Table Of Content

ParticipTaUtTorOyR CIoAnLtracting PARTICIPATORY CONTRACTING William N. Washington Participatory contracting represents a philosophy in which the government attempts to involve outside entities in a form of partnership or coordinated effort, with the goal either of reducing costs or improving performance; private industry seeks to increase profits and have greater control over the effort. This win-win scenario can thus appeal to all participants, and makes administration of the contract more of a partnership effort, for its success benefits all the participants. O ver the past several years, the fed- recent Department of Defense (DoD) eral contracting world has seen guidance to promote commercialization of several changes, as the government military depots (“Maintenance of Military has attempted to modernize practices and Equipment,” 1996), and is also discussed find innovative ways to improve on the in a Government Accounting Office (GAO) procurement process. One of these trends, Report (1998). Further, these types of ar- which I shall term “participatory contract- rangements are legal under Title 10 of the ing,” is to involve entities outside the United States Code. Generally, these government in a form of partnership or efforts have fallen under four types of coordinated effort. Four types of general arrangements, which are valued at about contracting seem to fall into this type of $500 million annually (Cahlink, 1999): arrangement: partnership agreements, cooperative research and development • direct sales (the government facility (R&D) agreements (CRADAs), share-in- acts as a subcontractor for private savings (SiS), and research tournaments. industry); • workshare (the program manager sends PARTNERSHIP AGREEMENTS AT DEPOTS funds directly to the depot for part of the work, and contract is awarded to This is part of a continuing change in private industry for the remaining function for the depots, in that the depots portion); are currently seeking outside work in or- der to better utilize existing facilities, and • directly contracting out the repair of thus reduce costs. This is in keeping with military equipment to private industry, 373 Report Documentation Page Form Approved OMB No. 0704-0188 Public reporting burden for the collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington VA 22202-4302. Respondents should be aware that notwithstanding any other provision of law, no person shall be subject to a penalty for failing to comply with a collection of information if it does not display a currently valid OMB control number. 1. REPORT DATE 3. DATES COVERED 2000 2. REPORT TYPE 00-00-2000 to 00-00-2000 4. TITLE AND SUBTITLE 5a. CONTRACT NUMBER Participatory Contracting 5b. GRANT NUMBER 5c. PROGRAM ELEMENT NUMBER 6. AUTHOR(S) 5d. PROJECT NUMBER 5e. TASK NUMBER 5f. WORK UNIT NUMBER 7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES) 8. PERFORMING ORGANIZATION HQ CECOM,Ofc Deputy Chief of Staff for Resource Management,Fort REPORT NUMBER Monmouth,NJ,07703 9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSOR/MONITOR’S ACRONYM(S) 11. SPONSOR/MONITOR’S REPORT NUMBER(S) 12. DISTRIBUTION/AVAILABILITY STATEMENT Approved for public release; distribution unlimited 13. SUPPLEMENTARY NOTES Acquisition Review Quarterly, Fall 2000 14. ABSTRACT 15. SUBJECT TERMS 16. SECURITY CLASSIFICATION OF: 17. LIMITATION OF 18. NUMBER 19a. NAME OF ABSTRACT OF PAGES RESPONSIBLE PERSON a. REPORT b. ABSTRACT c. THIS PAGE Same as 8 unclassified unclassified unclassified Report (SAR) Standard Form 298 (Rev. 8-98) Prescribed by ANSI Std Z39-18 Acquisition Review Quarterly(cid:151)Fall 2000 where the depot and private industry Teaming and technology transfer form a team effort; or projects can involve commercial work only, projects with technology transfer • leasing the space or facilities at depots incubators (TTI), small business innova- to private industry. tion research (SBIR), and small business technology transfer (STTR). These ap- These partnership agreements portend proaches can serve as a bridge between the future for depot facilities and usher in commercial, government, and university the concept of “commercialization” of R&D and production applications (Wash- these facilities, which in turn has the ington, 1995). They can also incorporate potential to provide both small and major existing federal, state, and local funding defense firms with several benefits, such initiatives which promote small businesses as: (in 1988 this represented $550 million to promote technology innovation [Peterson, • applied engineering programs; 1993]) to help provide funding for the projects. These approaches can tie into the • advanced manufacturing knowledge; Services’ Centers of Excellence Programs and or the Office of the Secretary of Defense- funded university research initiatives. • state-of-the-art laboratory or manufac- Further, these programs have been ex- turing resources. panding somewhat to now also include joint university-industry research projects These efforts further bring to the de- (Gaumond, 1994). The Advanced Re- pots outside work and money that would search Projects Agency (ARPA) also lower the depots’ costs by fully utilizing funds engineering programs through its existing personnel and facilities. Further, technology