President Bush has proposed the formation of a new Department of Homeland Security (DHS), and Congress is currently considering his request. Congress and the White House are debating the following issues concerning the new department.

• Which agencies will make up the new DHS?
  
• What degree of management control will the executive branch have over the new agency?
  
• What collective bargaining rights will employees of DHS have? (The President has the right to deny federal employees working in national security the right to join a union.)
  
• What power will the President have to spend DHS budget as he sees fit? (Bush is proposing 5% of the budget.)
  
• To what degree will DHS collect intelligence information directly as opposed to acting as a clearinghouse?

Regardless of the final makeup, though, establishment of the new department will constitute the most extensive reorganization of the federal government in the last 50 years. DHS would be one of the largest federal agencies and it would assume many non-security functions. Only the Department of Defense and Veteran's Affairs would be larger.

DHS's Fiscal Year 2003 budget is estimated to be approximately $38 billion. State and local governments are on the front lines of first responses to terrorist attacks. The President's budget allocates $3.5 billion to support state and local homeland security efforts. The Federal Emergency Management Agency (FEMA) has the responsibility to implement a procedure to speed the flow of funds to state and local governments. The debate over how this is to be done (e.g., through the states or directly) is underway.

Congressional action on the new department is expected sometime this fall. The Office of Management and Budget (OMB) will be responsible for the transition effort to establish DHS. Complete implementation of DHS is expected to take several years; many experts predict it will take as long as 5 years or even longer for the agency to be fully operational.

President's Proposal

Under the President's proposal, DHS would be composed of 22 agencies. The new department would incorporate the Coast Guard, Customs Service, Federal Emergency Management Agency, Immigration and Naturalization Service, Secret Service, Transportation Security Administration and a host of smaller entities totaling more than 170,000 people.

Only one of the 22 agencies will be new, National Biological Weapons Defense Analysis Center.

More detailed information on the proposed 22 DHS agencies will be presented in the next installment.

The secretary of DHS will be nominated by President Bush (Security Advisor Tom Ridge and Deputy Secretary of State Richard Armitage are among the names being mentioned.)

Many of the proposed 170,000 DHS employees will remain in their current locations, (e.g., border patrol agents) while others may be moved to a yet undefined headquarters location (possibly outside Washington, DC).

Scope of the Series

This installment series will cover how to sell to the 22 homeland security agencies in the President's proposal. Congress may exclude some of the 22 agencies from the new department but they will remain part of this series because they perform homeland security functions and are interrelated with the agencies that will make up the new department. New agencies added to DHS by Congress will be added to the scope of the series.

The series will present information on each agency's current contracts, acquisition plans, key procurement decision-makers, and contract organizations.

Selling to Homeland Security Agencies

Selling to the new Homeland Security Agencies is sometimes presented in the press as something new and mystical. It is not. The 22 agencies have to continue to function where they are currently located organizationally, existing contracts will be renewed, and they will continue to do business as usual.

Two things, however, may change as a result of the agencies being part of DHS.

First, instead of increased contracting we may see some decrease in contract expenditures for 6 months to a year as the transition takes place and agencies are told to put new initiatives on hold. As an example, a freeze on IT expenditures was announced recently in order to avoid duplication of effort and to have new systems comply with a new DHS enterprise architecture. Of course, essential operating support contracts will continue to be funded and renewed and new contracts, which are compatible with the mission of DHS, will continue to be let.

Second, new initiatives which are critical to homeland security and/or politically visible (from both Congress's and the Administration's viewpoints) will be funded quickly. These types of new contracting will probably go to the large prime contractors already doing business with the 22 agencies either through ad-ons to existing contracts or GSA schedule task orders. Yes, the rich will get richer and vendors not currently doing business with the 22 agencies should concentrate on selling their products/ services to the primes.

DHS purchases are of four general types.

• Information Technology
• Security and Threat Detection Equipment and Services
• Management and Organization Services
• Contracts to Support Basic Program Operations

1. Information Technology

The National Strategy for Homeland Security focuses heavily on the use of information technology to improve the nation's ability to collect, analyze, and disseminate information on possible threats to homeland security. Some research groups are predicting that the 9/11 attacks will be the biggest catalyst for US technological innovation since the Soviets launched Sputnik in 1957.

Most new IT initiatives will be of the following types:

• Large-scale database projects, which integrate or relate homeland security data from a number of agencies.
  
  
• Data mining and analysis projects designed to detect trends (possible risk situations) form homeland security data.
  
  
• Case management projects, e.g., management of investigative report information.
  
  
• Systems for sharing homeland security data among federal, state, and local agencies.
  
  
• Purchase, installation, and maintenance of new and improved networks.
  
  
• Highly sensitive (probably secret) communication/networking projects.

2. Security and Threat Detection Equipment and Services

As indicated almost daily in the national press, billions will be spent on security and threat detection equipment and services by federal, state, and local agencies. Examples include:

• Baggage screening equipment.
  
  
• Perimeter security devices such as cameras and fencing for power plant and military installations.
  
  
• Sensors that monitor the quality of drinking water and air.
  
  
• Border protection devices like electronic sensors, metal detectors, biometric devices, etc.
  
  
• Personal identification devices like smart cards, finger print scanners, iris scanners, etc.
  
  
• A wide range of personal services like baggage screeners, border guards, air marshals, security guars, security center monitoring personnel, etc.
  
  
• Secure radio and video conferencing facilities for emergency communications among first responders.

Analysts are predicting that people screening will be a $8 billion dollar business in five years. Airports, stadiums, public venues, and government agencies will be installing machines that check identities, criminal history and scan luggage and clothing.

3. Management and Organization Services

A fully operational DHS will require the integration (virtual and physical) of over 170,000 personnel from 22 agencies. The integration effort is expected to take at least five years and will require a wide range of services from the private sector.

These services will include:

• Organization planning and development services.
  
  
• Human resources services including executive search, recruiting, personnel program development, and employee orientation services.
  
  
• Training program development and execution.
  
  
• Management consulting.
  
  
• Program administration and support services.
  
  
• Travel and conference management services.

4. Contracts to Support Basic Program Operations

Most of the active contracts in the 22 DHS agencies exist to support ongoing program operations and, as such, will remain active in FY 2002 and FY 2003 (multiyear contracts) or will be re-competed.

As an example, a currently active contract for custodial services for one of the 22 DHS agencies would not be directly related to new DHS initiatives. Yet this type of contract must remain in place and be re-competed at its expiration date in order for the agency to function.

Reality Check?

The flood of homeland security spending expected to boost the industry has yet to appear. "I think there were unrealistic expectations that the money being put forth would be a windfall for lots of companies and it's been slower to develop," said Jim Kane, head of marketing firm Federal Sources, Inc.

In fact, homeland security spending may slow down from its normal pace because of uncertainties caused by the reorganization of homeland security agencies. As an example, OMB has placed a temporary freeze on most large homeland security information technology procurements.

Initially the big winners in contracting at DHS will be the large prime contractors currently doing business with the DHS agencies. Using them is expedient (probably through add-ons to existing contracts, large, bundled public procurements, or GSA Schedule buys) and the end-users trust and rely on them.

Homeland Security Business Database

This free series will be supported (we hope) by the revenue from our new Homeland Security Business Database (HSBD), a subscription product to assist vendors in selling to DHS. This online database will be an evolving source for DHS business development information that will grow with the gradual implementation of DHS.

For each DHS agency the HSBD will tie together acquisition plans (new opportunities), existing contracts (continuing opportunities), contract end-users, and procurement decision-makers.

More on this in the weeks to come.