The Growing Need for Shared Benefits Acquisition

Government executives are seeking innovative ways to work with contractors and looking for vendors willing to share in both the risks and the rewards of creative contracting arrangements. Given that existing agency budg ets are steadily decreasing and that there is virtually no new money programmed for investments, particularly in the technology area, government would like to work with industry to establish "zero-dollar" contracts in which the vendors agree to only make money on the cost savings. The challenges in such arrangements include finding vendors willing to enter into such agreements and working with the appropriate agency departments to put the contracts in place.

The private sector abounds with examples of contractual relationships where the vendor takes on the upfront capital investment costs and "leases" back the equipment or service provided. Several recent public sector examples also exist. The Navy-Marine Corps Intranet stands as an example of "buy-by-the-drink" or "on-demand" contracting. In the private sector some companies have also engaged in so-called "benefits-based" contracting where the provider gets paid out of the benefits generated. Here again, some public sector examples exist. The Virginia Department of Revenue engaged in such a contract for its upgraded tax revenue system.

What's missing for the public sector today, however, is a contractual context. GSA revolutionized the way agencies purchase many commodities, products, and services. No similar construct exists today for the average agency to begin thinking about these kinds of contracts. The process learning curve is so great as to virtually nullify the expected benefits in most cases. The public sector needs someone to step forward to provide a mechanism, context, or other framework to help get everyone's mind around these issues.