It's Time

It's Time for a New Model'

A Modern Government Integration Paradigm Unfolds

By Nick Wakeman

Procurement reform has wrought many changes on the government information technology landscape. Take the alphabet soup of new buying vehicles: IDIQs, BPAs and GWACs - also known as indefinite delivery, indefinite quantity contracts, blanket purchase agreements and governmentwide acquisition contracts. And then there are agencies such as the National Institutes of Health and the Department of Transportation, which have turned their procurement shops into rivals of the General Services Administration.

But there's a billion-dollar question looming in the wake of sweeping procurement reforms: What's the new model for government integration projects, and how much will it resemble the commercial one the government wants to emulate?

For Thomas Hewitt, chairman and chief executive of market research firm Federal Sources Inc. of McLean, Va., the old model based on charging according to time and materials just doesn't cut it.

"The old model is dead; it is time for a new model," Hewitt said.

He noted the best example of a new model that is working in the commercial sector can be found by looking at the rapidly growing systems integrator, Cambridge Technology Partners of Cambridge, Mass.

The company uses a fixed price-fixed time approach that relies on hammering out clear-cut requirements with the customer before work begins and sticks to those requirements as the project continues, said Masood Chaudhry, group business manager for Cambridge's Washington office.

That approach has proven successful. Revenues have soared from $179.7 million in 1995 to $406.7 million in 1997. Net income rose from $16.5 million in 1995 to $37.7 million in 1997.

"If you look at why projects fail, it is because of a lack of [customer] input, changing requirements and unclear requirements," Chaudhry said.

That Ol' Scope Creep
Requirements changing in midstream - called "scope creep" - has long been a problem in the federal government, said William Loomis, an analyst with Legg Mason Inc. of Baltimore.

The government's traditional way of procuring information technology was a major factor to changing requirements after a project started, said Renato "Renny" DiPentima, president of the federal sector for SRA International Inc., Fairfax, Va.

"Under the old model, the government put up a lot of money and worked four, five, six, seven years with some expected outcome," he said. "That just didn't work."

Federal IT managers wanted long contracts because the procurement process was so cumbersome, said DiPentima, who knows of what he speaks. Before joining SRA in 1995, he spent 30 years at the Social Security Administration. His last position was deputy commissioner of systems.

"Senior [government] managers didn't want to go through that long process, so you would try to do a single procurement that was comprehensive enough to do the whole project rather than break it into pieces," he said.

The result was projects with no clear end point, Loomis said. "You just had continuous work going on."

With typical procurements taking two years or more, the technology sought by the government would be out of date by the time a contract started, said Carl Salzano, director of contracts for Booz-Allen & Hamilton Inc., McLean, Va. "That is why you saw a lot of changes in the past," he said.

Recent reforms not only have shortened the time it takes to award a contract but they also encourage the government and contractors to work together earlier in the process, Salzano said.

"There is a real emphasis on improving and increasing the sharing of information between the government and the contractors," he said.

The new procurement rules, many of which just took effect in October 1997, also have sparked greater interest from the government in using performance-based contracts, Salzano said.

Shifting Risks
Better-defined requirements mean clearer statements of work and a greater willingness from the contractor to bid on a fixed-price contract, he said.

"The fixed-price contract shifts the risk to the contractor, but the contractor gets more opportunity to define the solution," he said.


DiPentima
Early communication is critical to a successful fixed-price contract, Cambridge's Chaudhry said.

"We use a workshop approach, where we take the IT folks and the business folks and put them in a room with [Cambridge] folks," Chaudhry said.

After about a week or two of meetings, the participants have hammered out the specific project requirements, he said.

Under this approach, Cambridge can offer its customers a precise solution for a set price and delivery time.

Cambridge also relies heavily on repeatable solutions so projects rarely last more than a year, he said.

It would be hard to find that scenario in the federal government, said Loomis, adding it wouldn't work for large enterprisewide projects.

"The assessment phase to define the scope of the project could take you a year," he said.

But size really doesn't matter, Chaudhry said. What is important is breaking the project down into smaller pieces so requirements can be better defined, he said.

DiPentima does not think Cambridge's model can be lifted from the commercial world and simply plunked down in the federal market. But, he said, variations of the model could work.

Large umbrella contracts under which smaller task orders are issued is a model that works, DiPentima said.

But there is one caveat - the agency must have an overall plan, he said.

"The concern is that you will have task orders coming out without a master plan," he said. "That is not good management."

The Next Step
Repeatable solutions and pure commercial, off-the-shelf products also can be difficult to deliver to the government, he said.

Even when the government requests commercial, off-the-shelf products, there also is often a request for customization, he said.

"So you end up with something that is not [commercial, off-the-shelf]," he said.

A better definition of requirements is vital for the government to take what should be the next step in an evolving procurement process: a shift to value-based contracts, said Steve Rohleder, managing partner of the federal business for Chicago-based Andersen Consulting.

"The concept is that with certain types of projects, there are inherent savings," he said. "If we believe we can save you money, we'll put a clause in the contract that puts part of our compensation at risk to achieve those savings."

Several state governments have used this type of contract, he said. Andersen has worked with California and the city of Detroit on contracts where at least some of Andersen's fee was based on collecting more taxes in those jurisdictions, he said.

Military logistics operations are one area ripe for this type of contracting in the federal market, Rohleder said.

"But you really must have the due diligence step in the front end to identify the benefits that are the basis for your compensation," he said.

"Conceptually, the government is very interested in doing this," Rohleder said. "The challenge is going to be taking the next step."

GSA will begin studying value-based contracting by the end of the summer, said Wanda Smith, director of the special projects office for GSA.


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