New Scope for NETCENTS
Written by Peter Buxbaum
MIT 2010 Volume: 14 Issue: 4 (May)
EXPANDED AIR FORCE CONTRACT PROGRAM WILL BE MORE
COMPLEX TO MANAGE, BUT SHOULD OFFER BETTER VALUE
TO THE GOVERNMENT AND MORE OPPORTUNITIES FOR VENDORS.
Air Force officials are working on a new version of the NETCENTS contracting vehicle that will be structured substantially differently from its predecessor. The upcoming NETCENTS 2 program will add more complexity to the instrument, but will also likely drive more business to NETCENTS and will especially benefit smaller businesses.
The existing program, which was to expire last year, received a one-year extension, with four three-month options, as contracting officials and senior leaders put the finishing touches on the requests for proposals.
NETCENTS supports network-centric operations through the acquisition of commercial information technologies, networking equipment and services, and voice, video and data communications hardware and software.
The $9 billion indefinite delivery/indefinite quantity (IDIQ) contact, which was initiated in 2004, has been used primarily by the Air Force, Air National Guard and Air Force Reserve, which together used 68 percent of the dollars spent and 84 percent of the task orders. The Army spent 11 percent of the total dollars, the Navy, 7 percent, and the Defense Information Systems Agency, 4 percent.
The new NETCENTS will include a $24 billion spending ceiling, stricter enforcement of mandatory use policies for Air Force acquisitions of networking and telecommunications equipment and services, and more complicated teaming arrangements.
The first NETCENTS involved a single IDIQ contract awarded to eight prime contractors—Centech Group, Multimax, Northrop Grumman Information Technology, NCI Information Systems, Booz Allen Hamilton, General Dynamics Network Systems, Lockheed Martin and Telos. Together with their teams of subcontractors, each has been entitled to compete for all task orders issued under the contract.
This contracting scheme will be changing significantly under the new contract. Eight separate contracts, one products-related contract vehicle and seven solutions vehicles, each with multiple contract awards, will be let to an estimated 50 or more prime contractors. Of these, three contracts will be set aside for small businesses for solutions.
“The existing NETCENTS contract covered the scope of IT products and solutions in one contract,” said Stephen Davis, program manager for NETCENTS 2. “After reviewing Air Force spend data and updated requirements, it was determined that a better design for NETCENTS 2 would be to break out the scope and requirements to best match commercial capabilities. The expectation is to award 50 or more contracts total under NETCENTS 2.”
ENTERPRISE INTEGRATION
Some of the key features that make the NETCENTS contract attractive to users will still apply to NETCENTS 2, according to Dennis Scully, the program manager for NETCENTS at Booz Allen Hamilton. These include “a long period of performance that will continue to run through September 2012,” he said. “Decentralized ordering provides the flexibility for users to continue to use their current contracting office or reach out to the NETCENTS contracting office. Quick response times allow customers a short turn time for processing draft statements of work into RFPs by focusing on solutions and cost versus having to qualify contractors.”
A detour from the single IDIQ approach used for NETCENTS is one major change coming to NETCENTS 2. “NETCENTS 2 will have a series of eight interrelated IDIQs that will introduce new capabilities and allow the government to select the best teams to support the individual IDIQs,” said Scully.
NETCENTS 2 has sets of contracts for netcentric (COTS) products, legacy telephony products and solutions, applications services, and NetOps and infrastructure solutions. “These multiple award IDIQ contracts cover the scope of the existing NETCENTS contracts as well as allowing for newer requirements and technologies,” said Davis. “For example, the existing NETCENTS did not support advisory and assistance requirements. Through lessons observed and frequent customer requirements, it was decided that the Air Force needed IT specific advisory and assistance contracts.”
NETCENTS 2 includes two advisory and assistance services (A&AS) multiple award IDIQ contracts, one for program and tactical level requirements, called IT professional support and engineering services, and one at the strategic and enterprise level, called enterprise integration and service management (EISM).
“EISM will be a new area for NETCENTS 2,” said Scully. “This contract will allow contractors to provide advisory and assistance services at the CIO level. A&AS was not permitted under NETCENTS.”
