Business cases bolster contracts

Michael Sade

Henrik G. DeGyor

The Office of Management and Budget's requirement that agencies justify their IT investments in business cases has a positive side effect: better overall contracting.

Michael Sade, director of acquisition management and procurement executive for the Commerce Department, said the justifications will lay out the project's metrics and make clear the positions that could be opened up to public-private competition under OMB Circular A-76.

Sade, who gave a keynote at FOSE 2003 in Washington, offered some insight to upcoming procurement trends, including the status of performance-based contracting.

'The business case should be tied to the Government Performance and Results Act plan and lay out budget and schedule,' he said. 'All too often we hold contractors accountable and we don't hold ourselves accountable. That is one of the things that needs to be changed.'

Business cases and GPRA also will call attention to agencies' core missions and that will point to opportunities to do A-76 competitions, Sade said. 'The competitions should be based not just on cost, but on the core capabilities of the organization, its mission, its competency and, above all else, past performance. There are some pockets where we are better than industry in doing certain things or there is a void in industry, and you can't outsource those things.'

The improved use of business cases also is moving agencies toward more performance-based contracting, he said.

Agencies are making progress, but Sade questioned whether industry is ready to bid on those types of contracts and whether program managers are ready to oversee performance-based projects.

'There is a large part of industry built on a model that is not conducive to performance-based contracting,' he said. 'And contracting officers are not trained to write or manage these types of contracts.'

OMB's Business Reference Model, part of the Federal Enterprise Architecture, is a good starting point to do performance-based contracting, Sade said.

Sade also said agencies rely too much on the General Services Administration's Federal Supply Service schedules. He cited a recent analysis by Federal Sources Inc. of McLean, Va., that found about 50 percent of all agency buys of more than $5 million are via FSS contracts.

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