FAR Council cancels share-in-savings regulation

The Federal Acquisition Regulations Council today withdrew its proposed rule to incorporate share-in-savings contracting into acquisition regulations after the law allowing its use expired.

The E-Government Act of 2002 authorized agencies to award 10 share-in-savings contracts in fiscal 2004 and 2005, including five by the Defense Department, NASA and the Coast Guard. But the FAR rule implementing the provision never made it out of the Office of Management and Budget over the next three years.

The General Services Administration set up an office and received agency proposals to use the contracting method, where the contractor puts up some or all of the development funds and is paid from the savings or revenue that is generated.

Because OMB never approved the final regulations, share-in-savings died without any contracts ever getting off the ground.

'Without authorization, agencies can't do anything,' said a government official familiar with the contracting concept. 'Even if they did it, there is no authority for them to save the money. There is some question whether they could even pay the contractor or whether the money would have to go back to the Treasury.'

Rep. Tom Davis (R-Va.), chairman of the House Government Reform Committee and author of the E-Government Act and share-in-savings provision, tried to get the language renewed in the Defense authorization bill but was unsuccessful.

'The problem is not so much the merits of share-in-savings, but that Congressional Budget Office attached a large score to the authority,' said Drew Crockett, spokesman for the committee. 'That said, the committee has not given up and we're exploring other options to renew this authority. We remain convinced that share-in-savings can be a valuable tool in helping modernize our government in this era of tight budgets.'

GSA also had awarded a $3 billion blanket purchase agreement to six contractors to help push share-in-savings forward, but never awarded any work through it.

The official added that the regulations didn't get any traction because there is no incentive for the federal government to save money.

'If you look at performance appraisals among federal executives, we are told to spend at least 98 percent of [the] budget and if you don't, you get a bad appraisal,' the official said. 'If OMB really wanted to do this, then this would be done. There was good traction with [former Office of Federal Procurement Policy administrator David] Safavian, but he is no longer there.'


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