To combat its budget woes, the U.K. has increased communications between industry and government. Should we follow its example?
Last year, chief executives from some of the United Kingdom government’s largest contractors were summoned to the country's Cabinet Office to talk about how to cut the costs of their services. Amid a deep financial crisis, the U.K.’s Conservative-led coalition government is looking here, there and everywhere to substantially reduce public spending and slash the country’s massive budget deficit.
The government has imposed a freeze on IT spending and aims to decrease the use of consultants. In addition, government’s procurement office instructed buyers to purchase hardware for central government IT operations directly from manufacturers, not from IT resellers, as part of a planned $4.5 billion cut in spending on office equipment.
“The days of the mega IT contracts are over,” Frances Maude, Cabinet Office minister and paymaster general, told contractors in December. "We will need you to rethink the way you approach projects, making them smaller, off the shelf and open source where possible."
As the leader of the government’s efficiency drive, Maude also has formalized an effort to work with contractors to reduce costs. “We will say we want to have something off your margins," he said. "We will expect you to tell us how we can pay you less, sometimes for doing less." The Cabinet Office said it was looking for about $1.2 billion in overall savings from the program.
“Renegotiating contracts in this way had never been done by government before, but the current financial situation meant there was simply no time to waste,” the Cabinet Office said in a statement.
The program represents a new partnership between the government and its suppliers, the office said.
About 19 government contractors have signed agreements with the government, and 34 others were still working out agreements on savings just before Christmas. It appears that, so far, the companies that signed agreements have emerged from the process largely unscathed, the Financial Times reported. Several companies said the savings they planned to deliver were not material to financial expectations.
Some companies have achieved projected savings by descoping specifications on existing contracts — for instance, relaxing a requirement that 95 percent of calls to a call center be answered within 10 seconds.
Like the governments of the United Kingdom and other Western nations, the U.S. government is also experiencing a major budget crisis and wants to make cuts. Could the U.K. government’s approach of cutting costs by collaborating with its contractors work in the United States? Yes — but with a caveat. The U.S. government and its contractors first need to cultivate the collaborative culture necessary to underpin a cost-cutting partnership similar to that in the United Kingdom.
“I think the biggest barrier here is that we just don’t have the environment that effectively fosters partnerships and empowers people to have that kind of collaborative arrangement,” said Stan Soloway, president of the Professional Services Council, a trade association that represents the U.S. government professional and technical services industry. “That would take some leadership direction.”
Soloway, a Washington Technology columnist, described the government/contractor partnership in the United Kingdom as “an effort to figure out what they could do collectively to reduce costs in a contract but maintain as much capability as possible. That could involve everything from unnecessary contract requirements that lead to overstaffing to unnecessarily bureaucratic process requirements.”
In the United Kingdom, Soloway said, “there is a general recognition that [the financial crisis] is happening. Nobody wants it to happen. Nobody likes it, and as good citizens and as partners of the government, we know we’re going to feel some of the pain. And it is best addressed together. It doesn’t mean that everything going on in the U.K. is hunky-dory, but as a concept, [the new approach] is an important one.”
“I think what it takes here is the recognition that the strategy can work and [that it takes] leadership, direction and encouragement to empower people to do it,” he said.
Soloway said Dan Gordon, administrator of the U.S. Office of Federal Procurement Policy, has launched a campaign to improve the government’s relationship with industry, including overcoming the reluctance to engage in discussions with contractors.
“That’s a hopeful sign,” he said. “Dan Gordon is clearly focusing on government/industry communications and revitalizing those communications as an initiative. So I think there is leadership recognition that we’ve gotten way too far away from a communications balance" in government/contractor relations.
At a panel discussion in Washington in December, Steven Schooner, co-director of the Government Procurement Law Program at George Washington University and former associate administrator of procurement law and legislation at OFPP, agreed that successful services contracts demand robust communications between government and its contractors. “You wouldn’t hire a nanny to take care of your kids and never speak to him or her again,” he said.
A culture that promotes more open dialogue between the government and contractors would help pave the way toward a collaborative effort to find cost savings.
“I don’t think there is anybody on the government or industry side who doesn’t feel that there are significant efficiencies that could be had if we had open dialogue at the individual requirement or program level,” Soloway said.
In the United Kingdom, while it appears that cost cuts around the edges can be negotiated fairly easily, more substantial changes in contracts would be more difficult, according to U.K. contract experts. “The freedom to change contracts is constrained by law,” a London-based attorney told the Financial Times.
Soloway said there aren’t any major regulatory or legal impediments to making collaborative changes in U.S. contracts to yield cost-saving efficiencies.
“I don’t think there is anything that hinders it,” he said. “If you’re looking at contract modifications, there are technical things that you have to do, but there is nothing in the [Federal Acquisition Regulation] that prohibits it. In fact, there are probably a lot of things that encourage you to collaborate to figure the most efficient way to get something done.”