Like the existing NETCENTS contract, NETCENTS 2 will include significant setasides for small businesses. NETCENTS 2’s eight multiple award IDIQ contracts will include five full and open competitions, two small business contracts, and one service disabled veteran-owned small business set-aside. The government is also changing the small business goals for the large primes from 20 percent on NETCENTS to 23 percent on NETCENTS 2.
The multiple contract instruments will enable companies to focus on their core capabilities and build contracting teams that better match specific contract requirements, according to Bill Schuhle, the NETCENTS program manager at Lockheed Martin. Under the original contract, he said, Lockheed Martin sometimes bid on task orders it might have not otherwise in order to support the contract and help achieve the Air Force’s goal of spurring competition.
“In NETCENTS 2 the functional areas will be split up, so customers can start doling out pieces directly to small business,” said Schuhle. “When task orders involve enterprise work, the contractor must have very broad capabilities and has to be pretty large to handle it. When the projects are smaller, small businesses are better able to cover the whole gamut.”
The NETCENTS 2 strategy also represents a change in Air Force acquisitions policy, according to Bill Wagner, NETCENTS program manager at BAE Systems, which has done substantial subcontracting work on NETCENTS. “The new contract is seeking to change behavior to acquire things in a structured way,” he said. “The Air Force is moving away from dealing with integrators to buying pieces of a solution set. This will make it difficult to win a contract that provides a tooth-to- tail solution. It will force contractors to go after smaller pieces.”
In addition to supporting small business, such a scheme will also promote efficiency and efficacy in Air Force acquisitions, according to Davis. “The expectation is that the change in structure will allow Air Force customers to contract more directly with the providers actually doing the work, which should cut down or eliminate excessive passthrough charges, resulting in an overall cost reduction and increase in performance.
“Since the prime awards are expected to increase from eight to 50 or more awards, the Air Force expects to see more efficiencies from increased competition at the task order level. The structure’s focus on individual requirements areas will also lend itself to supporting agile and rapid acquisition events, since the requirements can be met by teams experienced and focused in that particular area,” Davis said.
MANAGEMENT COMPLEXITY
The increased number of contracts will also increase the workload for government managers and the complexity of program management. “This increase in the number of primes on NETCENTS 2 will place an increased demand on the government program management office,” said Scully. “It will also become imperative for primes to be accurate and responsive in reporting to the government.”
“This will add an extremely large burden on the acquisitions staff,” added Wagner. “The Air Force has to hire people with contract oversight and management expertise and see they are properly trained to make sure that all these acquisitions work together.”
“A strong post-award team of program, contracting and technical resources will provide the oversight and governance structure to implement this goal,” said Davis. “Concrete activities include the use of due diligence checklists, policy and technical guidance, and the use of performance work statement templates.”
The new contracting arrangements will take some getting used to from the vendor perspective.
“Contractors will have to put in more bids on more task orders, and will need to invest more in support of multiple bids,” said Wagner. “More of the contracts will be cost-plus. All this means that contractors will need to be more cautious on what they bid on and more prudent in their cost estimates.”
The new regime will also require companies to pursue different sorts of contract teaming strategies. NETCENTS 2 in some cases restricts a company from being both a prime contract holder and a subcontractor to another prime contract holder within the same contract pool. However, cross-teaming is allowed within the netcentric products and telephone products and solutions contract pools.
There is also a unique rule that applies to the NetOps infrastructure and application services contract pools. “A company that is a prime contractor in a full and open or a small business contract pool,” Davis explained, “may subcontract to a prime contractor in the opposite contract pool.
“Further, companies can be a subcontractor to multiple primes within the same multiple award IDIQ contract pool, provided they are not a prime in that pool,” Davis added. “These teaming restrictions are expected to increase the number of responses received for each competed task order in a contract pool.”
Task orders are likely to be more narrowly focused in NETCENTS 2, according to John Heller, IT services vice president and general manager at Harris Corp. Harris acquired Multimax, a small business NETCENTS contractor, in June 2007, and since then has competed as a large business.
“By creating different contract segments that align with different functional requirements, task orders will require more specialization,” he said. “The government will be tailoring the task order RFPs to the more narrow segments and the contractor companies will be building teams with a much more comprehensive set of capabilities around each segment.”
