Online extra: Share-in savings works with the right projects
- By Gail Repsher Emery
- Feb 06, 2004
Share-in-savings contracts are appropriate for several types of IT work, industry and government officials said, including system or infrastructure consolidation and revenue collection.
Accenture Ltd. of Hamilton, Bermuda, has done share-in-savings projects at the state level in revenue collection and projects in system consolidation and revenue collection for federal agencies.
At the Defense Logistics Agency, Accenture was contracted to simplify and cut the costs of getting all non-armament materials out to the field, everything from paper and pencils to toilet paper and uniforms.
"We got paid for driving down cost of that infrastructure," said Steve Shane, a partner in Accenture's Federal Government Group.
At the Department of Education, Accenture cut the cost of systems used to deliver financial aid to thousands of schools. The department had used a wide area network to connect to the schools; Accenture moved communications to the Internet, cutting costs dramatically, Shane said.
American Management Systems Inc. of Fairfax, Va., has worked on numerous state share-in-savings projects. In Virginia, the company modernized the tax system, first improving collections and auditing systems and using the revenue and savings to fund new services, such as Internet tax filing.
Eventually, the savings funded the replacement of old back-end systems, said Donna Morea, executive vice president and general manager of AMS' public-sector practice.
For share in savings to work in the federal government, industry and government officials said:
- It must be used to fund projects that change the way government does business, not with marginal IT projects that were rejected in the appropriations process.
- The agency must identify a solid baseline cost from which to measure savings.
- The contractor must analyze the agency's baseline cost and performance data without criticism.
- The contractor must have time to conduct due diligence to understand if savings can be achieved, and the agency must have time to understand the potential solutions offered.
- Contracts must include specific, required results.
- Both the agency and contractor must have incentives to make the project work.
- The agency must commit to implement the contractor's recommendations for the life of the project, which could span 10 years.
- Agency procurement, budget and legal offices must support the effort.
Staff Writer Gail Repsher Emery can be reached at email@example.com.