Agencies told to pool their software buying power

Government spending on computer software is "uncoordinated…wasteful and ineffective," Office of Management and Budget Director Mitch Daniels said Monday, announcing a new governmentwide plan to buy software licenses for multiple agencies.

Called SmartBUY, the program will negotiate so-called enterprise licenses for common software used by more than 4 million computers across the government, Daniels wrote in a memorandum outlining the policy. He estimated that consolidating the government's buying would save more than $100 million a year if the best deals could be negotiated.

Agencies are now required to participate in the SmartBUY program, which is led by the General Services Administration. Daniels instructed agencies to provide information on existing license agreements, including current pricing and unique terms and conditions of contracts. GSA is collecting this information through a Web-based survey to use in an overall acquisition strategy, Daniels said.

Besides taking a software inventory, though, agencies are also expected to forecast their "future needs for relevant software," Daniels said. Doing that may be easier said than done, however, since the software buying habits of agencies have changed dramatically just in the past few years, said Larry Allen, executive director of the Coalition for Government Procurement in Washington.

Agencies must also now develop a software "migration strategy" and take "contractual actions as needed" to move quickly to a governmentwide licensing arrangement, under the terms of the new policy.

The SmartBUY team has been given significant decision-making powers over purchasing. Agencies must integrate "common desktop and server software licenses under the leadership of [the team]," Daniels' memorandum said. "This includes refraining, to the maximum extent feasible, from renewing or entering into new license agreements without prior consultation with, and consideration of the views of" the team, it continued.

OMB has made contract consolidation a priority. The Bush administration wants agencies to save money by purchasing technology items in bulk and by sharing systems and applications. The software licensing arrangement reflects that larger policy.

Allen said many agency procurement executives don't think the policy is all that necessary. "I think it's more politically driven than driven by a perceived need in the procurement community," he said.

Allen said that a Defense Department software licensing program has achieved "mixed results," and he questioned how a more massive plan to buy common items for an organization as wide and disparate as the federal government would fare much better.

At the same time, there is some evidence that big licensing regimes do work. In 2000, the Army reported that its licensing agreements saved the service and the Defense Department $677 million over two years.

Still, Allen said he doubted Daniels' claim that the government could save millions of dollars through common licensing. "I hesitate to think there's a one-size-fits-all solution for anything this government does," he said.

Software companies already offer deep discounts to government agencies, and on the whole, the government has often been able to secure significantly lower prices than the commercial sector by leveraging its massive buying power.

The government "can't get [software] for much cheaper" than it already is getting it, Allen said. With companies' profit margins already so slim, he doubted "that there's that much [more discount] to be squeezed…. I don't see [companies] getting fat, dumb and happy off selling software to the feds."

Allen predicted that the OMB policy could cause some companies to rethink their marketing strategies. If firms that bill themselves as "one-stop" providers of software, hardware and installation services now have to contend with software as a separate line item in agency budgets, that will throw some companies' sales approaches "out of kilter," he said.

The policy might also end up costing the government whatever savings it creates, Allen said. Savings from software licensing agreements might be eaten up paying another company to integrate separately purchased software into a full solution system, he predicted.

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