Bring back share-in-savings contracting

Nextgov/FCW reported last week that the Treasury Department and General Services Administration have announced a program that will offer financial rewards for employees who make suggestions about possible contract savings that are implemented and save the government money.

This effort recalls a more ambitious attempt, begun in the procurement reform effort of the 1990s and placed in statute in the E-government Act of 2002. It was designed to establish a so-called “share-in-savings” program in the government. The basic idea of share-in-savings is quite simple and straightforward: a contractor is paid, in part or in some instances completely, not through appropriated funds but in the form of a percentage of the cost savings their efforts generate. At the time, I praised this effort as the ultimate form of performance-based contracting and as a polar opposite to a contractor being paid for just showing up.

There are some existing share-in-savings programs in government. Energy Savings Performance Contracts, started also in the 1990s, pay contractors in the form of a share of the savings their energy efficiency efforts generate. There is a similar, more recent, program under Medicare for providers.

However, implementing this idea often turned out to be hard. 

First, the savings needed to be quite large to allow any significant amount of funds to be paid to the contactor in lieu of appropriated funds. Relatively few contracts generate savings of such magnitude. Second, it is not straightforward to construct a measure of the savings a contract realizes.

But the effort also sadly faced political headwinds at the time from an advocacy group called the Project on Government Oversight, which is actually still around today. They thundered against share-in-savings as a way to circumvent the appropriations process. In the years after passage of the E-government Act, interest in procurement reform wilted, and the major advocate of share-in-savings in Congress, northern Virginia Congressman Tom Davis, left his seat.

What I am hoping is that the winds may be more favorable now. Larry Allen, the associate administrator for GSA’s Office of Government-wide Policy, has been a big advocate of procurement innovation at GSA. Vice President J.D. Vance has often been interested in out-of-the box approaches that don’t follow traditional party lines. On the Democrat side, I could imagine that somebody such as Hakeem Jeffries, who is looking for ways for Democrats to advocate something other than the same old same old, or perhaps Chuck Schumer would support such a policy.

This is an opportunity to go beyond stale ideological homilies and do something that would help the public. I hope we can seize it.