Contract Types for Software Development

Having spent 33+ years in Federal Government service in both Contracting and Information Technology and now as an IT contractor, I’ve been pondering the current situation in contracting for IT services, especially software development. I’ve come to the conclusion that we’re in a real pickle!

Rule #1 of contract type selection is to place as much risk on the contractor as is practicable. We’ve been at the task of software development in Government-Contractor relationships for a few decades now (the Government used to use its own programmers, but that’s another blog post).

Conventional contracting wisdom is that if a process is well known and practitioners of the process are abundant then the amount of risk to either party is low and therefore firm, fixed price is the appropriate contract type. As a COTR and SOO/SOW writer I engaged more than one contracting officer in a discussion of the difficulties associated with this approach. Either the Government defaults to the straight-line method (“just bill the same amount every month”) or each system change is treated as a task order with its own price. The latter is much more in line with what FAR and DFARS envisions but it is also fraught with difficulty.

The other principle for when FFP is the appropriate contract type is that the requirements are well known. Requirements definition for software, when done correctly, is exacting. Ensuring that the software users’ needs are met requires details about data, processes, inputs, outputs, roles, permissions, formats, communications protocols and reporting. Even the best requirements writers inadvertently leave gaps in requirements. Once the requirements get to the developers there is often more than one way to produce the same outcome, each with a different cost. Most of […]

DOD EMALL as a Price Analysis and DLA Inventory Level Research Tool

DOD EMALL is a valuable tool used by prime contractors and responsible Government officials to perform market research, price analyses and researching inventory levels of these repair parts within DLA. Of the 1,600 parts on the follow-on contract which had sufficient DLA inventory to cover the annual requirement, over 50% of the DLA prices were lower for a potential savings to the government of $8M.

Congress Trying to Raise Small Business goals, but SB Success Rates are Down

The House version of the fiscal 2013 National Defense Authorization Act (H.R. 4310) recommends raising the Small business goals to 25%. Sen. Ben Cardin (D-Md.), along with Sen. Mary Landrieu (D-La.), chairwoman of the Small Business and Entrepreneurship Committee, introduced the Small Business Goaling Act (S. 3213) on May 22. It would raise the annual prime contracting goal by 2 percentage points, from 23 percent of contract dollars spent with small businesses to 25 percent. It also would raise agency subcontracting goals for small businesses from 35.9 percent to 40 percent.

The bill would also put the onus of succeeding at the contracting goals on the senior executives at an agency. Evaluators would have to consider in their performance how they did in meeting the contracting goals. The goals would become another factor in evaluations, along with productivity, efficiency and meeting affirmative action goals.

However, a survey conducted by American Express in 2011 found that it was increasingly hard for Small Business to get a government contract. The survey found that Small Business are having to spend an estimated 21% more in 2011 to compete for a government contract and succeeding  less.  As the average total investment made in seeking federal contracts has risen over the past year, bidding activity has declined by nearly half – both in prime and subcontracting activity. The average success rates for active small business contracts in both prime and subcontracting have declined as well – pointing to a more competitive and tighter environment.

Small business bring a number of advantages to the Government including lower overhead, more flexibility with ever changing requirements and increased innovation. As the saying goes, “A smaller ship is easier to turn.”  Also Small Business usually have fewer clients and therefore are more dedicated to […]

Why Strategic Sourcing Savings Plans Don’t Always Work Out

There has been an ongoing discussion in Linked-In about why some procurement saving initiatives or strategic sourcing plans fail to realize the savings they are projected to have.  The comments to the questions have revealed a few likely reasons so many projects fail.  I work primarily with government agency buying groups, but the following comments pertain to both public and private buyers.

Many buying groups operate in isolation and are not always aware of the enterprise-wide opportunities and/or mandated vendors.
Because these groups operate independently, they don’t understand the value of buying from the corporate contract. This may result in buys made to the contracted vendor, but outside the corporate contract, making effective tracking difficult.
Sometimes the contracted vendor may not have the preferred items and local vendors may provide better or additional services to the customer. If many people are buying outside the strategic supplier, there may be a problem with the supplier and the program should be looked at or possibly an additional supplier should be added to the authorized list.

Several things have to happen to counteract these “Buy Around” behaviors.

