First streamlining, now the results
- By Steve Kelman
- Oct 31, 1999
Ever since 1996, when some scrappy entrepreneurs at the National Institutes of Health and the Transportation Department invented the governmentwide acquisition contract, my hope was that GWACs would serve two important purposes.
One was to spread the use of multiple-award task order contracting authorized in the Federal Acquisition Streamlining Act to allow quick, commercial-style competition in government.
The second was to promote the spread of best practices, such as performance-based contracting, that promised better results from information technology investments. The argument for why GWACs might help achieve this goal was that GWAC offices would have a central vantage point from which to develop and promulgate lessons learned from recurring IT requirements that passed through the contracting vehicles.
Even the most casual observer would agree that GWACs have succeeded above all expectations on the first objective, although there are, as we all know, important issues about maintaining the "competition" part of "streamlined competition."
However, progress on the second has been minimal. NIH organized training on developing performance-based work statements early during its Chief Information Officers Solutions and Partners contract, which offers federal agencies a wide range of IT services. Leamon Lee, NIH's associate director for administration, has expressed interest in encouraging share-in-savings contracting under that contract. The General Services Administration's Federal Technology Service has done an excellent job in helping agencies develop statements of work and evaluation models for its virtual data center contract. But in general, GWACs haven't done much to make IT contracting more successful and not just more streamlined.
In this context, I was enthused to read a recent FCW opinion piece by Abby Pirnie and Warren H. Suss ["Three hot technologies for the millennium," Oct. 4] presenting the results of a GSA Federal Technology Service effort to identify "the most important new technologies for federal agencies." Its conclusions? For the government as a whole, three important new technologies are enterprise resource planning (ERP) systems, call center systems and services, and technology-enhanced learning and training. GSA is developing three "product line" groups to help agencies get the most value from these technologies.
The technologies are important new ways to enhance agency missions and save money. They also are technologies made to order for a slew of results-oriented contracting and incentive techniques. They are technologies commercial businesses invest in to get measurable results and a return on investment, which bodes well for the application of results-oriented techniques in a government context. And there is enough experience using these technologies that no agency needs to start from scratch in figuring out how to apply innovative techniques.
There are so many targets of opportunity among these technologies for results-oriented contracting that I feel like a kid in a candy shop just thinking about it. In this column, let me give just a few examples.Contracting for call center services is a low-hanging fruit for performance-based contracting.
Traditionally, many call center contracts told the vendor what to do—how many bodies to provide on the phones or what kinds of equipment to use—but didn't specify performance standards. This is exactly backwards. Specifying inputs raises vendor costs and is unnecessary if the agency specifies results instead. Results could include the average waiting time for a call to be answered and the frequency of abandoned calls, both of which can be measured automatically by off-the-shelf call-distribution equipment. A crucial set of results would include customer satisfaction with the service provided, as measured by surveys of a sample of callers.
Several years ago, as part of an Office of Federal Procurement Policy pilot, the Environmental Protection Agency converted a water-quality hot line to a performance-based contract, with superb results in terms of cost savings and improved quality. In addition, call center contracts are tailor-made for experiments with results-based incentives. Agencies should ask bidders to offer a base price to attain basic performance levels, combined with a schedule of rewards and penalties for deviations from that baseline—for example, extra payments for customer satisfaction levels above the minimum the contract specifies.
This would enable an agency to choose a vendor willing to forego some guaranteed payment in exchange for a bigger upside reward if they exceed contractual performance levels. Call center contracts also are a great fit for award-term contracting, where contracts can be extended based on outstanding performance.
To take one other example, ERP systems are obvious candidates for share-in-savings contracting. These systems provide productivity benefits with a good return on investment. The return is probably not high enough to allow full funding using share in savings. But one could imagine a hybrid contract with a fixed price and share-in-savings components. Given the benefits of faster implementation, these contracts also are perfect for incentives or penalties based on how quickly a vendor gets a system up and running. Furthermore, before competing contracts for ERP systems, agencies should provide vendors with due diligence opportunities to learn more about the as-is business processes at the agency before they bid.
All this provides a fantastic opportunity for GSA. Fortunately, they have a great team of leaders working on these three business lines, starting with Charlie Self, who, as assistant commissioner for IT solutions, will have overall responsibility, with some advice from Ken Buck in FTS commissioner Dennis Fischer's office, who's been the government's point person on share-in-savings. GSA should be developing templates, draft contract language and other forms of aid for agencies. Maybe some cash from an IT fund could be used to jump-start this.
If GSA does it right, this could be a turning point for making results-oriented contracting central to how the government does IT business.
--Kelman was the administrator of the Office of Federal Procurement Policy from 1993 to 1997. He is now Weatherhead Professor of Public Management at Harvard's Kennedy School of Government.