Share in savings not a cure-all
A newfangled procurement process called share in savings seems like a logical next step in the march to reform the sluggish and costly process for buying information technology in the federal government. But like every new idea, the revolutionary concept has its limits.
At the extreme, share in savings would give agencies the ability to purchase IT systems with no upfront money. Generally, agencies would contract with an IT vendor to hand over a portion of the increased revenue or savings that a new IT system would generate. Not only does the concept offer agencies an innovative funding mechanism, but it also dramatically increases incentives for vendor performance. For agencies operating under tight budgets, share-in-savings contracting makes IT systems affordable.
If done properly and within the law, share-in-savings contracting is a good example of applying to the public sector the best contracting methods the private sector has to offer.
However, like any scheme that claims to offer no risk, pitfalls abound.
Congress, whose key function is to control the government's purse strings, will not look kindly on agencies that attempt to use the share-in-savings concept simply to avoid the appropriations process. Similarly, agencies that attempt to quietly augment their budgets by the savings generated by a new IT system will find themselves the subject of intense scrutiny.
The General Services Administration and the Office of Management and Budget have tried to head off these problems by encouraging agencies to discuss any share-in-savings program with OMB and Congress.
GSA Administrator David Barram has said that share-in-savings contracting "won't cure cancer." True, but it shouldn't be treated like aspirin, either, and agencies should carefully choose the programs that are most appropriate for this irresistible procurement concept.