Integrators: Front-runners for GSA Program

Integrators: Front-runners for GSA Program

Rep. Tom Davis

By Nick Wakeman, Staff Writer

Companies with experience in performance-based projects will be front-runners to participate in a General Services Administration program allowing agencies to fund IT programs through contractor investments and savings generated by the new systems, government officials said.

"We want to sign ordering agreements with about five vendors, and then take requirements [for projects] from the agencies," said Ken Buck, assistant to the commissioner of GSA's Federal Technology Service.

The GSA's pilot program, which should be running by May, will begin with a solicitation next month that will outline criteria for selecting the contractors, agency officials said. This "share-in-savings" contracting approach could be used widely in about two years.

The share-in-savings concept, detailed at a Jan. 12 conference sponsored by GSA for government and industry officials, borrows heavily from states that have used a performance-based approach to finance systems through vendor investments and savings from implementing the systems.

California, Massachusetts and Virginia have fielded or are in the process of fielding large tax collection modernization efforts using this concept. The Internal Revenue Service plans to finance parts of its upgrade effort using this approach through its Prime Integration Services contract won by Computer Sciences Corp. in December.

Systems integrators with strong federal business that have been gaining experience with the share-in-savings concept on the state and local level include American Management Systems Inc., Andersen Consulting, CSC, Electronic Data Systems Corp., IBM Corp. and Unisys Corp.

GSA Commissioner David Barram and Rep. Tom Davis III, R-Va., backed the share-in-savings concept at the conference earlier this month. Davis is a co-chairman of the House Information Technology Working Group and is a member of the Committee on Government Reform and Oversight.

"Too many systems are being built that don't bring any benefit," said Davis, who hailed share-in-savings as "the next giant step in procurement reform."

The concept, which shifts the risk from the government to the contractor, works like a contingency contract in law. "If you win your case, you get paid; if you lose, you don't," said Davis, an attorney and a former general counsel for PRC Inc. of McLean, Va.

Davis, who plans to hold hearings on the concept this spring to build congressional support for the idea, said the plus for contractors is they potentially can make more money than through traditional payment methods.

One factor that GSA likely will consider in picking pilot participants will be the contractors' financial resources, because the contractor will have to pay a project's initial costs, Buck said. Other criteria will include past performance and technical capabilities, he said.

The wealth factor raised several questions at the conference about how small businesses, which might not have the same upfront monetary means, will participate when share-in-savings contracts become more widespread.

California had the same concern when it launched its Tax Franchise Board project in 1992, said Ralph Shoemaker, project director. That contract, which has been worth about $51 million so far, was awarded to AMS and Andersen Consulting.

"We coordinated with our primes to build consortiums with small companies," said Shoemaker.

"We don't want the upfront investment to push out small businesses," Barram said. "Joining with a cash-rich partner may be an answer for them."

While Barram said he has high hopes for the concept, share-in-savings contracts cannot be used for every IT project. "It's not going to cure cancer," he said.

If the share-in-savings concept is to survive beyond the pilot, certain budgetary issues will have to be addressed, said Steve Kelman, a professor at Harvard University's Kennedy School of Government and former administrator of the Office of Federal Procurement Policy at the Office of Management and Budget. Agencies also will have to work closely with the OMB and the congressional committees that handle their appropriations, he said.

GSA officials are so bullish about the prospects for the pilot that they put share-in-savings provisions in the recently awarded Applications Support for Widely Diverse End-user Requirements contract, known as Answer. The Millennium contract, which will be awarded later this year, also will have share-in-savings provisions. Both GSA contracts are multibillion-dollar vehicles offering broad ranges of IT services.

Buck said the agency wanted some contractual vehicles in place for agencies that want to begin using the share in savings concept after the pilot program.

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