If the combination of our price, service and terms isn’t the best value, then we lose the business. We should lose the business,” Barram notes.
Much of the GSA’s work is conducted through two organizations, the Federal Technology Service (FTS) and the Federal Supply Service (FSS). Originally a provider of telephone service, the FTS now offers information technology solutions such as hardware, software, consulting services, information security services and products.
The FSS produces the GSA schedules that are used to buy everything from buildings to toilet paper. Barram notes that the FTS is the largest user of the FSS system schedules. Federal customers can also purchase a wide array of products from GSA’s e-commerce World Wide Web site, GSAAdvantage.gov.
According to Barram, one of the GSA’s assets is its long experience of working with the government and the often complicated rules associated with federal purchasing. “We know how to do it better than anybody else because we know where the products are, how to use them, how to get them, and we know the rules well,” he says.
Another federal agency providing specialized service on a smaller scale is the Interior Department’s Mineral Management Service’s organization, Gov.Works. This outfit helps federal agencies make acquisition and procurement decisions. According to David Sutfin, Gov.Work’s chief of procurement operations, “What we do is take a lot of the administrative burden off program or project managers so they can focus on their jobs. We make the acquisition process run more smoothly.”
Launched in 1996, Gov.Works helps federal clients with almost every type of acquisition except major weapon systems. The agency provides end-to-end service covering every step of the process from solicitation, negotiation and award to contract administration and close-out. Gov.Works does much of its business in the information technology arena. Major clients include the U.S. Defense Department and the National Institutes of Health.
From the outset, Gov.Works was designed as a lean fee-for-service operation. A small staff of 25 officers and support personnel keeps costs down and customer fees low. This acquisitions team helps managers and employees by streamlining the proposal process. Sutfin claims Gov.Works was the first federal agency to use oral presentations in the acquisitions process, offering greater clarity and less ambiguity for contractors.
Gov.Works focuses on customer service because it relies entirely on the fees it charges. “There is no congressional appropriation that keeps us going. It’s your customers and how well they receive you,” Sutfin explains. In four years of existence, the agency has seen annual revenues from contract awards rise from $33 million in 1996 to $208 million in 2000.
Other government organizations also are providing online purchasing for agencies. The U.S. Air Force operates an online central purchasing Web page called the IT Superstore. Managed by the Air Force Standard Systems Group’s Commercial IT-Product Area Directorate (CIT-PAD), Maxwell Air Force Base, Alabama, the site generated sales of $500 million in 2000, its first year in operation. According to the Superstore’s director, Col. Neal Fox, USAF, the site operates in the same manner as a commercial e-commerce Web page such as Amazon.com.
Fox notes that the directorate is a fee-for-service operation. “We have to do business that brings the best value to the customer,” he says. To provide better prices, the directorate conducts large volume blanket purchases. This allows the Superstore to purchase computers on the GSA schedule, which brings in volume buying and leverages discounts. Depending on the products and services, buyers can realize a percentage of savings in the double digits, he says. Prices are benchmarked to the GSA schedule, and vendors must beat GSA pricing to qualify.
Some private sector businesses have moved beyond the traditional role of contractor and now provide services that support existing government e-procurement efforts. Many are setting up shop to meet the growing federal sector need for information technology services and hardware. Others are offering entirely new online services that focus on doing business with government.
For example, epipeline incorporated has carved out a niche for itself helping contractors locate federal business opportunities. The Atlanta, Georgia-based company produces an online business solution designed to identify and qualify contract opportunities for sales and marketing personnel.
According to Scott Fletcher, epipeline’s president and chief operating officer, the company’s service is unique. He notes that over the years, top government contractors such as EDS and Lockheed Martin have developed their own methods for doing business with the government. “What we’ve done is extracted these practices, put a high-tech solution around them, and priced it so that it is usable by the high and low end of the market,” he says.
A key part of the service consists of breaking news feeds and alerts that are targeted to a firm’s specific business interests. This material is extracted from a variety of sources, from data mining publicly available information such as federal Web pages and news services to networks of human contacts in federal organizations. Using proprietary algorithms and a prediction scenario technology that compares past and current contract information, the company delivers processed data to subscribers.
In addition, epipeline features file and e-mail sharing. David Langley, the company’s executive vice president for corporate and customer development, notes that this capability allows the members of a distributed sales or marketing team to share information about contracting leads or competitors. Subscribers can also meet virtually through the system and view, comment on and annotate PowerPoint presentations and other documents.
Launched in October 2000, epipeline is now in its first phase of product rollout, targeting firms doing business with the federal government. The second phase, scheduled for this year, involves expanding the service to companies seeking state and local government contracts.
While epipeline’s business solution currently is aimed at private sector firms, government fee-for-service agencies such as the GSA would find the service of value, Fletcher says. Just like their private sector counterparts, these agencies are very interested in contracting opportunities within the government, he observes.
Commercial businesses also are meeting the government’s ongoing need for computer-related equipment and services. iGov.com specializes in reselling computer equipment to government agencies. Working through an online purchasing Web page and a sales team for on-site visits, the McLean, Virginia-based firm provides information technology product and procurement services.
Bradley Mack, iGov’s vice president of sales, believes that his company offers the largest product catalog in the public sector, with 1.3 million products from every major distributor and manufacturer in the United States, representing $7 billion of real-time inventory. “You won’t find any of my competitors doing this because they’re showing you what’s in their own warehouse. I’m showing you what’s in the country,” he says. This is possible because iGov has contracts with major firms specializing in global distribution.
The company’s e-commerce site is designed with government customers in mind. The electronic store has work-flow solutions built into it allowing clients to customize accounts to meet specific needs. Embedded administration tools allow federal employees to conduct product research and send price quotes to their superiors for purchasing approval.
Mack notes that only 10 to 20 percent of the company’s business is e-commerce based. iGov maintains a trained sales team to conduct the larger, more specialized purchases that require field visits. The company has worked with federal agencies on specific client-based initiatives. For example, the company has an enterprise agreement with the Special Operations Command based at MacDill Air Force Base, Florida. The agreement allows purchasing officers at the command to directly access the online store.
Beyond large purchases, the online store also fills an important niche by catering to those making micropurchases—sales under $25,000. Mack notes that the federal government’s annual goods and services budget is $200 billion. Some 486,000 large purchases account for almost 90 percent of this budget, while more than 19 million individual micropurchases are made, he says.
Another advantage offered by iGov is that its processing fees are only $8, compared to the government’s fees of $100 to $150 per order. While a $100 fee is negligible for a large buy, it is prohibitively expensive for small purchases, Mack says.
As a commercial e-commerce site and reseller, GTSI, Chantilly, Virginia, offers access to more than 150,000 information technology products from more than 2,100 vendors. According to Elizabeth Greene, GTSI’s director, the Web site allows customers to shop for several contracts at a time. The Web-based service is provided with no additional fees to the customer.
Clients can customize their access to the site to direct employees to specific contract vehicles set up in sub-Web sites. Customers include Randolph Air Force Base, Texas, the U.S. Navy and the U.S. Marine Corps. Special pricing is done on an agency-by-agency basis, she says.