GSA puts up $3 billion to spur share-in-savings

The six share-in-savings contractors

GSA chose six vendors for share-in-savings blanket purchasing agreements that could be worth up to $500 million per company.

Accenture LLP

CGI-AMS of Fairfax, Va.

Computer Sciences Corp.

IBM Corp.

Science Applications International Corp. of San Diego

SRA International Inc. of Fairfax, Va.

Ken Buck says GSA is using the share-in-savings approach for the Federal Asset Sales e-government project.

Henrik G. de Gyor

The General Services Administration has done the easy part on share-in-savings contracts. Now it's up to agency procurement officials to do the real work.

GSA earlier this month signed blanket purchasing agreements with six vendors. Procurement officials next will need to figure out what projects best fit into the share-in-savings approach, determine the baseline costs and then agree to a performance-based contract.

But even with that task in front of them, officials expressed optimism that the BPAs are the road map they have been looking for.

'We have been in limbo for a long time because we keep hearing about share-in-savings, but the Federal Acquisition Regulations have been silent on it up to this point,' said Efrain Fernandez, chief procurement officer for the Bureau of Alcohol, Tobacco, Firearms and Explosives. 'Now we finally have the basis and parameters to do this type of contracting.'

A share-in-savings contractor provides some or all of the development funds for a project and receives payment from savings or revenue the project generates.

Six BPAs, each worth $500 million, which are open to 23 agencies for IT services and run through Sept. 30, 2005, streamline the contract process to save agencies time and standardize terms related to this type of procurement. They also identify vendors that have performed well on other share-in-savings or high-risk incentive contracts.

The contract award comes on the heels of a rule proposed by the Federal Acquisition Councils that would set guidelines for using this approach.

'The procedures in the BPA bring to life the FAR rule,' said Ken Buck, director of GSA's share-in-savings program office. 'It references the business case tool on our Web site, which gives a clear definition of how to capture baseline costs.'

Judy Davis, the Environmental Protection Agency's director of acquisition management, said establishing the baseline costs is the most important aspect of this contracting method, which the BPAs recognize.

The agreements call for program managers to get senior procurement officials to sign off on baseline-cost calculation.

'I don't think this is going to change the world in terms of everyone quickly converting to share-in-savings contracts because of the complexities involved,' Davis said. 'This still is an extraordinarily complex contracting approach.'

Davis said she recognizes the importance of the BPA as a step in the right direction.

Robert Lloyd, the State Department's policy director in the acquisition office, said the BPAs build momentum for the approach because 'agencies don't have to reinvent the wheel' when developing terms and conditions.

Lloyd, who helped write the documents, said having standard wording for termination procedures, liability issues and due diligence gives agencies a solid starting point.

Dave McClure, vice president for e-government at the Council for Excellence in Government, said having all the front-end work finished under the BPA is a major advantage when agencies decide to use share-in-savings contracts.

ATF's Fernandez, like many officials, is considering a number of projects for share-in-savings, though he declined to discuss them.

GSA's Buck said his agency is using the approach for the Federal Asset Sales e-government project, and the Office of Management and Budget is seriously considering this approach for the Lines of Business Consolidation projects.

Donna Morea, president of CGI-AMS of Fairfax, Va., said interest in this approach has been fairly steady among federal customers.

'The prospect of federal deficits has been the driving element of this,' Morea said. 'Money will be pretty tight in the federal government, and there is a real movement toward trying to reduce the risk of projects failing and increase the likelihood of getting true business results.'

CGI-AMS has done share-in-savings contracts with five states, including Virginia's E-Procurement system. CGI-AMS developed the system at no cost to the state and recoups its investment by taking 1 percent of gross system revenue. Last year, state and local government agencies spent about $3 billion on goods and services through the system.

'The FAR guidance puts the bones on share-in-savings and the BPA puts the meat on it,' Fernandez said. 'The BPA will speed things up, because there never has been a how-to guide for this before.'


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