OMB evaluates share-in-savings for consolidation projects

By Jason Miller

Connecting state and local government leaders

| May 25, 2004

OMB considers requiring agencies to use share-in-savings procurements for lines-of-business consolidation initiatives.

'We are working with each of these projects to see if share-in-savings is a viable model,' Perry said. 'We read the fact that we have had 20 agencies approach us as aggressive interest.'But Perry and Evans faced industry skepticism during a panel discussion.Bob Woods, president and founder of Topside Consulting Group LLC of Vienna, Va., said share-in-savings hasn't worked in the past because the government has trouble computing savings and baseline costs.Evans said her office realizes that it is hard to quantify costs and is working on it.'A lot of the data contractors want is what we are collecting now from agencies,' Evans said.Perry added industry input on what works and what doesn't is essential to make share-in-savings work.

PHILADELPHIA'For the lines-of-business consolidation initiatives, the Office of Management and Budget is seriously considering requiring agencies to use the share-in-savings procurement method.

Karen Evans, OMB administrator for IT and e-government, said yesterday her office will release a letter to industry by the end of May detailing how they will go forward with this next wave of e-government projects.

With share-in-savings contracts, a vendor pays for developing an IT system and is compensated from the savings it generates for the agency. For example, a contractor building a tax collection system would get a portion of the revenue it creates.

'These projects are good candidates because of what we are seeing of the answers from the request for information,' Evans said. 'Things that are new in approach lend themselves to the share-in-savings model.'

The General Services Administration, on behalf of OMB, released a RFI last month and has received more than 100 responses from industry on how the government can consolidate systems along three lines of business: financial management, human resources and grants management (Click for April 26 GCN story).

Along with the share-in-savings method, OMB also is considering performing these projects in modules, Evans said at the 24th annual Management of Change conference sponsored by the American Council for Technology.

'These projects are so huge that you don't want to put the big bang theory procurement out there,' she said. 'We want a structure where we will gain efficiencies a little at a time, and then reinvest savings back into the project.'

Evans added that modular contracting also reduces the risk to the government and industry because each phase of the project is finished before the next one is started.

'We don't normally use modular contracting, but we should,' she said. 'It also will help us demonstrate success. We cannot go a long time without showing success.'

Since January, when GSA opened a share-in-savings office to assist agencies in deciding whether certain projects are good candidates for this contracting method, about 20 agencies have contacted the office.

Stephen Perry, GSA administrator, said four of the projects with the greatest potential are:

The Office of Personnel Management's E-Payroll e-government project

GSA's Fed Asset Sales e-government project

Defense Department's financial system consolidation project

The Navy's product evaluation center.

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