Federal Contract Law: Try these 7 steps to grief-free outsourcing

Joseph J. Petrillo

With competitive sourcing now a major goal of the administration, it's more important than ever that agencies get it right.

The General Accounting Office has weighed in with a report, Information Technology: Leading Commercial Practices for Outsourcing of Services.

The report traverses seven stages of outsourcing and identifies three overarching lessons. The stages start with determining a sourcing strategy. In the federal environment, this is dictated by OMB Circular A-76. My last column discussed the report of the Commercial Activities Panel on how to improve this strategy.

The next step is to define an operational model, basically the way the outsourced activity will fit into the agency. GAO said executive leadership is crucial at this and several other stages.

The third step is to develop the contract using the operational model. The report expresses a preference for performance-based contracting'in other words, specifying the result to be achieved rather than the means to achieve it. Specifications, however, are directed not only at the technical aspects of performance. GAO thinks they should also reflect, in some way, end-user satisfaction.

Interestingly, commercial organizations need to budget up to 12 months to negotiate a contract, GAO noted. Federal procurement isn't necessarily slower than its private-sector counterpart.

The fourth step, selecting a provider, will look familiar to a federal acquisition official. Starting with market research, the best commercial organizations will define a process to select a provider from among competing vendors, establish evaluation criteria at the outset of the competition, issue a request for proposals, hold negotiations and conduct due diligence on the winner, checking its past performance and responsibility.

The fifth step, transition, requires a shift of in-house focus from allocating resources to managing for results. It also tests management skill at handling touchy personnel problems.

The sixth and seventh steps concern contract administration: managing the provider to ensure that the client receives the services for which it contracted. Success requires an agency to have a sufficiently robust process in place, both in the contract clauses and organizationally, to monitor and manage the provider.

The three overarching factors for success are really different parts of the same thing: communications. The first factor, executive leadership, requires that communications extend from top-level executives down into the ranks. The second factor, partner alignment, requires the agency and provider to achieve a common set of strategic goals. The final factor, relationship management, stresses communicating on a daily and providing necessary flexibility.

The GAO report gives valuable insight into commercial best practices for acquiring IT services, a prime area for government outsourcing as well. It may be no surprise that well-designed and properly managed government contracts already resemble successful private-sector initiatives.

Joseph J. Petrillo is an attorney with the Washington law firm of Petrillo & Powell. E-mail him at [email protected].

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