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Federal acquisition officials are soliciting ideas for changing the Federal Acquisition Regulation to allow agencies to use share-in-savings contracts for information technology projects.

The 2002 E-Government Act included language authorizing federal agencies to acquire information technology through this type of contract. The premise behind share-in-savings is that contractors are paid - up to a fixed dollar amount - from the savings generated by the projects they're hired to complete. Under these contracts, an agency could avoid paying large, upfront costs for a product or service. House Government Reform Committee Chairman Tom Davis, R-Va., an advocate of the measure, said the provision would allow agencies to improve efficiency without big investments.

On Oct. 1, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council published a notice in the Federal Register soliciting comments for implementing a share-in-savings structure for IT on a governmentwide basis.

"The councils seek the public's comment on the challenges associated with [share-in-savings] contracts, such as the establishment of quantifiable baselines and a reasonable return on investment over the life-cycle of the investment, so that this tool can be applied effectively to improve mission performance," the notice said.

Specifically, the councils want feedback on preparing share-in-savings proposals, determining the ratio of savings to share with the contractor, how to set up a payment schedule, how to determine costs for canceling or terminating the contract, how contracts should be structured and potential share-in-savings projects.

The 1996 Clinger-Cohen Act authorizes the share-in-savings contracting approach on a pilot basis and to date share-in-savings contracts are not used extensively throughout the federal government. But some agencies, such as the Education Department's Office of Student Financial Assistance, have generated savings using the method. In March 2000, SFA formed a partnership with Accenture to modernize its outdated and duplicative loan servicing computer system. Under the contract, Accenture gets a decreasing percentage of the savings each year.

Written comments should cite ANPR FAR case 2003-008 and should be sent via e-mail to: ANPR.2003-008@gsa.gov or by regular mail to:

General Services Administration
FAR Secretariat (MVA)
ATTN: Laurie Duarte
1800 F Street, N.W., Room 4035
Washington, D.C. 20405

COMMENTS

• This probably is one of the most dangerous ideas to date. 1. Agencies do not know how to estimate the savings properly and probably will hire a contractor to prepare the estimate! 2. Agencies that think they know the savings probably are wrong because they over estimate the savings as a way to increase their own rewards for good actions and in the military they get it in their OPR, which is totally overstated. If we saved everything listed in OPRs the government would be making money. 3. The contractors will reduce the quality of the work to reach extensive savings and increase their revenue stream. 4. This favors large contractors and eliminates small contractors because small contractors typically have a cash flow problem and cannot wait until the implementation to determine savings and get paid! This factor alone should cause the sudden infant death of the proposal. Davis needs to know what he is doing! 5. There is no reasonable return on projects - these are government projects that in many cases are not worth doing - that is why they are government! GovExec.com reader Posted October 6, 2003 6:47 AM