Opportunity and Insight from T4NG
On July 28th, the U.S. Department of Veterans Affairs (“VA”) issued the long-awaited RFI for its Transformation Twenty-One Total Technology (“T4”) Next Generation (“NG”) contract to provide IT products and services. T4NG will replace the original T4 multiple award contract that expires in June 2016. With awards expected to be announced in late 2015 and an anticipated ceiling value of ~$12 billion, T4NG is one of the larger IDIQ contracts to be awarded in the near-future and will be of significant interest to contractors with a focus on the Federal Health IT (“HIT”) market.
The original iteration of T4 was designed to chart the VA’s long-term technological vision by transforming and updating IT functions across the agency. In the same way, T4NG charts the next five to ten years of the VA’s technology roadmap and exemplifies VA and HIT priorities. Though the technical functional area categories are the same for T4 and T4NG, the new contract has evolved to comport with the recent industry trends of addressing HIT requirements and cost reductions through agile development. The VA has also identified customizing generic IT solutions for the HIT space as a key priority by requiring contractors to provide comprehensive IT solutions to address the full range of requirements. Additionally, iterative management of contractors will be enhanced by the VA’s internal enterprise management framework that collects real-time performance data. Ultimately, the VA aims to create best-value solutions that will not have to be re-engineered in the future.
T4NG has the potential to influence the growth trajectory of awardees in a short period of time and catalyze M&A activity. As witnessed in the contract’s predecessor, the landscape of opportunities afforded to T4 contractors sparked massive growth for each of the set-aside awardees – per GovWin IQ, SDVOSB awardees on T4 experienced, on aggregate, 70+% compounded annual growth between FY2010 and FY2013(1). Additionally, major system integrators that are not awarded a position on T4NG may turn to acquisitions of awardees in order to avoid being shut out of this attractive market for the next few years. M&A activity on T4 included the purchase of Information Innovators, Inc(1) by DFW Capital Partners, ASM Research(2) by Accenture, and 7Delta(2) by ManTech International. In each case, the deal afforded the acquirer an immediate and established footprint with the priority VA health customer, and a new avenue to drive organic growth amidst challenged funding and spending patterns with other Federal customers. With similar expected ceiling value, duration, and capability requirements as T4, T4NG is poised to present similar growth potential and may act as an acquisition catalyst.
(1) FY2010 and FY2013 data includes revenues from non-T4 related contracts
(2) KippsDeSanto & Co. acted as the exclusive financial advisor to Information Innovators, Inc, ASM Research, and 7Delta