ITAA urges government to move fast on share in savings

The Information Technology Association of America wants the General Services Administration to act swiftly to implement a rule enabling greater use of share-in-savings contracting.

GSA should move directly from its notice of advanced rulemaking to a final rule, ITAA Executive Director Harris Miller wrote to GSA last Friday. ITAA represents about 400 U.S.-based firms in the computer software and services industry.

"We urge swift issuance of a final rule without the further delay of issuing a proposed rule. Nearly one year has already passed since enactment of the E-Government Act, and we believe further delay will hamper the potential for agencies to benefit from this important new tool for achieving savings," Miller wrote.

The E-Government Act of 2002 took share-in-savings contracting out of the pilot stage in the federal government for information technology purchases. It charged the GSA with writing new procurement policy that would enable broader use of share-in-savings contracting and with advising agencies on use of the method.

With share-in-savings contracting, the contractor 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 be paid a portion of the revenue it creates. The method has been rarely used in the federal government.

GSA published its notice of advanced rulemaking Oct. 1 in the Federal Register. The notice outlined GSA's proposal for implementing share-in-savings contracting. It said contracts cannot be longer than five years without special justification, and that no contract can be longer than 10 years. It also said the contracts must be performance-based and used only for projects involving significant innovation or process improvement.

In his letter, Miller advised GSA that the contractor and its government client should work together to develop proposals for share-in-savings projects after discussing how the agency does business and how IT systems support agency missions.

Miller also said that because share-in-savings projects require industry to assume the risk of an upfront investment, companies typically will require a higher-than-usual rate of return if they are to participate in share-in-savings projects. The rate of return should be comparable to commercial business, not just government work, he said.

Share-in-savings contracts are especially suited for systems that are redundant, out of date or for which automation can improve productivity. Some of the most promising areas for these contracts are in call centers, supply chain management, medical records maintenance and administration of tax or revenue collection, Miller said.