Share-in-savings regulations will receive one more review

Office of Federal Procurement Policy officials admit they dropped the ball in getting share-in-savings off the ground and have fumbled again in their attempts to fix it.

Administration and agency officials had expected that the Federal Acquisition Regulations Council would issue the final regulations last week, but sources say the rule still is under review.

A Bush administration official, who re- quested anonymity, said OFPP administrator David Safavian is reviewing the final rule because of concerns that it seems to require awarding contracts based exclusively on cost and developing a business case for every proposed project, no matter the dollar value.

“These are not small issues,” the official said. “There is some consideration that a rewrite in parts may be needed.”

Safavian would not comment on when the final regulations would come out or what issues his office is looking into, but he said OFPP had failed to provide good guidance. “We dropped the ball in part because my predecessor was no fan of share-in-savings. This has taken far too long.”

Angela Styles preceded Safavian as head of OFPP and oversaw most of the development of the proposed rule before leaving the Office of Management and Budget in August 2003.

The E-Government Act of 2002 allows for 10 share-in-savings IT projects in 2004 and 2005, and it lets agencies keep the extra savings they realize, as long as they spend it on IT.

Under share-in-savings contracts, a vendor pays for developing an IT system and is compensated from the savings it generates for the agency.

‘Shady financing’

Styles had testified before the House Government Reform Committee that agency interest in share-in-savings was weak and the benefits were unclear. She also warned in an American Bar Association newsletter last year that this contracting method should be used judiciously because of concerns over “shady financing and accounting techniques” and because it moves federal IT buys away from “public and congressional scrutiny.”

Styles did not return calls asking for comment on Safavian’s charge.

The delay of the final regulations also compelled OMB to ask Congress to extend the pilot for three years. The program is scheduled to end Oct. 1, 2005.

“This will provide ample time to determine whether the agencies will increase their use of share-in-savings contracts to a significant extent,” said Clay Johnson, OMB’s deputy director for management, in a report to Sen. Susan Collins (R-Maine), chairwoman of the Homeland Security and Governmental Affairs Committee.

Under the provision signed into law, OMB was required to send a report to Congress last December on the use of share-in-savings contracts.

Rep. Tom Davis (R-Va.), author of the provision, tried to make the program permanent last year in his Acquisition System Improvement Act. The House did not vote on the legislation.

But Davis, chairman of the Government Reform Committee, is a big supporter of share-in-savings and said he will reintroduce ASIA with the share-in-savings provision.

The Government Accountability Office also likely will recommend an extension of the program, agency sources say.

But Bill Woods, GAO’s director for acquisition and sourcing management, said no decision has been made on an extension.

Under the E-Government Act, GAO is required to submit a report to Congress analyzing OMB’s findings on the progress of share-in-savings in agencies. Woods said GAO would send the report to Congress in June.

OMB said in the report to Collins that, for 2006, seven projects “will explore the possibility of using share-in-savings contracts.”

More contracts in works

Additionally, General Services Administration officials had said that more than 15 agencies, including the Defense Department, Environmental Protection Agency and OMB, are working with GSA’s Share-in-Savings program office on potential contracts.

But without the final regulations, agencies have shied away from moving out of the planning phase, GSA officials say.

The lack of progress also has frustrated vendors who won a spot on the General Services Administration’s $3 billion blanket purchase agreement for share-in-savings contracts.

“We haven’t had anyone who wanted much of a dialogue because there were so many unanswered questions,” said Ron Knecht, senior vice president at Science Applications International Corp. of San Diego, one of the six share-in-savings BPA holders. “From our side, the biggest unanswered question is, can a contractor do effective due diligence going into an agency?”

Knecht said he doesn’t think the final regulations will make much of a difference this year because agency budgets and plans are set. But he said he would expect agencies to come out with share-in-savings contracts next fiscal year.

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