Share-in-savings is one approach to e-gov sustainability

With many of the 25 Quicksilver e-government initiatives in their final phases, the Office of Management and Budget wants agencies to consider using a share-in-savings model to fund their operation and maintenance.

Karen Evans, OMB’s administrator for e-government and IT, today said share-in-savings is one approach to making sure the projects are self-sustaining.

“This model has a lot of potential to realize huge savings,” Evans said at a seminar sponsored by the Council for Excellence in Government and the General Services Administration. “But it requires the government to open up its coat and show what is underneath.”

With share-in-savings contracts, a vendor pays for developing an IT system and is compensated from the savings it generates for the agency. For example, a contractor building a tax collection system would get a portion of the revenue it creates.

Evans said OMB’s consolidation projects, which include human resources and financial management systems, are ripe for this type of contracting.

“We want each project to look at share-in-savings,” Evans said. “We have not specifically said this one or that one should use it. We are working through that now.”

Ken Buck, director of GSA’s Share-in-Savings program office, said programs that consolidate systems, conduct recovery audits or enhance revenue are the best for this type of performance-based contracting.

He said current e-government projects such as Grants.gov, E-Payroll and E-Clearance are suitable for share-in-savings contracting.

The Federal Asset Sales project, which is managed by GSA, is using a type of share-in-savings contracting. Buck said the contractor, which will be selected soon, will receive payment for its work by taking a share of the fees charged to customers.

“Many e-government projects have had funding issues, but with share-in-savings contracting, this is not a problem,” he said. “But it is important that the projects meet certain requirements such as consolidating for agency efficiency and that there is little or no up-front cost for the agency.”

GSA has developed a set of online tools to help agencies decide whether a project is suitable for share-in-savings.

GSA made the business case decision tool, developed by Beacon Associates Inc. of Bel Air, Md., available in September. The simulation software lets agencies develop a business case and define the cost baseline and savings potential. The tool then rates the potential success of the project under the share-in-savings model.

Buck said 25 agencies have used the tool since September.

The proposal evaluation tool, which will be available later this month, ranks projects based on highest net present-value return, how long until savings are realized and how much money the government is required to offer up front.

“This is a change in direction in how procurement is done in the federal government,” said GSA administrator Stephen Perry. “It requires new learning and a new behavior.”

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