Executive Suite: Market forces should apply
- By Mark Forman
- Oct 07, 2004
Competition is strong in today's IT marketplace, and the federal government should take maximum advantage of it.
The government has long had a process-driven approach to competition in IT purchasing, based on the notion that government holds unique buying power. But the government's share of IT software and hardware demand is now small, even though it is the world's largest IT customer.
During the 1990s, the Federal Acquisition Streamlining and Clinger-Cohen acts adopted commercial buying practices that exercised forces at work in the commercial marketplace. But now, there is a move toward returning government to its old purchasing practices.
Competition creates choice. Software and hardware are becoming more ubiquitous as technology improves; the Internet offers more creative buying options; the failure of dot.com businesses drives down demand; and customers demand lower prices. Plus, global competition and automation are driving down costs.
IT buyers now have choices such as whether to develop their own software or reuse standardized components, and to use free open-source software or buy proprietary products. Procurement officials can view IT as a service or buy the software and equipment to run it, and they can staff their projects by hiring new employees or hiring a contractor.
In short, IT buyers have much more complicated decisions today than 10 years ago. But critics and reformers are missing the real issue: Agencies may be failing to take advantage of to-day's hypercompetitive IT marketplace to get the best deal for taxpayers and the best technology for government workers.
To help government get the best from the commercial market, the acquisition streamlining law and Clinger-Cohen moved the focus from who writes the best proposal to who delivers the best results. Many of the reform proposals risk re-inserting rules limiting government's ability to get the best value because the reforms focus more on process and vendor promises than on results.
For example, the largest government IT spending category is services and consultants. Some procurement officials base their decisions on who bid the lowest labor-hour cost, rather than who has the skills or technical approach to achieve the best result at lowest total cost. But competing on hourly labor rates is not the best way to match agencies looking for solutions with vendors that can provide them. The real choice comes down to technical approach.
IT companies now compete on four fronts: cost reduction, security, reliability and time to value. Companies create detailed descriptions of their offerings, often comparing their value to that of other vendors and highlighting their competitive differences. These are the competitive differences that government must tap into.
So what should you be doing? Agencies and industry should develop common means of communicating about options, and the procurement process should be updated to reflect alternative sourcing approaches.
Government needs to focus on modern ways of buying IT, and it needs a procurement system that focuses on results. Any new reforms must take advantage of IT being viewed as a commodity and commonly being sold as a service.
Finally, we need performance-based services contracts that reflect IT quality-of-service metrics from agencies' enterprise architecture work, and procurement shops must have better insight on effective service-level agreements with IT vendors. Mark Forman, former Office of Management and Budget administrator for e-government and IT, is executive vice president at Cassatt Corp. of Menlo Park, Calif.