Learn to share

Almost anyone can talk the talk, but the General Services Administration

and other agencies are walking the walk with share-in-savings contracting

pilots.

Under a share-in-savings contract, the vendor agrees to bear the upfront

project costs until the client agency begins to achieve the specified results

from the work. Frequently, payment to the vendor is based on a percentage

of the savings and sometimes it is capped at a specific dollar amount.

The Education Department's Office of Student Financial Assistance, which

administers more than $42 billion in student aid annually, is pioneering

the use of this contracting vehicle with its modernization project. The

modernization contract awarded to Andersen Consulting includes a clause

tying the firm's compensation to results achieved from the new information

technology system development and re-engineered business processes that

are expected to improve services and streamline operations.

Share-in-savings even allows government executives to tap new ideas

with integrated teams of contractors and agency executives who understand

all the components involved in achieving a goal, injecting a greater sense

of accountability for all involved. As a result, share-in-savings contracts

are likely to result in the development of better solutions to advance agency

missions and improve citizen services.

The National Finance Center, which issues pay for federal workers at

nearly 60 agencies and plans to modernize its payroll system, is seeking

industry input about requiring a vendor to finance the front end of the

project, paying the vendor on the back end. Payment would be based on the

number of federal employees the system successfully pays.

Historically, procurement processes forced contractors and government

executives, much like factory managers, to focus on excellent workmanship

for a specific step in a process without considering the big picture. Share-in-savings

allows the factory owner, or the government, to tap the knowledge, experience

and creativity of those who understand the goal and understand best how

to achieve it.

Although share-in-savings represents a giant step toward making federal

government more efficient, states continue to lead. Texas, Washington and

Wyoming recently requested proposals for government portals that would require

the winning vendor to bear the cost of construction with payment received

on the back end on a per-transaction basis.

Such arrangements work because they focus on outcomes rather than prescribed

processes. They align a vendor's financial incentives with government goals.

More important, value-based arrangements result in changes that translate

into big gains.

The government must push for more innovative value propositions in contracting.

Value-based procurement represents a sound strategy when the contract structure

is founded on shared risks and rewards, and clear objectives.

—Rohleder is managing partner for the USA government services group at Andersen

Consulting.

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