Share-in-savings guidance on the way

Ken Buck, director of the Share-in-Savings Program Office at the General Services Administration

GCN file

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

A proposed rule outlining procedures for share-in-savings contracting should be published in the Federal Register 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.

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

Buck said the proposed rule includes:
  • A six-step procedure for 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.

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

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

    Although it is widely used in state government, federal agencies have shied away from share-in-savings contracting. Until recently, they could not keep any extra savings they realized. In addition, many members of Congress see the method as a means of outsourcing jobs, and they also are opposed to contracting methods that allow large industry profits, said Rep. Tom Davis (R-Va.).

    Despite the resistance, share-in-savings got a boost recently from key leaders at the Office of Management and Budget and GSA, and from legislation. The E-Government Act of 2002, sponsored by Davis, allows 10 share-in-savings IT projects each year, and it lets agencies keep extra savings they realize, as long as that money is spent on IT.

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

    '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 in the E-Government Act expires in 2005, however. 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.


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