Intermec competes for military RFID contracts

EVERETT, Wash., 2 August 2005. As the U.S. government moves to adopt passive RFID tags, Intermec Technologies Corp. is vying to become one of its primary hardware and services vendors.

Aug 2nd, 2005

EVERETT, Wash., 2 August 2005. As the U.S. government moves to adopt passive RFID tags, Intermec Technologies Corp. is vying to become one of its primary hardware and services vendors.

The company just won its third radio frequency identification (RFID) blanket purchasing agreement with the government, this time to provide passive RFID technical engineering services to the Department of Defense and Coast Guard. Intermec would now compete head-to-head with IBM, which it acquired RFID technology from in 1997, and other approved vendors for potentially lucrative contracts.

Already this year, Intermec has won purchasing agreements to supply RFID tags and readers to the government, one of the world's largest consumers of RFID technology.

About 20 companies have RFID-related blanket purchasing agreements with the government, which essentially means they are approved to bid on a government contract.
Intermec Director Larry Huseby said Intermec already has won DoD RFID contracts as a result of the two agreements the company won in May and March. He declined to say how much they were worth or to speculate on the value of potential RFID service contracts with the military. However, industry watchers estimate each agreement to be worth about $5 million.

"We're always competing on price," Huseby said of the government's RFID bidding processing, "but also on performance. We may be competing with other companies on specific [government] jobs, but without the award of the BPA we wouldn't even be competing."

Uncle Sam is becoming increasingly important to Intermec, which mostly makes passive RFID tags and equipment.

Unlike active RFID tags, passive RFIDs have no battery. Active tags have greater read-write range and data content bandwidth than passive tags. Yet passive tags far outlive active tags, since they are only powered up when an RFID reader is reading them.
The DoD typically uses active tags on the outside of containers that are being shipped overseas because the tags can be read from a distance and can hold the entire cargo manifesto.

But now the DoD is looking to increasingly employ passive tags, which tend to be applied at the pallet or box level. This year was the first the DoD made it compulsory for all its suppliers to use RFID tags where possible on many of the goods that they ship to US armed forces.

Huseby said the DoD was "probably the largest active RFID user in the world. Now it's just starting to get into passive RFID use and we expect the DoD to be one of the world leaders."

Indeed, the US military may help Intermec capture a sizable portion of the RFID market.
Huseby said it was impossible to know how that business would be distributed among approved vendors.

However, Intermec may have a strategic advantage in that it has been selling to the government for the past 15 years, including its barcoding and other identification technology. This history "certainly helps in winning" other government agreements, Huseby said. "Not only do we have a track record of success with the [government contracts'] office, it allows us to better understand what they're looking for in the bidding process."

What's more, he said the US government often is loyal to previous suppliers, provided those vendors keep up their end of the deal. "When they have a vendor that they have worked with successfully in the past they tend to go back to that vendor."
Also, having a successful track record with the DoD means a vendor stands to become a primary source for all its RFID needs.

RFID drives a small yet growing amount of business for Intermec, which founded in 1966. "The government is a strategically important customer," he said. " I believe that the commercial world will use the government as a bellwether going forward. When the government has success in technology, industry trails closely behind."

In addition to the three already granted, the government is expected to grant companies purchasing agreements in two additional RFID categories, including printers.

So far, the government has issued more agreements for technical engineering services than the other two RFID categories, Huseby said. This may be because services do not require stringent hardware testing or the same level of investment as RFID hardware.

"The other categories are competitive because you can't just pull an RFID reader out of your hat," he said.

The government RFID purchasing agreements with Intermec and others run through July 2007. For more information, see www.intermec.com.

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