Legislation to alter IT services procurement

The U.S. Senate recently passed a bill that’s poised to significantly alter the way federal agencies procure IT services. The Defense Authorization bill includes the Services Acquisition Reform Act (SARA). Introduced earlier this year, SARA would move the government away from costly “time and materials” contracts. The bill is now being prepared for President George W. Bush to sign.

A key section of the SARA provisions offers incentives for agencies to use performance-based contracts, a shift that analysts and industry executives said will force IT product and services vendors to change the way they do business with the federal government.

Most IT service providers will likely benefit from the legislation because it will give them flexibility to choose the best commercial technologies to use under a contract, rather than building custom products to meet government specifications, said Jim Howard, CEO of CrownPeak Technology, a Los Angeles-based Web content management service provider.

The legislation would also benefit the government by ensuring that money isn’t spent on products and services that aren’t doing what it needs them to do, he said.

“With the (performance-based) software service model, in which you pay for what you use, the vendor is taking the chance that the software will work well for the customer, as opposed to the government paying a lot of money to make it work and then betting that the entire enterprise will use it,” Howard said.