The Merger and Acquisition of GWACs

Is GSA Solving an Actual Problem?

On March 20th, the Trump Administration released Executive Order 14240 entitled: Eliminating Waste and Saving Taxpayer Dollars by Consolidating Procurement that sets out the plan for GSA to consolidate control over Government Wide Acquisition Contracts (GWACs). I believe that the administration is embarking on a very complex journey that has history and relevance in the commercial world of acquisitions and mergers.

For all intents and purposes, this could be the largest merger and acquisition of federal contracts. Mergers have the ability to make a company/agency stronger if executed correctly, but there are many examples of acquisitions that have left the combined companies/agencies weakened and less effective.

Contractors need to be aware of the changes that this executive order may usher in. There has been no true indication of how GSA will handle this consolidation, but a worst case scenario could be the elimination of an entire GWAC or GWACs.

On May 28th, GSA will “present information regarding consolidating domestic Federal procurement in GSA.” To register to attend this event, please click this link. I will have a follow-up article to this one detailing any changes and potential impacts following this event.

Update May 23: I’ve just received an email from GSA regarding the upcoming May 28th event. The stated agenda is as follows: Several senior officials will present information regarding consolidating domestic Federal procurement in GSA. They will also present GSA’s work on the FAR Overhaul initiative, including GSA’s deviations to FAR Parts 1 and 34. GSA has clarified via email that “GSA will not be announcing anything related to its plans for GWACs at that session.” The above paragraph has been changed to reflect this update.

For a merger to work for companies and/or contracts they have there has to be a reason that is more than simple consolidation. In the book, Good to Great by Jim Collins a team of researchers looked at a set of 20+ companies who had acquisitions and divestitures over a period of 10 years. They found that while you can buy your way to growth, you absolutely cannot buy your way to greatness. Two big mediocrities joined together never make one great company - or contracting entity. I believe that this important for any consolidation or merger to work for it’s customers/consumers.

The stated goal of the Executive Order is -”It is time to return the General Services Administration to its original purpose, rather than continuing to have multiple agencies and agency subcomponents separately carry out these same functions in an uncoordinated and less economical fashion.” It is attempting to do what GSA has tried to accomplish for the past 30 years - Consolidate all buying within the federal government to their agency.

When I break down the order, the following seem to be the identified “problems":

• “Multiple agencies and agency subcomponents separately carry out these same functions in an uncoordinated and less economical fashion” - There is no quantified metric shown for how this statement is proven. Would the work done by other agencies be done more efficiently or effectively at GSA? How do you prove that?

• “Consolidating domestic Federal procurement in the General Services Administration — the agency designed to conduct procurement — will eliminate waste and duplication,” - Once again, this is not proven in the order. From my understanding, the offices at NITAAC and NASA SEWP are significantly smaller than those of GSA’s GWAC offices, so I’m not sure where the “waste and duplication” is coming from.

GSA’s stated and implied mission is to provide procurement services to the entire Federal Government. Their stated mission is - To deliver the best customer experience and value in real estate, acquisition, and technology services to the government and the American people. The question that I have yet to see in the order or interviews with GSA is: Does GSA provide the best “customer experience” that justifies this consolidation and will it exist in the remaining contracts after consolidation?

In the articles and interviews I’ve consumed on the topic since the release of the Executive Order, there is an implication that GWACs have proliferated in some way in the past few decades and that consolidation is the answer to these “problems.” I have not seen evidence that any other agency than GSA sees the above as a problem nor that consolidation is needed.

Only GSA has been granted the right to compete and manage a net-new GWAC since the early 1990s. NASA SEWP and the NITAAC CIO-SP and CS vehicles were established in the early 1990s as a direct response to the challenges of buying on GSA Schedules during that decade. GSA has launched the Alliant, VETS and Polaris GWAC vehicles as well as the Multiple Award Contract (MAC) OASIS and OASIS Plus since then.

Over the past decade, NASA SEWP V has provided over $70B in goods and services to the entire federal government with a a total of 140 government employees. The National Institutes of Health’s current NITAAC’s CIO vehicles have provided over $39B to federal customers worldwide.

These numbers include significant services and products provided by small businesses. GSA has had a full and open GWAC vehicle, Alliant 2 (current spend $35B), available to the Government for the past 8 years due to protests and cancellations of Alliant 2 Small Business and current protests on GSA Polaris, it’s successor.

GSA tried to acquire NASA SEWP previously in during the early 2006, so this is not a new idea. (GSA Wants to Add SEWP To Its Plate) The result of the OMB investigation found the NEED to keep NASA in charge of SEWP. An anonymous Government Executive said the following as a result of this investigation:

“NASA made a compelling argument to keep the contract. SEWP is well-run, responsive to customers and offers more up-to-date technology than can necessarily be found at GSA, the official said. "There are all sorts of things that NASA figured out how to do that other people ought to figure out, including GSA," the official said.”

Each GWAC has a very particular customer base. Does a civilian agency need to pay for the risk mitigation or certification strategies that the Department of Defense or Homeland Security would? No, but some of these procurements such as the GSA Alliant and Polaris vehicles have these elements baked into their solution which eliminates potential contract holders and could raise overall pricing. One size does not fit all in the government. When customers buy from SEWP, it is not because of the name, it's because of the service they receive from the contracting organization running SEWP.

In any acquisition or merger there is a due diligence period prior to the finalization of the merger. I believe that this should be employed in this very important effort. A simple list of the activities that normally occur during this stage are:

• Commercial Due Diligence: This examines the contract’s customer base, market position, and competitive landscape to assess its growth potential and market viability.

• Operational Due Diligence: This involves examining the contract’s operations, including its supply chain, manufacturing processes, and IT infrastructure, to assess its efficiency and effectiveness.

• IT Due Diligence: This assesses the contract’s IT infrastructure, cybersecurity, and data privacy practices to identify any potential risks or vulnerabilities.

• Human Capital Due Diligence: This examines the contract’s workforce, including employee contracts to assess its integration potential.

• Financial Due Diligence: This involves reviewing the contract’s overall financial health.

• Legal Due Diligence: This focuses on reviewing the contract's legal documents, such as contracts and litigation history, to identify any potential legal liabilities or risks.

While I appreciate that the Trump Administration is putting very aggressive timelines on this effort, I highly doubt that there is the ability to perform the analysis above on every GWAC contract and to have a plan to ensure that operations will run effectively for all federal customers following this “consolidation.” This seems to be at cross purposes with their goal for efficiency. I’m very interested to hear the next steps that GSA will be employing when they roll out at the end of this month.

The energy and effort being spend to solve a problem that I find hard to prove exists is frustrating for industry and the government customers who use these contracts. I believe that the time and energy would be much better spent in figuring out how to AWARD the existing contracts in evaluation and protest (CIO-SP4, GSA Polaris, Department of State EVOLVE, Army ITES 4H, DHS First Source III, etc.). That is a problem that I believe all of us can agree on.

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