Treasury tests new contracting waters

The Treasury Department last week asked industry to help it develop guidance on how to award performance-based contracts that will enable vendors to offer more creative and innovative solutions that meet the department's information technology goals.

Treasury's request for information could push the department to the forefront of a movement that has been promoted for years as a necessary switch in the way the federal government purchases IT services. Unlike traditional contracts in which agencies specify requirements and maintain close oversight over vendors, Treasury would use performance-based service contracts that describe the end results the agency would like to have and leave it to the contractors to determine how to meet those goals.

The Office of Federal Procurement Policy (OFPP) believes performance-based contracting could cut contract prices by an average of 15 percent and the number of contract audits by more than 90 percent.

Ronne Rogin, a procurement analyst in Treasury's procurement office, acknowledged that the department has little collective experience to draw on to develop the strategy. "There's not a lot being done with performance-based IT service contracts, and so there's not a lot of expertise available," she said. "We know what we need to do, but no one knows how to do it correctly."

Rogin said a lot of information exists about performance-based contracting in general, but most of the data dates back several years and no current information relates to IT. She said IT procurements differ from other kinds of purchases because they involve factors such as support services and business process re-engineering, which are difficult to quantify.

"What yardsticks do you use?" she asked. "What kinds of rewards and penalties do you put into the contract to address good and bad contractor performance?"

Steven Kelman, former administrator of OFPP and now Weatherhead Professor of Public Management at Harvard University's Kennedy School of Government, cautioned that it would be difficult to find a set of metrics that would apply across all performance-based contracts because most would be specific only to one contract in particular.

Nevertheless, he saw Treasury's RFI as "very positive, in that it at least shows that they are taking the idea of performance-based contracting seriously," he said.

Bert Concklin, president of the Professional Services Council, said the major barrier to faster uptake of performance-based IT contracting is the current corps of federal contracting professionals, who are "deeply acculturated to the traditional, close oversight way of contracting."

He said these officials find it "profoundly difficult" to accept performance-based procurement. Consequently, the government has suffered "an enormous deficit" of people who can write performance-based statements of work.

Treasury has not scheduled a time line for issuing performance-based contract guidance to its bureaus. But Rogin said she has been encouraged by the initial response to the RFI. Just a week after its publication, 13 vendors had responded with offers of help or at least a desire to be involved.

"Perhaps the best way to go with this will be just to get all the vendors together and brainstorm," she said.

-- Robinson is a free-lance journalist based in Portland, Ore. He can be reached at hullite@mindspring.com.

About the Author

Brian Robinson is a freelance writer based in Portland, Ore.

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