GSA IT Contract Sales Dip

GSA sales of IT services through Schedule 70 contracts saw a 6 percent decline in the third quarter year-over-year, and a 3.2 percent decline since first quarter 2005, according to a recent study. While part of the lackluster growth could be due to a slowing federal IT market, solid results from solution providers overall indicate that federal agencies are more likely opting for other contracting vehicles.

Governmentwide, GSA sales year-over-year were up 0.1 percent in the third quarter of the government fiscal year, which ended in June, compared to 7 percent the second quarter year-over-year.

"Five years ago, GSA sales were growing rapidly at a double-digit pace, but recently that growth decelerated and is getting flat," says Josephine Millward, federal IT services analyst at Standford Washington Research Group.

The capital-based firm released a report this week that examined GSA sales for Q3 '05, and detailed the results of six specific solution providers: Anteon, CACI, ManTech, MTC Technologies, SI International and SRA International. The companies chosen represented the small-cap federal IT companies that the study seeked to examine.

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"It's getting more and more difficult to determine where the business is going based on GSA sales data," Millward says, "because many federal agencies are shifting their work off this schedule."

As that shift occurs, small to midcap IT services companies seem to be capturing market share; the companies analyzed, for example, grew their GSA sales by 14 percent for the first three quarters this year, compared with only 2.8 percent growth by companies overall. At the same time, SI International's GSA sales declined significantly third quarter, despite admirable results overall.

"That shows that the company has been very successful at moving the business to different contracts," Millward says.

In the first three quarters of this fiscal year, prime sales through the GSA for Anteon were $218 million, compared to its reported total sales of $1.1 billion. The average percentage of total sales that were made through the GSA for the six companies during the same time frame was 23 percent.

As for why GSA may be losing its appeal, Millward points to such highly publicized contracting abuses as the Abu Ghraib debacle, where interrogation work was improperly awarded under a GSA contract for IT services. GSA responded with the Get It Right Plan, an attempt to ensure proper use of GSA contracting vehicles and services. But, to some degree, the damage was already done, Millward says.

"Government customers, especially military, are moving purchasing to other contract vehicles if they can," he says.