An equal slice of success
- By Greg Langlois
- May 14, 2001
A lot of people in government have high expectations for share-in-savings contracting — including President Bush, who called for increased use of it in his budget proposal for fiscal 2002.
How well it can work for information technology projects is a question on the minds of many in the IT arena. Based on the results of a closely watched IT share-in-savings debut at the Education Department's Office of Student Financial Assistance Programs, so far, so good.
OSFAP signed with Accenture in July 2000 to shut down its Central Data System (CDS), an information routing system that was used as part of the agency's Direct Loan Program, and shuffle its still-pertinent functions to other systems. Under the share-in-savings agreement, the agency paid Accenture nothing. Instead, the company will take home a percentage of the savings that OSFAP reaps during the next three years from not having to maintain CDS.
CDS shut down Nov. 18 without any disruptions in service, and its demise started generating savings immediately, according to OSFAP and Accenture officials. By January, about $3 million in savings had accrued. At this stage in the contract, the savings are split 50-50 between Accenture and its partners and OSFAP.
"I think everyone would agree that for the very first one, this would be termed a success by anyone's standard," said Ken Dineen, a partner in Accenture's Federal Client Group and an OSFAP modernization partner. "This will set the stage for doing more of these types of deals, especially for Student Financial Assistance."
At this point, most of the systems work is finished, Dineen said, and by summer, the only tasks left will be working with OSFAP to measure the savings each month. The contract projects total savings of $31.3 million, with Accenture's share capped at $14.4 million.
So far, the agency is on pace to beat savings estimates, said Candace Hardesty, OSFAP director of acquisitions. Hardware, software and networking support, and contract personnel no longer needed all factor into the savings, she said.
"It's truly awesome," Hardesty said of share-in-savings. "We didn't pay anything until we achieved our business results. This is the way the government will be doing business in the future."
With this one under its belt, Accenture has five more share-in-savings contracts in the works with Education, said Steve Shane, another partner in the OSFAP modernization effort.
But Shane cautions agencies not to be too enthusiastic about share-in-savings. "[Share-in-savings] carries more risk; therefore, [agencies] need to be careful," he said. "They require a lot of attention."
Much of the risk lies in agreeing on a savings starting point. In April 2000, more than three months before signing a contract, OSFAP and Accenture worked out a baseline cost for running CDS — the amount of money the agency spends each year for operating it. The agreed-upon amount of $20.3 million laid a framework from which to measure savings.
"The baseline is what's the whole determination of the success or failure of a share-in-savings approach," said Robert Guerra, president of Robert J. Guerra and Associates. "If you can't get the measurement right, then there's no basis for it."
OSFAP and Accenture also developed an "escalation process" on disputes so that "everyone understands how we're going to resolve issues," Hardesty said. They haven't had to use it yet, she said, but it's there if they need it.
In general, share-in- savings fosters — and requires — a more cooperative relationship between agencies and industry than traditional contracting does. "We have an "us' approach instead of a "we and them,' " Hardesty said.
That change in approach may take time to trickle into the contracting culture. The Clinger-Cohen Act of 1996 welcomed share-in-savings approaches to IT contracting, Guerra said, but shedding the decades-old Brooks Act and its laundry-list approach to buying IT still isn't easy.
"You don't turn around 35 years of one culture in a matter of five," he said. "I think [share-in-savings] is going to work. I just think it's going to take years to bring it into the culture of both industry and government."