Firms That Help DHS Save Money Will Make Money, Analysts Say
The days of big price tag, cutting-edge technology acquisitions at the Department of Homeland Security are over.
After nearly a decade, the money spigot has been turned off, as one executive put it.
Advanced portals to scan shipping containers for nukes? Canceled. A virtual fence spanning hundreds of miles along the Southwest border. Forget it. A fleet of 24 Predator B drones at the ready? Customs and Border Protection will have to settle for 10.
The Transportation Security Administration bought so much baggage screening equipment so fast that millions of dollars worth of the machines are piled up unused in a Texas warehouse.
The department and its 22 components never did master the art of acquisition management, a recent House Homeland Security Committee report pointed out. Initiatives to tighten up the department’s contracting practices have not been followed, Rep. Michael T. McCaul, R-Texas, chairman of the oversight, investigations and management subcommittee, said in the report.
“Consequently, poorly managed programs have resulted in capabilities that are delivered late, cost more and do less than expected,” the report said.
DHS’ mixed record when it comes to fielding complex, advanced technologies — particularly those in the public’s eye and Congress’ crosshairs — coupled with the looming federal budget crunch and possible draconian cuts in the form of sequestration, means a dearth of new high-profile programs, executives and analysts who spoke to National Defense agreed.
John Hernandez, senior aerospace and defense analyst at Frost & Sullivan, said, “Most talk about sequestration has been about DoD, but DHS is not immune. It’s also an election year, which always seems to slow down government spending, and companies are somewhat apprehensive about the future.”
But there are ongoing initiatives in the information technology realm within the department, insiders said. It’s not glamorous, but there will be business opportunities, especially for firms that can show the department how to save money.
“It’s a little bit boring. It’s not as cool as drones over the border, but on the flipside … this is not risky business. We know we can save money. We know we can help,” said Paul Christman, president and CEO of Quest Software’s public sector subsidiary.
The department has embarked on behind-the-scenes projects to put its cybersecurity, interoperability and computing houses in order. Seamlessly integrating its workforce so a Coast Guard officer, for example, can communicate effortlessly with a CBP agent, and have access to his or her data when needed is one of the goals. It also wants an identity management system in place so these personnel, along with outsiders in the public safety sector, can access public or classified data wherever they are and when they need it — but only if they are authorized.
DHS also needs to sharply reduce its computing costs. To do so, it is in the process of consolidating 23 data centers down to two.
The department wants its network operations and information technology to be “simplified, efficient and cost effective,” said Stephanie Sullivan, a consultant with immixGroup’s Market Intelligence division, which provides insights into DHS for some 200 businesses that are looking to score contracts.
Of the civilian departments, DHS in 2012 has the second largest IT budget in the federal government, lagging only slightly behind Health and Human Services, she said. Some years, it has been the largest.
The department is looking at a range of cloud-based services with mobile capabilities, she said.
“Going forward, data will be maintained in DHS data centers, wrapped with mobile capabilities, enabling employees to work on a variety of devices with security architecture,” she said.
As far as communications is concerned, DHS plans to move from a land mobile to a 4G network in the next five years. That will allow agents in the field to access their work on handheld communication devices or at kiosks. This will be a boon for personnel in such agencies as the Coast Guard, Immigration and Customs Enforcement and the Border Patrol, who are not always at their desks, but are out in the field.
They will want on-demand video and biometric identification checks to work on smartphones and tablets, she said.
Joseph Beal, a contractor for CCSi, who works as an IT security program manager at DHS, said the department still has a lot of work to do to reach its longtime goal of integrating communications among the 22 agencies.
“The ability to have something that is interoperable is going to fix a lot of those issues. … It shouldn’t matter if they have their iPad, or some kind of smart device, they should still be able to communicate during a disaster, across the agencies and across the federal government.”
Beal added: “There is definitely a market for vendors to come in and really make an impact.” DHS will be looking for “innovation,” he said. But that is not always defined as the latest gizmo or software.
“Innovation doesn’t always mean incorporating leading-edge technologies or additional vendors. It means exposing the capabilities of the systems you already have in place,” he said.
Contractors can offer commercial-off-the-shelf devices, but also enhance those capabilities with niche products, he said.
This is all good news for small businesses that can sell these kinds of products, said Sullivan.
But Christman said this is bad news for some of these incumbents and their legacy software that is expensive to maintain. Standardization will follow consolidation. That means doing away with vendors, and discarding exceptions to the standards.
“You can’t deal with everybody anymore. You have to get rid of all your outliers,” Christman said.
He predicted that the trend at DHS, and across all the federal agencies, will be “software as a service.” That will mean moving away from perpetual licenses to a “consume only what you use” model.