reinvestment project (TRP) through working with other government initiative, in conjunction with the Nation- and Service programs (such as the al Science Foundation (Wax, 1995). CRADAs mentioned below) they can pro- Through these programs, the Services mote technology transfer and areas of have leveraged the best universities in the science, of interest to the military, sup- nation to advance the state of science in porting both these programs and the areas of interest to the military (and also depots (Washington, 1999). provide external funding for those same projects). These approaches are thus a win-win scenario for new technologies, in COOPERATIVE R&D AGREEMENTS that they promote the growth and development of new firms or universities, and Cooperative R&D agreements provide additional research and develop- (CRADAs) have been used for teaming ment on technologies of interest to the or technology transfer projects with small military at reduced costs (being partially businesses, universities, and government subsidized by federal, state, and local laboratories. funding). 374 Participatory Contracting SHARE-IN-SAVINGS not being limited to internal savings from a specific department or program. In this Another type of initiative contracting type of program the contractor makes the represents a variation on the value engi- capital investment needed to execute the neering change proposal (VECP) theme, initiative, then shares substantially in the which is similar to the gain sharing ap- savings that are derived (i.e., under current proach used in private industry. The Share- initiatives up to 50 percent). in-Savings (SiS) instrument was a prod- An additional feature of this type of uct of the National Defense Authorization program, unlike VECPs, is that actual sav- Act of Fiscal Year 1996, titled “Share-in- ings to the overall agency can be used for Savings Pilot Programs” (1998). The pro- the award payments to the contractor, un- gram allows for the use of saved monies like the normal fiscal rules, where those from government accounts to reward a savings would have to be returned to the contractor(s) for successful programs and general trea- procedures that enable the government to sury. This fea- (cid:147)The [Share-in- save money. The use of SiS in government ture can be a Savings Pilot outsourcing is relatively new, and since it definite advan- Program] allows has only been approved for limited infor- tage in some for the use of mation technology pilot projects (10 circumstances, saved monies projects between $25 million and $100 and has been from government million, and another 10 projects between much sought af- accounts to reward $1 million and $5 million), it has not ter by program a contractor(s) for received much attention. managers for successful programs and procedures that So far, three projects have received the past several enable the govern- Office of Management and Budget years. Similar- ment to save (OMB) approval for an SiS pilot program: ly, at about the money.(cid:148) the Department of Energy’s “Energy Sav- same time as ings Performance Contracts” (1998); the SiS was ap- National Aeronautics and Space Admin- proved, Dr. Kenneth Oscar, Deputy As- istration’s “Shared Savings Clause” sistant Secretary of the Army (Procure- (1998) used for the modernization of their ment), suggested an “Acquisition Reform headquarters’ computer networking; and Incentives Clause” (1996). This clause the General Services Administration’s represents a variation on the VECP theme “information technology projects” (Frank, for use on nonhardware item contracts. It 1999). The premise behind SiS is to allow would work like a VECP proposal, but a contractor to share in either internal or reflects the larger percentage savings collateral savings that have been gener- (based on a five-year reward payout sched- ated as a result of the contractor’s actions; ule) typified in the SiS initiatives, with a similar to a VECP. However, SiS can op- slightly different but appealing wrinkle, erate on a higher funding level, both in that the contractor’s percentage payment terms of the absolute dollars that can be would decrease over time. awarded ($100 million), and in terms of 375 Acquisition Review Quarterly(cid:151)Fall 2000 RESEARCH TOURNAMENTS This process promotes innovation on the part of the offerors, and provides Research tournaments (Fullerton, 1995; firmer cost estimates for equipment, since Taylor, 1995; Washington, 1997) repre- costs are based upon completed hardware sent a competition process that is struc- and not conceptual hardware estimates. tured like an auction, with the winner Rich and Janos (1994) also point out that awarded a “prize” for the best product. the “beauty of a prototype is that it can be The auction component consists of the evaluated, and its uses clarified, before participants paying a fee for entering the costly investments for large numbers are tournament, made.” This is also in keeping with DoD which could be Directive 5000.1 (1996), which stresses (cid:147)This process pro- used to defray modeling and simulation of new systems. motes innovation the cost of the An additional benefit of this type of on the part of the prize, or offset procurement is that it should require less offerors, and pro- the cost of government oversight, since the offeror vides firmer cost conducting the has already developed the item, and is estimates for competition. offering it at a fixed price to the govern- equipment, since The government. Thus, concerns about overseeing de- costs are based upon completed ment commits velopment and production costs are ne- hardware and not to pay the re- gated. Finally, as mentioned above, the conceptual hard- search tourna- contractors could specify along with their ware estimates.