GSA eyes share in savings for popular IT contracts
- By Diane Frank
- May 16, 1999
The General Services Administration is talking with NASA, the National Institutes of Health and the Transportation Department about incorporating incentive-based contracting options into several of the government's largest programs for information technology products and services.
GSA is working with numerous agencies across government to develop pilot projects that incorporate so-called share-in-savings contracting, which reduces the money that customers pay upfront to a contractor by basing payment on the actual savings or increased revenue that results from the use of the technology.
But GSA also wants to add share-in-savings options to such popular governmentwide contracts as NIH's Chief Information Officer Solutions and Partners (CIO-SP), Electronic Computer Store II and ImageWorld, as well as to NASA's Scientific and Engineering Workstation Procurement II and DOT's Information Technology Omnibus Procurement (ITOP) II. GSA also plans to use the contracting method on its own recently awarded $25 billion Millennia and Answer IT services contracts.
These contracts together account for billions of dollars' worth of government IT purchases.
"These are all contracts that a lot of people use and that could benefit from using [share in savings]," said Ken Buck, assistant to the commissioner of GSA's Federal Technology Service.
"I think it's a very good idea, and we could get a lot out of it," said Leamon Lee, associate director for administration at NIH. Sharing the cost of projects could bring in more agency customers for the contract and lead to better solutions for those agencies, he said.
In addition to its existing contracts, NIH also is developing a contract for communications products and services that the agency is hoping could be a share-in-savings pilot contract, Lee said.
DOT has not officially added share in savings to ITOP-II, but several customers already are using a form of share-in-savings contracting in the program, said Dell Berry, the ITOP project manager. "We very much support [the share-in-savings concept] and encourage people to use it for contracting," he said.
For example, the Federal Highway Administration recently awarded a task order on which the vendor will share in the cost and the profit of a project. And the Department of Health and Human Services is developing a task order that also could have vendors sharing the costs and profits of the project, he said.
While GSA wants to formally adopt the use of share in savings - in part to draw together all these types of contracts under a single structure approved by Congress and the Office of Management and Budget - DOT may incorporate share-in-savings-like elements into contract task orders where it makes sense.
"We feel that [share in savings] can be accommodated in the RFP without necessarily going into the contract," Berry said. The agency is considering a modified award-fee structure that would include higher payments for vendors if they meet or beat specified goals that would be included in each task order as each is released, he said.
The Army also is considering share in savings as part of its $1 billion Wholesale Logistics Modernization Program, although the concept is not built into the contract, said Kevin Carroll, program executive officer at the Standard Army Management Information Systems Office, Fort Belvoir, Va.
The request for proposals released last month contained a clause that will allow bidders to propose a share-in-savings-type solution, which the Army will consider using once the contract is awarded, he said.
The contract originally included wording that would have formally made the logistics modernization a share-in-savings-style contract. But like the rest of government, the Army had concerns about using an untried contracting method and about who would keep the money that was saved, Carroll said.
The use of any form of share in savings on the DOT and NIH contracts, however, could prove helpful to agencies looking for examples, especially because so many people pay attention to these large contracts, said Chip Mather, senior vice president of Acquisition Solutions Inc. "They'll be wonderful examples of what to do and how to do it," he said.
"It really opens up a lot of contracting vehicles for people out there," said Steve Kelman, former administrator of the Office of Federal Procurement Policy and now a professor at Harvard University. "ITOP and CIO-SP can be for the small projects, while [GSA's] Millennia can be used on the bigger deals."
Congress has charged GSA to lead the governmentwide initiative to use share-in-savings contracting. GSA wants to choose five to eight possible pilot contracts out of 35 proposals from different agencies, Buck said.
Those pilots will serve as examples for future contracts, and they should help to overcome concerns agencies have about the share-in-savings concept.
"We need to have examples of lessons learned," Mather said. Very few agencies, he said, have tried to address the funding, legal and cultural issues that will be changing under share in savings. The pilots will show other agencies that this type of contracting can be done, but "the key right now is to select the right pilots," Mather said.