Share in savings struggles for second chance
- By Michael Hardy
- Feb 08, 2006
Rep. Tom Davis (R-Va.) will try to restore statutory authority for share-in-savings contracting, and some procurement analysts still hold out hope that the approach to acquisition will gain some federal traction.
The E-Government Act of 2002 authorized a limited test-run of the practice. But regulations for implementing the authority were slow to materialize, and the authority expired last year. No agencies attempted any pilot projects that would have demonstrated whether the concept could work for the government.
The Professional Services Council is one organization rooting for the return of share-in-savings.
"We know the business model can work," said Alan Chvotkin, senior vice president and counsel at PSC. It isn't appropriate in many cases, but in a few instances, it makes sense for both the government and the contractor, he said.
Under share-in-savings, contractors are paid a portion of the money their work saves for the customer. Although agencies still have to have some funding on hand upfront, their outlay can be much less than a traditional contract because the contractor isn't paid until savings are generated. Contractors may not be paid at all if the effort fails to save any money.
Agencies and contractors have been reluctant to embrace share-in-savings, but PSC President Stan Soloway said a second try might be more successful.
"We've done a lot of the spadework on regulations, so we won't be in a three-year holding pattern" while rules are written, he said. "Companies are three or four years more experienced."
Add to that the current environment of ever-tightening budgets, Soloway said, and share-in-savings should be more attractive.