(cid:148) ment winner a proposals what they consider to be appro- set amount that priate rewards or fees for additional or is verifiable by alternative performance goals. This would the courts, and must be awarded. The se- allow the source selection authority to per- lection of the winner would be based upon form up-front tradeoffs and assessments. specified priorities (e.g., performance or To date, the author has not seen any re- cost) established by the government, search tournaments used by any of the which would be specified in the request Services, but the National Academy of for proposal, so that the competing firms Engineering workshops have recently would know which innovations or priori- endorsed the concept (National Academy ties were most important in winning the of Engineering, 1999). prize. Finally, each firm would submit its prototype at the end of a specified period SUMMARY of time, for the government to evaluate and subsequently award the prize for the best product. Thus, the competition would These various types of contracting af- differ from a patent competition, in that it ford both the government and private in- would select the most innovative design dustry significant benefits. For the gov- across a group of offerors that would win, ernment, they offer the potential for re- with the quality of the design stressed over duced costs and improved performance; the date of discovery. private industry receives the potential for 376 Participatory Contracting increased profits and more control over vehicles approaches this partnership pro- those projects. This win-win scenario can cess from a different perspective, they all thus appeal to all the participants, and attempt to seek optimum performance makes the administration of the contract through assigning the work in the “best more of a partnership effort, for its suc- division of labor” between the government cess benefits all the participants. Further, and outside agencies to achieve their while each of these different contracting shared goals. William N. Washington is an operations research analyst with the Office of the Deputy Chief of Staff for Resource Management, HQ CECOM, Fort Monmouth, NJ. He has a B.S. degree from Kansas State University and an M.S. degree from Trinity University. His doctoral studies were in Measurement, Evaluation and Research Design at Michigan State University. He is a graduate of the Army Acquisition Corps Senior Service College (1995), and the Advanced Program Management Course (96-2). He has received the Secretary of the Army’s Award for Outstanding Achievement in Material Acquisition (1994), two DoD Outstand- ing Paper Awards from DoD Cost Analysis Symposiums (1998 & 1999), three Assistant Secretary of the Army (Financial Management & Comptroller) Author of the Year Awards (1997, 1998 & 1999), a DA Commander’s Award for Civilian Service (2000), a DA Achievement Medal for Civilian Service (1998), and the Army Materiel Command’s Cost Analysis Award for Modeling (1988). Over the past several years, he has authored several journal articles on acquisition topics ranging from education/training to contracting issues and cost savings. A mem- ber of the Army Acquisition Corps since its inception, he is certified at Level III in Program Management; Business, Cost Estimating and Financial Management; and Systems Planning, Research, Development and Engineering. A reference citation for Mr. Washington also appears in both Who’s Who in America (2000) and Who’s Who in the East (1999). (E-mail address: [email protected]) 377 Acquisition Review Quarterly(cid:151)Fall 2000 REFERENCES Cahlink, G. (1999, November 15). Depot Maintenance of military equipment: Plan partnerships pay off. Federal Times. for increasing depot maintenance privatization and outsourcing. (1996 Department of Energy. (1998, October January 18). DoD home page for 27). Energy savings performance con- maintenance of military equipment. tracts. Http://www.eren.doe.gov/ Http://www.acq.osd.mil/log/mp/. femp/financing/espcoverview.html. National Academy of Engineering. DoD Directive 5000.1. (1996, March 15). (1999). Concerning federally spon- Defense Acquisition. sored inducement prizes in engineering and science. Http://www.nap. edu/ Frank, D. (1999, January 25). GSA to test books/NI000221/html/14.html (4 new buying concept. Http://www.fcw. 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Facili- tation of university technology transfer through a cooperative Service-university-industry program (Senior Ser- vice thesis, University of Texas, Aus- tin, TX, June 1995). Research and Development Technical Report, U.S. Army Communications-Electronics Command, Fort Monmouth, NJ, CECOM-TR-97-2, May 1997 (DTIC ADA323019). 379 Acquisition Review Quarterly(cid:151)Fall 2000 380