A Second Take on The Better Contracting Initiative: Takeaways and Market Implications
Published: November 29, 2023
Contractor margins to come under pressure.
This post is the second on the Better Contracting Initiative (BCI) published by Federal Market Analysis. Click here to read the first post by my colleague, Christine Fritsch.
Earlier this month the White House announced the beginning of its Better Contracting Initiative. Designed to secure better contract terms and prices for the government, the BCI builds on existing contracting practices, such as category management and components of the Periodic Table of Acquisition Innovations. The goal of the BCI is to improve data sharing and requirements development to increase government purchasing power and provide more agility for agency acquisition strategies. The BCI also has implications for the contracting community. Today’s post discusses some of these below.
The BCI pursues four strategic goals, each of which has subordinate pieces. These are as follows:
Analytics for Acquisition Data
- The BCI directs the Office of Management and Budget (OMB) to develop a centralized data management framework to facilitate information sharing across agencies. The OMB just produced a memo on this.
- The administration plans to launch a centralized tool for researching product pricing, contract information and vendor data.
- Market Implications: Sharing re pricing data across government creates significantly less wiggle room in price negotiations with agencies. Agencies will have a central database of prices for goods and services. Unless it is carefully monitored (keep in mind this is government we’re talking about), this initiative could lead to unintended growth in the use of dreaded Lowest-Price Technically Acceptable (LPTA) source selection criteria by contracting officials.
- The OMB will develop guidance to help agencies develop better requirements for professional services engagements, requirements that will drive down the use of costly modifications.
- Agency facilitators will conduct workshops to help program, acquisition, supply chain, IT, and other teams develop better performance-based requirements.
- Market Implications: Guidance is good, but without technical knowledge contracting officials will probably continue to struggle to develop performance-based requirements. Contractors should still keep an eye on the guidance when it comes out to determine if proposals pass muster.
- The BCI charges the General Services Administration (GSA) with developing a government-wide software license agreement with a “large software provider” (noted as being Microsoft in GSA’s draft FY 2024 IT category strategic initiatives) to reduce price variance and drive efficiency gains.
- Market Implications: This initiative will probably affect resellers the most, as they are typically the ones selling enterprise licenses to agency customers. Expect this initiative to expand well past Microsoft to other providers of commonly used software, such as Adobe products.
Sole Source/High-Risk Contracts
- The BCI institutes peer reviews that leverage cost and engineering expertise to offer second opinions on negotiations for sole source and other high-risk contracts.
- Agencies are directed to leverage hybrid contracts that allow for multiple payment types (e.g., fixed price, cost reimbursement) to offer flexibility in payment type during different parts of the lifecycle.
- Market Implications: This part of the BCI ensures more eyes will be on some services contracts, particularly those that concern projects deemed high-risk by the Government Accountability Office (GAO).
In an era of already razor thin margins, the BCI promises to create yet more headaches for contractors feeling the squeeze from expensive federal regulations (e.g., FedRAMP and CMMC compliance). Small businesses in particular could find that the BCI actually adds costs to proposals and performance. If the BCI is intended to lower costs for agencies, it could end up backfiring by causing frustrated vendors to simply stop selling to government customers.