The Department of Homeland Security pulled the plug on two major acquisition programs, and to several observers, it may be just the beginning.
DHS on Friday announced the cancellation of the Program Management, Administrative, Clerical, and Technical Services III (PACTS III) departmentwide contract vehicle solicitation.
At the same time, the agency decided not to go forward with its FirstSource III contract vehicle, which has a $10 billion ceiling. It is canceling awards under the IT value added resellers (ITVAR) functional category and not making new awards under its software category. DHS said it’s terminating both for convenience.
DHS has been pursuing FirstSource III since 2021 and had made initial awards in September to 30 small businesses in the ITVAR category.
“In alignment with recent executive orders, the department conducted a thorough analysis of active contract awards and solicitations to assess mission-criticality and continued needs. As a result of the analysis and findings, FirstSource III was determined to be a non-mission critical contract that would provide redundant offerings available through existing General Services Administration (GSA) and other governmentwide solutions,” DHS wrote in its announcement to industry on SAM.gov. “The department will continue to leverage existing GSA and governmentwide contract solutions, such as NASA SEWP, for future IT requirements.”
The decision comes after DHS Secretary Kristi Noem decided last month that her office would approve all new contracts and awards worth more than $100,000. This latest decision to terminate contracts continues DHS efforts to revamp its approach to acquisition.
DHS to lean harder on GSA’s OASIS+
For services initially slated for PACTS III, DHS said it will use “existing contract solutions such as GSA’s One Acquisition Solution for Integrated Services+ (OASIS+) and the GSA multiple award schedules.”
Brian Friel, co-founder of BD Squared, a federal contract bid and proposal consulting firm, said the consolidation of large, multiple-award contracts represents a growing trend across both civilian and Defense Department agencies.
“I expect both civilian and DoD buyers to move many more requirements to GSA vehicles including OASIS+. This will benefit companies on GSA vehicles and force companies that don’t have pre-tender presence on GSA vehicles to get on them,” Friel said in an email to Federal News Network. “Companies on contracts like Army RS3 and Navy SeaPort-NxG that aren’t on OASIS+ already should plan to get on when OASIS+ opens back up.”
Jacob Bertram, a principal consultant with Lohfeld Consulting and a former GSA and DoD contracting executive, said while this is the first big example of an agency pulling back their own contracts to meet recent executive order mandates, he expects more are on the horizon.
“Agencies may look at their in-house IDIQs and consider using best-in-class contracts like OASIS+, Alliant and SEWP instead, especially for commodity IT and administrative services. The rationale is avoiding duplication and saving taxpayer dollars by leveraging GSA’s platforms,” he said. “Vendors should prepare by diversifying their contract portfolio — don’t rely on any single agency-specific contract. Make sure you’re positioned on major GWACs or schedules so you can still compete if agencies consolidate their acquisitions. That said, this won’t happen overnight everywhere. Some agencies with very unique mission needs might hold onto their bespoke contracts a bit longer if GSA’s offerings don’t perfectly fit. But the overall direction is toward more centralized procurement, so contractors need to be ready for that shift.”
DHS kicked off the PACTS III effort in February 2024 and vendors expected imminent awards. The agency awarded the PACTS II contract, which had a $1.5 billion ceiling, in March 2017 to 34 service-disabled veteran-owned businesses across two functional categories: program management, operations and technical services; and administrative support services.
PACTS and PACTS II were popular contracts with DHS and its components, spending more than $500 million on the original contract and more than $1.1 billion on the second version, according to market research firms.
Similarly, FirstSource and FirstSource II were equally popular as small business vehicles. DHS awarded FirstSource II in 2012 and spent more than $6.3 billion over the last 13 years.
Small businesses lose out with cancellations
Small businesses were equally excited about both contracts and spent significant resources to bid on them.
“These IDIQs cost vendors 30 to 90 days of effort with combined internal and external costs between $30,000 and $50,000 for small businesses,” said Robert Turner, president of rTurner Consulting, which also helps companies bid on contracts. “We are recommending that clients immediately start submitting GSA schedule offers if they are not already on schedule, and prepare their teams and proposals for OASIS+ on-ramps and Phase II domains. Vendors should plan to bid as many domains as they have past performance coverage. Small businesses can cover OASIS+ past performance requirements with subcontractor support, so teaming is a critical function.”
Bertram said DHS’s decision especially hurts the small business marketplace.
“It’s a significant blow, as they allocated scarce resources expecting a chance at a multi-year DHS contract,” he said. “All that effort is essentially lost, and there’s no mechanism to reimburse proposal costs, which can be demoralizing and financially painful. This kind of abrupt cancelation undermines planning and may make contractors more cautious about major procurements in the future.”
GSA said it was preparing to open an on-ramp to OASIS+ by releasing a request for information on June 17. The update said the RFI “seeks feedback from the services provider community within industry to develop evaluation criteria (scoring cards) and refine technical capabilities for five new domains in Phase II of OASIS+, namely: Financial services, human capital, marketing and public relations, social services and business administration. Responses to the survey will inform GSA’s decision-making for developing the new domain offerings for the expanded scope of this unique contract program.”
Feedback on the RFI is due by July 8.
Since GSA made more than 3,600 awards to large and small businesses, agencies have spent about $4.1 million, but the number and amount of money going through the contract is expected to increase significantly in the coming years.
Friel said the good news for a lot of PACTS III bidders is DHS spent significant money on OASIS over the last five years and many of the companies likely were already on OASIS+. GSA’s OASIS dashboard says DHS spent $6.8 billion across 977 task orders since 2015.
“DHS was only planning to pick eight winners for each socioeconomic group in each scope area on PACTS III, so more of them will have access to opportunities on OASIS+ than would have if PACTS III had been awarded,” he said. “So it is probably better for industry overall and DHS itself that PACTS III was canceled.”
Turner added companies need to consider expanding what and where they can be found on GSA vehicles.
“Other agencies will follow what we’re seeing at DHS. Vendors can prepare by adding labor categories to their schedules, getting their schedule offer submitted if needed, building teams, correctly scoring a mock proposal for additional OASIS+ domains and building a past performance library so that they are prepared to submit task order proposals,” Turner said.
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