“Teaming strategy will get much more complex,” said Schuhle. “More companies might be willing to prime a piece of NETCENTS 2 that could not qualify as a prime contractor in NETCENTS because they could not provide the full gamut of capabilities.” This fact could benefit mid-tier companies that do not qualify as small businesses but could not have held their own as a prime contractor under NETCENTS, according to Schuhle. For Wagner, NETCENTS 2 is structured not merely as a series of contracts, but also as “an integration mechanism” featuring “strict governance and mandatory use policies” designed to ensure that acquisitions comply with enterprise needs.
“I believe NETCENTS 2 is an attempt by the Air Force to get control of results and behaviors, so that it can acquire and manage IT portfolios more effectively, use dollars more expeditiously, and apply the highest level of fidelity to get mission results based on investments and portfolio decisions. It is a transformational mechanism and not just another contract,” Wagner said.
CULTURAL CHALLENGES
The success of the new framework of such a scheme will involve overcoming at least one major challenge. “The biggest one is culture, and not technology,” said Wagner. “The real questions are whether the culture of the Air Force can adapt and whether the senior leadership has the will to drive this into the future.”
Scully believes that overall program performance will be enhanced under NETCENTS 2 as a result of teams selected for award based on their ability to deliver against specific RFP requirements. “Having some teams that win on more than one of the RFPs will allow views across these multiple specialties and improve interoperability opportunities,” he said. “The multiple awards underneath the eight RFPs will also increase the talent available for new ideas and technology insertion.
“I believe there will be more competition on NETCENTS 2,” he added. “Some contractors may have elected to pass on NETCENTS because of the broad nature of the contract. These contractors may now find that NETCENTS 2 will allow them to compete because they specialize in an area such as software development required by the applications software services contract. The structure of NETCENTS 2 allows them to opt out of all or a few of the other seven RFPs where they may not have expertise.”
Schuhle agreed that “competition will be stiffer” under NETCENTS 2 because of the narrower scope of the eight contracts and the additional players the structure of the program will attract. “The end result will be better a better contract with better pricing and better overall value for the government.”
Norris Connelly, senior vice president of Air Force programs for NCI Information Systems, offered this overall assessment of the program: “Achieving the Air Force’s transformational goals through incremental and evolutionary network infrastructure sustainment and modernization requires that the Air Force have a set of contractors delivering services and solutions under a common set of standards and architecture, ensuring consistency across the enterprise. NCI believes NETCENTS 2 will play an instrumental role in achieving these objectives. NCI has been a trusted partner of the Air Force and NETCENTS and we look forward to continuing our trusted relationship with the Air Force and delivering missioncritical services and solutions to customers worldwide under NETCENTS 2.”
Another perspective was offered by Fernando V. Galaviz, president and chief executive officer of The CENTECH Group: “The NETCENTS contract has given us significant opportunities to compete and succeed on a large number of programs that would have been previously unavailable to CENTECH. Those programs include not only those within the Air Force, but also the Air Force Reserves, Air National Guard, Army, Navy, other Department of Defense agencies, and the Federal Aviation Administration. The NETCENTS small business program afforded us the opportunity to expand beyond our original technical competencies and has allowed us to diversify our business.
“Compared to the current NETCENTS contract, the proposed structure and features of NETCENTS 2 will provide considerably more opportunities to a higher number of firms to participate,” Galaviz continued. “Being very popular with DoD and civilian agencies, the NETCENTS program has supported the entrepreneurial spirit of those companies fortunate enough to be not only primes, but also subcontractors. It is clear that the Air Force and upcoming NETCENTS 2 program will afford these same opportunities, as it allows for extensive depth of supporting capabilities for networks, software systems, security, engineering, data, training, management, products and other IT services. Further, the program will continue to be vitally important if it receives the same systematic and full support currently experienced from all levels of DoD and civilian agencies. There’s no question that the NETCENTS acquisition strategy is headed in the right direction. The challenge is for the industry to aggressively reduce our cost structure, improve our service, and transform our business practices to enable growth.” ♦