Agencies will basically rent the software. “You use it as you need it, and if you don’t need it anymore, you get rid of it. It gives the agency a very nimble ability to turn on and turn off technology. Not buy it to own it,” he said.
It will also give IT managers predictability, and won’t tie them to long-term contracts, he added.
Cybersecurity goes hand in hand with these integration and consolidation efforts, and will continue to see growth, the analysts said. Network security budgets will continue to rise no matter how dire the federal budget outlook becomes, they said.
Meanwhile, the department’s operations and maintenance expenditures are “out of control,” Christman said. He agreed with the other executives and analysts who said that any company that can come in and offer ways for the agencies to reduce their costs is going to succeed.
“The money was just a spigot. The free spending days are over. The technology has changed over the last 10 years, and now DHS is under a microscope to reduce budgets. It is forcing them to make these choices,” Christman said.
Outside of the information technology realm, the major DHS agencies will continue to acquire new technologies, but there probably won’t be the multi-million dollar, high-profile projects that proved too hard for the department to manage and drew the ire of Congress.
However, the missions have not gone away. For now, upgrades, refurbishments and incremental improvements to existing hardware will predominate over big technological leaps.
For example, the Advanced Spectroscopic Portal program that sought to scan every shipping container for nuclear materials before they reached U.S. shores was canceled, but the congressional mandate to do so is still on the books.
Huban Gowadia, acting director of the Domestic Nuclear Detection Office, said at a recent House hearing that it will still be spending $1 billion over the next five years to acquire smaller-scale scanning technologies (see story page 11).
The virtual fence dream might be dead, but CBP is in the beginning of a competition to upgrade its sensor platforms with the Integrated Fixed Tower program, which is intended to give Border Patrol agents improved situational awareness. It may not have a catchy name like its predecessors, but with hundreds of potential tower locations on the southern and northern borders, and the need for maintenance after they are deployed, the contract could be worth hundreds of millions of dollars.
Hernandez said CBP is primarily interested in commercial-off-the-shelf, proven technologies for this project rather than new, cutting-edge sensors. The agency’s air and marine office also will not be acquiring new helicopters, but looking to upgrade and refurbish its existing Blackhawks, he added.
CBP recently announced that it can’t afford to expand the number of its medium-altitude, long-endurance unmanned aerial vehicles. But there are efforts to upgrade their full-motion video cameras with advanced targeting sensors, said John Appleby, who leads the border and maritime security division at the Homeland Security Advanced Research Projects Agency.
The Transportation Security Administration, the CBP and the Coast Guard remain the “big three movers and shakers” in the department when it comes to budgets, said Hernandez. The triumvirate spends more than half of DHS’ funding. The Federal Emergency Management Agency, when there are numerous disasters, also consumes a large amount of the dollars, but doesn’t spend as much on advanced technologies as the other three.
The Science and Technology Directorate, after some lean years, is poised to see a rise in spending, Hernandez predicted. It pays companies, universities and other entities to develop new technologies, but it does not acquire or field them. If the product works, it is up to the maker to market it to DHS agencies or first responders.
Hernandez said the directorate serves as a bellwether for what the component agencies are interested in acquiring. Chemical and biological sensors, cybersecurity and explosive detection seem to be receiving the bulk of S&T’s current funding, he said.
Manpower costs continue to eat up most of these agencies’ budgets, he said. CBP, as one example, will see a $400 million rise in salaries and expenses from 2012 to 2013, totaling more than $9 billion. By comparison, $327 million is expected to be spent in 2013 on border security, fencing infrastructure and technology. It doesn’t leave a lot of room in the budget for acquisitions.
Border screening acquisition programs will emphasize technologies that can cut down on manpower costs, Hernandez said.
“Less development and more emphasis on COTS is something you will see more in the future at DHS,” Hernandez said.
Similarly, the Coast Guard’s operating expenses are $6.7 billion in 2013, up slightly from 2012. It is in the middle of a 25-year effort to upgrade its aircraft and cutters. The acquisition budget is one-third of the operating expenses at $1.9 billion — $300 million less than 2012. The Coast Guard’s already small research, development, test and evaluation budget of $28 million in 2012 drops even further to $20 million in 2013.
Sullivan said the service’s IT budget is also down significantly from its 2012 level of $643 million. The Coast Guard has requested $573 million in 2013. It is girding for fiscal austerity and “is committed to doing more with less, looking closely at infrastructure performance management and systems lifecycle management,” she said.
As for TSA, Hernandez said there are no plans during the next few years to purchase new baggage screening equipment. The buying binge that procured the machines faster than the agency could deploy them means that they won’t need to be replaced until about 2015. Most funding will be spent on maintenance until then. For that reason, its aviation security account is expected to drop from $5.25 billion in 2012 to $5.1 billion in 2013.
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