GSA awards second SmartBuy deal

The General Services Administration last week signed a deal that it said could save the government $25 million on supply chain management software.

Manugistics Group Inc. of Rockville, Md., became the second vendor to join SmartBuy, the government's enterprise software licensing program.

The Manugistics contract came only a month after the signing of the first deal with ESRI of Redlands, Calif. GSA and the Office of Management and Budget have struggled to get the program off the ground in the year since OMB announced the initiative.

Administration officials had wanted multiple contracts in place by the past fall and had set a savings target of $100 million for the year.

For the second deal, Manugistics agreed to a three-tier discount for agencies buying from its Federal Supply Service schedule, said Neal Fox, assistant commissioner of FSS for commercial acquisition.

The first discount is 25 percent, the second an additional 15 percent and the third ranges from an additional 2 percent to 7 percent.

'The more the government buys, the more the price decreases,' Fox said.

Purchase of a single software module would qualify for the 25 percent discount. Purchase of a bundle of modules would rack up the additional 15 percent discount, for total savings of 40 percent, said Jeff Holmes, executive vice president and president of Manugistics' government aerospace and defense unit.

The third discount rewards agencies for cumulative government purchases. For example, an additional $20 million in purchases would qualify for another 3 percent discount, Holmes said. Existing federal customers that have passed the appropriate buying threshold will receive an added value'yet to be determined'that is equal to the 3 percent discount, he said.

'I'm projecting that 99 percent of our sales will be in the solution bundle area,' Holmes said. The company reports sales of about $50 million in software to the government since 2000. Its six federal customers include the Air Force, Marine Corps and Navy.

Manugistics benefits in two ways, Fox said. First, the discounts will entice agencies to buy more of the company's software. Second, Manugistics will work to change its business model through SmartBuy, he said.

Most of Manugistics' software is sold through other companies. Manugistics officials wanted the company to become a direct seller and saw that offering the steep discounts would help the company achieve that goal, Fox said.

Company officials approached FSS about negotiating a SmartBuy agreement because they saw the opportunity to change Manugistics' business model, Fox said. Some agencies have expressed interest in buying Manugistics' software through a SmartBuy agreement, but it's not known yet which agencies will participate, Fox said.

Under the agreement set with ESRI last month, six agencies will buy a guaranteed number of licenses over the next five years for the company's geographic information systems products. The agencies will save a total of $57 million over five years, GSA estimated.

Fox also said that as of April 1 management of SmartBuy will shift from GSA's Office of Governmentwide Policy to its Federal Technology Service.

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