Share-in-savings guidance is coming

Federal agencies and their contractors will soon get more guidance on how to do share-in-savings contracting, federal officials said today at a conference about the rarely used procurement method.

A proposed rule outlining procedures for share-in-savings contracting should be published in the Federal Register sometime in the next few weeks, said Ken Buck, director of the Share-in-Savings Program Office at the General Services Administration. GSA and the Council for Excellence in Government, a nonpartisan, nonprofit Washington group, hosted the conference in Washington.

With share-in-savings contracting, the contractor pays for system development upfront and gets compensated from the savings or revenue it generates for the agency. The contractor takes on greater-than-usual risk, and if the project is successful, gets greater-than-usual compensation.

Buck said the proposed rule includes:
  • a six-step procedure on how to do share-in-savings contracting

  • more definitions of contracting terms such as "benefit pool" ? the savings or revenue generated from share-in-savings arrangements

  • a clear definition of baseline costs, which must be determined before savings can be estimated

  • In addition, GSA and the council are planning a series of workshops between February and June that will bring together agency procurement, budget and program management staff with contractors and Capitol Hill staff to discuss best practices for share-in-savings, said David McClure, vice president of e-government at the council.

    Buck's office has also developed two tools that can be used to evaluate projects for use with share-in-savings contracting. One tool, for business case evaluation, is available for agencies at It will score projects on suitability and recommend improvements. The second tool, for proposal evaluation, will be available soon at the same Web site, Buck said. The tool will let contractors vet their ideas for projects that could be done with share-in-savings. GSA is also developing case studies that will guide contracting officers through the process of share-in-savings contracting.

    Although it is widely used in state government, federal agencies have shied away from share-in-savings contracting.

    Federal officials said the method has not been embraced by federal agencies because until recently, law did not allow agencies to keep any extra savings they realized. In addition, a sizeable number of Congress members see the method as a means of outsourcing jobs, and they also are opposed to contracting methods that allow for large industry profits, said Rep. Tom Davis, R-Va.

    Despite the resistance, share-in-savings has gotten a boost recently from key leaders at the Office of Management and Budget and the General Services Administration, and from legislation. The E-Government Act of 2002, sponsored by Davis, allows 10 share-in-savings projects for information technology each year, and it allows agencies to keep extra savings they realize, as long as that money is spent on information technology.

    "The administration is very keen on making this a success," said GSA Administrator Stephen Perry.

    "An era of limited budgets requires increasing focus on creative contracting methods," such as share-in-savings, Perry said. "It could enable us to do projects that would otherwise remain on the shelf."

    The share-in-savings authority contained in the E-Government Act expires in 2005. Davis said he is working to get the authority extended through new legislation.

    "What we really need are three or four more success stories. Then we can take them up to Capitol Hill and show how they work," said Davis, chairman of the House Government Reform Committee.

    Related story from Government Computer News: Share-in-savings is one approach to e-gov sustainability

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