Senior stakeholders have to make sure the buying units understand the importance of the enterprise projects. Making sure that the information filters down from the top to all the buying units can be a challenge. Often a single memo from the top is not enough to get the message out.  Some type of an extended Corporate  Marketing Campaign  may be required.
They have to adequately market to the enterprise that these contracts exist, that they are mandated for use, what the benefits of using these contracts are, and how much money will be saved by the business/agency.
Headquarters also has to make sure that the enterprise-wide contracts […]

Online Shopping: Nine Benefits to the Government Buyer

As is the case with commercial shoppers, government buyers can also benefit in a number of ways from shopping online.

1. Convenience and time saving

From the Contracting Officer’s perspective – writing a general purpose contract one time and letting buyers make purchase orders against that contract saves a lot of time. A number of federal agencies have used this strategy to save both time and contracting dollars.
From the Buyers perspective – A buyer does not have to travel to a store site or adjust his schedule around the store’s hours. No longer does the buyer have to wait on hold for a customer service representative to answer the phone. Without leaving the office, government buyers can access thousands of websites, or their own agency specific website, to research products, and purchase items which have been approved and made available through agency wide contracts.

2. Broader selection – By writing broad based contracts for vendor catalogs, the contracting officer can make more items available to the buyers without knowing the exact requirements. This prevents the contracting officer from having to go back and amend contracts. This policy is especially good for consumable products like office supplies and building supplies where the requirements vary greatly from day to day.

3. Global choice – While the federal government is restricted to multiple procurement regulations, online shopping can make Buy American Act products more easily available overseas. It can also give government personnel access to locally approved vendors worldwide.

4. Better information – Access to a fuller range of information about product availability, descriptions, reviews and pricing.

5. Lower prices – By writing multiple broad based contracts, the government can take advantage of their buying power and negotiate better prices […]

Why Strategic Sourcing Works

I saw a discussion recently on LinkedIn discussing why companies are turning toward having a few preferred suppliers rather than selecting items on price alone. This strategy is known as Strategic Sourcing. The question spurred quite a discussion.  Here are some of  the key points.

Price alone has nothing to do with material standards, product quality, or timeliness of delivery. Most often a manufacturer can excel at two of three key things…price, quality or service. A savvy buyer develops relationships for their company that balance all three.
Consolidating vendors helps reduce costs, and increases price leverage opportunities. A reduced vendor base can also help focus the procurement department’s ability to focus on quality, service and pricing.
Once you have developed a relationship with a supplier and know that they are reliable, you are often able to negotiate better pricing than they would offer to others. Another reason is that they know that you can deliver, such as paying on time,  which further solidifies their willingness to do business with one company over another. It goes both ways.
The simple answer is “Value.” Preferred suppliers are chosen for many reasons including: pricing, quality and service.  Some companies sell strictly on pricing and the notion that “you get what you pay for” usually holds true. I suggest that you demonstrate value and you may get more results than strictly pricing.
With a few preferred suppliers you can develop a kind of partnership which means long-term benefits for both parts, a win-win situation. Along with your supplier you can sometimes even develop or change products by using your joint knowledge and other things that you are unable to affect if you are frequently changing suppliers.
The movement toward fewer preferred suppliers is a […]

Transforming Government Supply Chain Management

While re-arranging my office space, I came across a book on government supply chain management. In 2004, the Honorable Jacques S. Gansler, former Under Secretary of Defense for Acquisition, Technology and Logistics, and Robert E. Luby Jr., Vice President, Supply Chain Management at IBM published a book titled: Transforming Government Supply Chain Management. In the book, among other things, they document two government eCommerce initiatives; DLA’s Medical eCAT and the DOD EMALL.

They state in the book that the Medical eCAT program, which at that time allowed web-based ordering of 650,000 medical items, “saved the DOD customers over 25 % of the product and handling costs  involved in obtaining the items through other means like local purchase.”

In Chapter 15, they document the benefits of the DOD EMALL in the following way.

Customer Benefits:

Assurance of ordering against establish contractual vehicles and compliance with federal regulations
Desktop access to product information and availability
Single point of entry , search and ordering across all electronic sources
Convenient payment mechanisms
Increased buying office productivity
Security

They conclude that web based ordering from commercial distributors using standard eCommerce transactions allows customers to receive products in a fraction of the time at a fraction of the cost.

Though this book was published some years ago, the benefits and cost savings are still true today. In fact, both of these systems still exist and are saving the government money every day. It just goes to show that there are ways for the government to save money and every little bit helps.

