Reward industry for RFP suggestions

I recently attended the second meeting of a group working on introducing better incentives into contracting. Ken Oscar, the Army's senior procurement official, convened the meeting. For an account of the first meeting, see my column in the Aug. 2 issue of FCW.

Toward the beginning of the meeting, the group got into a "wouldn't it be great if we could only do this but it will never happen" discussion. The subject was an idea that one group member had presented for a way to provide incentives to industry to help government in the early stages of the procurement cycle - before a request for proposal is finalized.

Imagine, to take a simple example, that the government plans to write a requirement in a RFP that would obligate the winning vendor to provide within four hours on-site service for computers that break down at all government locations served by the contract. It turns out, however, that some locations are very remote and difficult to serve within the four-hour limit. To meet the requirement as stated, vendors would need to jack up their prices.

Or imagine an electronic-commerce requirement in the early days of the Internet that was stated as an electronic data interchange solution instead of allowing an Internet solution.

Or imagine that the government is having trouble coming up with performance standards for its requirement but a vendor knows, based on its other government or commercial experience, about standards that could be put in the contract.

Or imagine that a vendor believed a job could be bid fixed-price, while the government was thinking of going with cost-reimbursement, or that a vendor felt they could fix-price the job if vendors were allowed the opportunity for due diligence, but the government did not know that.

Or imagine that the requirement was tailor-made for a share-in-savings approach that would increase the government's chances of getting results, but the government does not know about share-in-savings contracting.

Isn't it worth something for the government to learn about how it could improve its RFP before the RFP gets finalized? You bet it is. It means, potentially, a better deal for the government in terms of cost and results.

In fact, in the commercial world, providing such information to a customer, as I learned when I did the procurement research back in the 1980s that got me into this business, is part of what big commercial customers look for in deciding what vendors to do business with.

So, for example, General Motors wants vendors to suggest ways that it can change its specs for parts in a way that makes it less expensive to deliver the product.

What people at Oscar's meeting were looking for - but which they were inclined quickly to place in the "too difficult" basket - was the ability for government to create incentives to encourage similar behavior among firms bidding for government business by rewarding them, in terms of "points" in evaluating proposals, for such suggestions.

They were quick to think it was too difficult because of lingering worries in the federal environment about "wiring" contracts and "too much" communication between the government and potential bidders.

In fact - unknown to those at Oscar's meeting - a few folks in the government already have started to think and even to act that way. The first example, to my knowledge, of using this approach was in the competition for the Internal Revenue Service Prime Systems Integration Services contract for tax systems modernization, awarded last year to Computer Sciences Corp. In the evaluation model, 500 out of the 10,000 total points were awarded based on the quality of the input bidders gave the IRS during the draft RFP stage. So bidders were rewarded for helpful comments.

According to Greg Rothwell, procurement chief at the IRS, the idea worked well to encourage helpful ideas, and the factor also was a discriminator between the bidding teams. Leamon Lee, the innovative manager of the Chief Information Officers Solutions and Partners contract at the National Institutes of Health, is planning to use this approach when that contract is competed for again next year.

There are two important caveats to keep in mind when using this approach. The first is that vendors should be rewarded only for suggestions that help the government. There has never been any shortage of self-serving suggestions from vendors about how to "improve" an RFP so as to increase that vendor's chances of winning. Such suggestions hardly need to be encouraged.

The second caveat is that fairness requires that if the government plans to reward firms for the quality of their help, they need to announce up front that they intend to do so, and do so to all potential bidders. This is a problem with the occasional use of this kind of provision in task order or General Services Administration schedule buys where one vendor has been involved in "marketing" the agency.

If other vendors are suddenly informed late in the day that bidders are being rewarded for having been helpful in developing the RFP, this makes a questionable competitive situation even worse.

To me, this is the next step forward in getting value for the government from improved industry/government communications and is another example of the many good innovations sprouting up in today's more business-like contracting environment. Keep the caveats in mind.

But ye who think this is a great idea but could never be done in the government, look out. Your colleagues already are off and running.

Kelman was the administrator of the Office of Federal Procurement Policy from 1993 to 1997. He is now Weatherhead Professor of Public Management at Harvard's Kennedy School of Government.