We have discussed contracting trends in the past but not industry-specific trends. That is what we are doing today. We are looking at Information Technology (IT) industry trends.
For the last five years the government has been consolidating IT contracts. They have also moved to “as a service” based contracts. These trends are likely to continue for the next few years. A report released by Bloomberg Government (Jan 7, 2020) broke down the areas likely to impact the information technology industry. Let’s look at these trends.
The consolidation of IT services is not something new. It has been gaining momentum over the last five years. The driving force for IT consolidation is the Office of Management and Budget (OMB). Consolidating Information Technology procurements accounted for $40 billion in spending in 2019 alone. The government is referring to IT consolidations as the best in class or BIC for short. OMB is pressuring agencies to move from stand-alone contracts to designated BIC as part of its category management strategy. GSA has already made changes to its Multiple Award Schedules based on OMB guidance. Next, we will look at the changes GSA has made.
GSA Multiple Award Schedules
GSA has already revamped its Multiple Award Schedules by combining 24 schedules into one broad category. They are still modifying the terms and conditions of these contracts. It will take a while as there are over 18,000 contract holders. Hopefully, GSA was able to organize the one category so that government employees can easily find the service that they need. Next, we will look at “as a service.”
Government buying “as a service’.
When the government refers to “as a service,” it means cloud computing. Cloud computing (platform, software, or infrastructure) contracts will increase in the coming years. Another area to expect more contracts is in security operations centers and mobile backend service. Why? The government is moving to a more flexible model that allows it to buy as many services as it wants, instead of a set number of licenses. Thus, allowing the government to expenditure operating costs instead of purchasing capital assets. Also, it will reduce delays waiting for contracting officers to buy additional licenses to meet the government’s needs. Next, we will review the Small Business Runaway Extension Act.
Small Business Runaway Extension Act
This Act will allow small businesses to average their earnings over five years instead of three years. Why the change? To reduce the revenue spikes that can happen in a single year. Many small businesses will see a revenue spike within one year, causing them to lose their small business status. As a result, they no longer qualify for the set-aside programs. The following year the company would be eligible as a small business. The government is hoping that this will help those small businesses that have been impacted by revenue spikes in one given year. The next trend is on Cybersecurity.
The Department of Defense’s (DoD) Cybersecurity Maturity Model Certification (CMMC) will impact contracts. This certification sets different levels of cybersecurity for contractors and their subprimes. If a company is not able to obtain the required certification, then they will not be eligible for these contracts. The result will be an opportunity for businesses to differentiate themselves based on the cyber defense postures and raise the demand for third-party assessment services. DoD is not allowing self-certification for businesses. As a result, companies will have to obtain certification through third-party assessment services. The certification could be cost-prohibitive for micro-small companies.
Summary – IT
Government contracting is continually evolving, and companies must be able to meet the needs of the government or look for work elsewhere. These changes will create new opportunities for small businesses that are poised and ready.
I believe that these changes are going to reduce the number of small businesses eligible to compete on government contracts. Why? Because you must meet all these requirements and still be able to compete against small businesses that were yesterday considered large businesses. In addition, additional certification requirements can be costly to small businesses and many will not be able to afford the certifications.