Vendors Find Efficiencies in Outsourced Contract Management

Twenty-three agencies of the U.S. Executive Branch. Hundreds of subagencies. Thousands of order points. Hundreds of systems integrators who implement and maintain the IT needs of the federal government.

For vendors, doing business with the feds means keeping tabs on all of the above, meeting separate standards for each and maintaining dozens of contracts.

For companies like Secure Computing, a network security gateway provider that sells to the agencies exclusively through 15 VARs, they must still earn positions on federal agency schedules of approved vendors and products.

It is a burdensome operation, but given that the size of federal IT spending is lucrative, it is a competitive necessity for manufacturers such as Secure Computing, of San Jose, Calif., which generated about 20 percent of its $109 million in 2005 revenue from federal business, according to executives and company records.

"The federal business represents so much opportunity," said Matt Galligan, vice president of Secure Computing's federal division. "But you can't possibly bid on every project and be known to every integrator who might win a contract. It's a lot of time and energy that can be better applied to generating business elsewhere."

In December 2006, Secure Computing outsourced the burden, penning a deal with ImmixGroup, a McLean, Va.-based firm that handles those headaches for more than 150 vendors. Another company served the same function since December 2005 but didn't have the scale of ImmixGroup, Galligan said.

ImmixGroup, and other firms like it, manage and maintain contracts and position on schedules of approved vendors and products for their client manufacturers.

In a sense, they aggregate the hassle and burden, and provide an economy of scale to the task, said Steve Charles, co-founder and executive vice president of ImmixGroup.

"To use an analogy people will understand, we're like a distributor," Charles said. "A manufacturer could never reach this many agencies and contract positions on its own. We distribute them to those."

One benefit of teaming with such an organization is to take advantage of the subcontractors and integrators favored by agencies and subagencies, because of minority- or women-owned status or location in an economically underserved region.

"A vendor could never reach all of those integrators, favored by all of those agencies and subagencies," Charles said. "They pretty much need to guess and hope one or another gets the deal. We have contracts with the right ones."

In addition, organizations such as ImmixGroup reduce the margin erosion often caused by bidding wars and allow vendors to compete on value-add, Charles said. Because ImmixGroup already holds the contract and schedule position, its vendors compete on value-add, such as ease of integration and services, he said.