Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Sig who wrote (170726)	8/26/2002 12:07:43 AM
From: Herschel Rubin	Respond to of 176387

Office of Management and Budget slashes IT spending. __________________________________________________ washingtonpost.com OMB Puts A Freeze On Tech Spending $1 Billion in Plans Land In Limbo By Renae Merle Washington Post Staff Writer Saturday, August 24, 2002; Page E01 The Office of Management and Budget has ordered seven of the 22 agencies slated to make up the proposed Department of Homeland Security to temporarily halt spending on more than $1 billion in information technology projects while it looks for savings and compatible technology. The recent order has sent jitters through the community of government contractors expecting a flood of new spending in response to the war on terrorism -- not a delay in projects. "Our concerns are the length of time it is going to take" to determine which projects will be consolidated or canceled, said Dan Heinemeier, president of the Government Electronics and Information Technology Association in Arlington. "Companies put resources on the line when they bid for proposals." The OMB said ongoing projects won't be affected, but new contracts will have to be approved by the Homeland Security Investment Review Group. So far, the OMB suspects it can find about $300 million in savings among the agencies it has targeted with this order. More will be examined later; the OMB looked only at agencies that had proposed IT contracts worth more than $500,000. "This is a temporary cease on spending" to ensure money is not wasted on projects that will have a six-month shelf life if the agencies are combined, said Mark Forman, the OMB's associate director for information technology and e-government. "That includes looking at redundancies and interoperability requirements." The seven agencies had planned to spend $235 million to upgrade 21 financial management systems, according to OMB records. That can be consolidated into three or four programs, potentially saving $65 million to $85 million in the next two years, agency officials said. "What's clear is that there are a lot of redundant investments," Forman said. The OMB order shows that the expected flood of government IT spending -- which many people had hoped would offset losses in the private sector -- isn't guaranteed or without hurdles. "Overall, it will be a zero-sum game," said Jim Kane, president of market research firm Federal Sources Inc. in McLean. "There are going to be some winners and losers among the contractors." There's an escape mechanism for agencies that need it. Four emergency applications have already been filed and approved, including two by the new Transportation Security Administration. The agency was ready to award Unisys Corp. a $1 billion contract last month to develop its IT infrastructure, as well as to provide computers and cell phones for employees at airports across the country. That plan was delayed for about a week before it was approved by the Investment Review Group, company officials said. "I think we all had a little bit of concern about that," said Greg Baroni, Unisys's public sector president. But "we all came together to make sure we met OMB's expectations." The freeze came as the Coast Guard was about to sign a new contract to license Microsoft Corp. software. At the behest of the committee, it negotiated on behalf of itself and the six other agencies and was able to make a deal that will save at least $6.1 million over the next five years, Forman said. Some contractors are already starting to feel the pinch. For more than six months, Reston-based DynCorp has been developing a project for the Federal Highway Administration to lease desktop computers, new software and other equipment to the agency. But the OMB freeze put the program in peril. The agency was forced to redirect the funds for the program to "mission-critical systems" within the Department of Transportation, DynCorp officials said. "They said, 'Sorry, guys, there is no money for this,' " said Joe Cunningham, president of DynCorp Systems & Solutions LLC. The freeze has also caused some angst on Wall Street, where contractors have been experiencing newfound popularity. "It's something we are keeping an eye on," said Bill Loomis, an analyst with financial services company Legg Mason Inc. "Just about every company has some exposure to those agencies." But hope is not lost for IT companies desiring a piece of the federal pie. Congress is expected to approve a 16 percent increase in technology spending for next year. "Everyone agrees that the government is doing the smart thing," said Chris Penny, industry analyst for investment banking firm Friedman, Billings, Ramsey Group Inc. "While the tap has been turned off for a while, there is a flood right behind it."