Government IT: Looking forward to 2011

A number of predictions are being made about the direction of government IT for 2011. The Obama administration is taking a look at the effectiveness of the “grand design approach.” These costly, massive IT projects aim for sweeping reinvention of agency computer systems and business processes. Unfortunately, these large-scale projects are frequently plagued by cost overruns and schedule delays.

Government watchdogs say there are two critical elements that will make or break the effort to end the grand-design era: the ability to embrace agile development techniques and the creation of a well-trained acquisition and project management corps to oversee the new rapid delivery style.

Nearly 20 years ago, the General Services Administration advocated that government avoid giant, multiyear IT modernization projects and instead deliver new systems in small chunks and solicit user feedback to identify problems early and facilitate frequent course corrections. Few government agencies have taken that advice, but tighter IT budgets in the foreseeable future may cause them to re-think the idea.

In addition, OMB is calling for a number of IT Acquisition reforms including increased training for government IT program managers and increased oversight of IT products with better defined milestones and the use of agile development.

Over the last 10 years, Partnet has been the major developer of the Defense Logistics Agency’s DOD EMALL. Partnet has stressed the importance of agile development within the DOD EMALL program. The DOD EMALL PMO has an outstanding record of continual system improvement over the system life cycle.  Due to the use of agile development, projects have been able to stay within a tightly controlled budget and on schedule.  We hope the rest of the government will embrace the use of agile development as recommended by OMB.

Future-Proofing Enterprise IT with SOA

Continuing our discussion of Service Oriented Architecture, let’s look at some of the chief benefits.

SOA is designed to eliminate dependencies on a particular implementation technology. When services are accessed through a common interface, the underlying implementation can change without changing the systems that build upon them. The implementation of the service can change for many reasons, such as:

Replacement of aging hardware
Changes to operating systems or application servers driven by security policy or cost considerations
Selection of a more productive software development platform

One or more of these components can change without impacting any of the dependent processes if implemented within a proper architecture.

This is valuable when trying to leverage legacy systems for new applications. Perhaps there are many potential clients for the legacy system, but the respective clients might use different software development platforms. Hand-writing the software necessary to integrate with a system of moderate complexity can take several weeks.

Rather than asking each client to duplicate this effort, the legacy system can provide a web service adapter with a machine-readable description. Then, each client or business process can automatically integrate with the service—skipping the time-consuming, expensive, and error-prone process of manual integration.

Reliability is enhanced as well, since there is only one piece of software to be tested (the web service adaptation layer) rather than an integration layer within each client.

There are cases when an entirely new system is being designed, and an architect might have the power to mandate a particular implementation technology. Even then, accessing the constituent services through a standard interface is a wise choice for two reasons:

1)       It provides a measure of “future-proofing” to the system. As new implementation technologies emerge, they can be adopted piece-meal by different services and their dependent processes.

2)     […]

Department of Defense Gets B in Small Business Use

The Department of Defense gives itself a B in overall use of Small Business in FY2009. As a Small Business Prime Contractor for the DOD, Partnet is proud of our contributions to the DOD and feel that we give the America Taxpayer a good buy for their money. Small businesses frequently operate with lower overhead than large companies, giving a lower overall cost of development for a project. Small businesses are usually juggling fewer projects than their large business counterparts and can give full attention to a project and great customer service.

Shay Assad, director of defense procurement and acquisition policy, the final speaker during the two-day 2010 DLA Enterprise Supplier Conference and Exhibition, held in Columbus, Ohio, Aug 24-25, commented that the Defense Logistics Agency and its industrial partners must improve buying power and create more value for warfighters and taxpayers. He said, “What we’re looking to do is partner with industry to find ways to become more efficient.”

One of the ways that the DOD can achieve this goal is to increase the use of small businesses. The amount of business going to small businesses should also increase in the coming year, Assad said. The current Defense Department goal for small business partnerships is 23 percent, but currently stands at about 19 percent. Out of $400 billion spent by the department on supplies and services, about $12 billion is going toward small businesses.

DLA recently honored small businesses with a number of awards at their DLA Supplier’s Conference. Though we didn’t win an award this year, we had the honor of attending the awards ceremony and supporting our fellow small businesses.  We know we give great service and value to our customers and who knows […]

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