Consumers who purchase desktop or laptop computers are able to select various options, such as screen size or type of processor. When it comes to paying for the device, however, each consumer has the buying leverage of exactly one.
If the customer is the U.S. government, which buys computers by the truckload, the transaction surely involves a lot of pricing leverage for bulk purchasing.
Well, not really, says the White House Office of Management and Budget, which has launched a program to change the way federal agencies purchase personal computers.
OMB has tossed current purchasing practices for desktops and laptops overboard and prohibited agencies from using customary acquisition arrangements.
Under a directive issued this month, agencies will be limited in the type of federal acquisition contract they can use for purchasing desktops and laptops. In addition, they will be required to reduce the configurations they select for PCs for such elements as processors, memory, and operating systems.
Wasteful Purchasing Practices
The way federal agencies purchase PCs is diffuse and wasteful, and the government generally has squandered the opportunity to save money through the power of bulk purchasing, OMB contends.
For example, in fiscal 2014, agencies awarded more than 10,000 contracts and delivery orders for common laptops and desktops at a total cost of about US$1.1 billion.
This fragmented approach resulted in “reduced buying power, inefficient duplication of contracts, and very little transparency into prices paid,” federal chief information officer Tony Scott and OMB administrator for federal procurement policy, Anne Rung, wrote in the OMB directive.
Instead of government agencies “banding together as the world’s largest buyer to negotiate better prices and terms,” the government too frequently goes about purchasing “like thousands of small businesses, making smaller awards for the same IT products across multiple agencies, and sometimes within a single organization,” they wrote.
As a result, “the government is left with very little visibility into what we are buying, who we are buying it from, and how much we are paying,” Scott and Rung said.
To remedy the situation, OMB focused on three areas:
Contract Limits: The three largest government-wide purchasing contracts account for only one-third of civilian agency purchases of laptops and desktops. The remainder are scattered across more than 2,400 additional contracts, which greatly reduces purchasing power, according to OMB. Using fewer contracts also reduces administrative costs.
To replace the thousands of contracts used for purchasing such equipment, civilian agencies must instead select one of three existing best-value government-wide acquisition contracts or GWACs. These are NASA’s Solutions for Enterprise-Wide Procurement (NASA SEWP-7), the GSA Shared Sourcing vehicle (GSA-70), and the National Institutes of Health Information Technology Acquisition and Assessment Center (NITAAC CIO-CS).
Standardize to Reduce Costs: While most federal employees need only basic computing capability to do their work, there often are hundreds of options to choose from, further fragmenting the government’s position in the market, OMB said.
Laptop prices can range from $450 to $1,300 for the same configuration, a variance of nearly 300 percent, OMB found. Federal agencies frequently ask vendors to provide them with hundreds of different configuration options, which further drives up costs.
In conducting research on the federal workstation environment, OMB found that about 80 percent of today’s basic laptop and desktop needs could be met through five standard configurations.
The General Services Administration contract OMB cited applies to just five configurations. For desktops, the basic specification calls for an Intel Core i5 processor, or equivalent, with 8 GB of RAM and a 500-GB hard drive. Two upgrades are allowed for processors and hard drives. Laptops are limited to just two configurations — both with 14-inch displays.
Utilize More Efficient Practices: OMB has directed agencies to develop and implement uniform refresh cycles for their laptops and desktops to allow for more strategic and predictable budget requirements.
In addition, agencies should aggregate demand and participate in semiannual buying events to maximize collective buying power and drive further price reductions as volume increases, said OMB.
FITARA Sparks Reforms Effort
The OMB initiative was partly stimulated by the Federal Information Technology Acquisition Reform Act that was enacted in 2014 and provides a range of reforms in federal IT procurements.
Many federal agencies “continue to buy and manage their IT in a fragmented and inefficient manner, in large part due to the highly decentralized structure of major cabinet-level departments, which conflicts with the goals of FITARA,” Scott and Rung wrote. The PC purchasing directive is one of the first steps OMB is taking to implement that law.
One major supplier strongly supports both FITARA and the PC purchasing initiative.
“We’re looking forward to finding more ways to work with our government customers more strategically because of FITARA,” said Steve Harris, vice president at Dell Federal.
“As the only provider of end-to-end technology, we’re focused on making sure we help government CIOs solve the entire scope of their IT and mission needs, and giving government customers more effective tools to execute their IT strategies is something we’re fully in support of,” he told the E-Commerce Times.
“I can’t speak for any other organizations, but I can say with certainty this development will be positive for Dell,” Harris said, addressing OMB’s workstation computer directive.
“The OMB initiative has the potential for improving computer purchasing, but there are some potential problems associated with it as well,” said Shawn McCarthy, research director at IDC Government Insights.
“It certainly improves government compliance with purchasing reforms, and the standardization can help security, but you also have to ensure that the GWAC process doesn’t result in limiting the competition of vendors who are authorized under the blanket contracts,” he told the E-Commerce Times.
“You also have to consider how it affects the role of systems integrators in their ability to supply products, especially during a big rip-and-replace IT overhaul,” McCarthy added.
“In general, the reduction of duplicative and overlapping vehicles to consolidate the government’s purchasing power is a commonsense strategy used by the private sector for years,” said Richard Beutel, principal at Cyrrus Analytics.
“The challenge will be to implement such a consolidation with thoughtful on-ramps and off-ramps so that the overall structure does not unduly restrict competitive access to the government market, especially for emerging and innovative small businesses,” he told the E-Commerce Times.
For vendors, the initiative may not necessarily be beneficial, Beutel said.
“The government will, and should, ensure that competition flows to a diverse group of vendors. If the slots are by definition limited to three contract vehicles, then the purchasing managers handling the contracts will have to be careful to not allow these large incumbents to dominate the acquisitions by taking more than their fair share of the stated requirements,” he said.
The GSA apparently is aware of the potential for limited competition and is taking steps to provide a broad range of suppliers. The agency contract has 17 approved vendors, with just two of them listed as original equipment providers: Dell and Ace. The others are resellers that may offer a variety of brands.
“We are expecting more OEMs to be included. Our initial RFI yielded the current listing of 17 vendors. Most of our resellers in the program are small businesses, which are always a focus,” said Kay Ely, GSA’s director for IT Schedule-70.
“Throughout the initiative, we will continue to post additional RFIs to add more vendors. Additionally, we will be launching a targeted marketing campaign directed at IT Schedule 70 vendors to garner more participation,” she told the E-Commerce Times.
As for the impact of the initiative on federal IT managers, Buetel’s perception is that “initially, they will complain because starting up something new is always a hassle, and they may lose access to their ‘favorite’ sources of supply on a case by case basis, but over time they will appreciate the streamlining and the better pricing that should occur if this is managed properly.”