Should You Pursue DHS PACTS III?

We’ve all seen the trend – more and more federal contracting work is being pushed to large contract vehicles. It’s understandable for a Govcon company to feel compelled to bid reflexively on as many big IDIQs and GWACs as possible. But is that always the best growth strategy? One upcoming agency-wide IDIQ brings that question into sharp relief – DHS PACTS III. Should you bid? Let’s look a little deeper before answering that question.

DHS IDIQ History

First some history. During the period of 2005-2015, DHS was extremely active in competing their own IDIQ contracts. DHS EAGLE and EAGLE II were in full operation and the spend was averaging over $1B per year during the peak of those contracts. For larger programmatic and acquisition support needs, DHS competed Technical Acquisition and Business Support Services (TABSS) in 2010 and awarded it in 2013. There were dozens of other DHS multi-award IDIQs as well, such as FirstSource, TechOps, and others. And of course, there was PACTS, which was awarded in 2009. What distinguished PACTS from the other DHS IDIQs was that it supported a very specific community of users that required smaller programmatic, administrative, clerical, and technical (engineering and design) services. Some in industry may not remember this, but DHS had a “hall of fame” dream team in place to compete this contract including Soraya Correa, Tom Essig, Darlene Bullock, Harrison Smith, and the late (and great) Kevin Boshears.

PACTS Historical Spend

The original PACTS was competed and awarded in just one year, which might be considered record time today. As DHS awarded task orders, it became evident that these were mostly smaller in size from the tens of thousands to the low millions in contract value. On the rare occasion, there would be a task order for over $10M+, but it was more of the exception rather than the rule.

The current Draft RFP for PACTS III bears this historical trend out. The Draft RFP indicates that 80% of the task orders for Functional Category 1 (FC1) were awarded with values between $50K and $5M. Functional Categories 2 and 3 (FC2 and FC3) were not too different with 76% and 72% of all task orders awarded in that dollar range, respectively. For those very small businesses, winning awards that generally range from $50K to $5M may be worthwhile, but that was cumulative spend over a five-year period.

Putting the dollar value of the task orders aside for a moment, the first two iterations of PACTS have followed a common trend among multi-award agency IDIQs in that roughly 80% of the spend was awarded to 20% of the awardees. For example, for PACTS I, the top two companies accounted for 60% of the spend, while the top 20% (six companies) accounted for 90% of the spend. Similarly for PACTS II, the top two companies accounted for 50% of the spend, while the top 20% (eight companies) accounted for 75% of the spend.

This is something very important to keep in mind as you consider bidding this contract – will the value of the contract merit the upfront BD costs and continued capture and proposal costs for task order competitions given the size of the task orders and the historical award ratios to the top 20-30% of the awardees?

What will it take to win PACTS III?

The winning companies on DHS PACTS III will be those offerors who bring the highest number “Experience” examples ranging from $50k to $5M in revenue. DHS used the historical spend and performance on PACTS I and II and translated that data to be the primary basis for points for PACTS III. It doesn’t mean you can’t win if you do not bring projects in those size ranges – it just means you won’t get as many points and therefore have lower odds of winning.

Using FC1 as an example, you get 74 points for each project that is between $50K – $1M, 82 points per project that is between $1-5M, and only 32 points for projects between $5-25M. For projects that range from $25-50M, offerors only get 6 points for each of those examples. While there are other criteria for which you can earn points, they pale in comparison to the points you can gain from the properly sized contract experience. It is clear that DHS is looking for the kinds of companies that would have been successful on PACTS I and II to now compete on PACTS III.

Winning teams will likely be made up of “smaller” companies with multiple small projects. This may include MPJV mentors that are still small themselves via their primary NAICS code. For SBJVs, we may see multiple “smaller” small businesses for a JV, each with their own collection of past performance contracts that range from $50K to $5M. This is not a contract for traditional midsized or large companies.

Summary for Pursuing DHS PACTS III…

If programmatic or administrative work is a strong capability for your company and you either do work at DHS now or DHS is a target customer, then PACTS III should be on your radar. When deciding whether to bid or no bid, you should keep these ideas in mind:

1. You will need to maximize the number of projects in the $50k – $5M range.

Run through the scoring worksheet to see how many applicable experience examples you have in that range. It is hard to gauge the number of Experience examples needed to win, so we advise continuing to look for the best JV partners to add to your Experience portfolio. Keep in mind that you can use prime or sub work that you performed, and projects need to have at least 6 months of performance and have occurred in the past two years since issuance of the Final RFP – so it’s a narrow window!

2. For the most part, the task orders will remain small with the majority under $5M in total task order value.

While the wins will give you past performance and DHS experience, they will not be game changers in terms of revenue.

3. More than 50% of the awardees will not likely get a meaningful return.

To maximize your return on PACTS III, you need to start thinking about your approach to winning task orders. This includes assessing your relationships with DHS customers and program teams and also your internal capacity to pursue multiple task order requests. As with all agency IDIQs, it is critical to analyze your ability to capture task orders instead of just how to win the master contract.

4. While DHS continues to refine the teaming requirements (for example, the Draft RFP prohibits using a subcontractor’s experience from a Small Business Teaming Arrangement while the Q&A allows it), the ideal MPJV arrangement would have a small ($15-30M/year) or midsized ($30-50M/year) mentor with a SB protégé that both bring a collection of smaller past performance.

A SBJV that is comprised of small businesses with a collection of smaller past performance would also be ideal. Bringing on an established mid-tier company or large firm on as a mentor in a MPJV will not necessarily give you the experience or the properly sized projects needed to win.

Final Thoughts

Over the course of 19 years in business, we’ve seen patterns of who wins, why they win, and who is best positioned to compete overall. Hopefully some of these points are helpful as you evaluate if you should pursue DHS PACTS III or not. After all, the next best thing to a win is an early no-bid!