OFFICE OF MANAGEMENT AND BUDGET
OFFICE OF FEDERAL PROCUREMENT POLICY
AGENCY: Executive Office of the President, Office of Management and Budget (OMB), Office
of Federal Procurement Policy (OFPP).
ACTION: Notice of solicitation of public interest.
SUMMARY: OFPP is developing a new initiative to fundamentally examine the manner by
which the Government develops and applies incentives to its contractual vehicles, and is seeking
information and advice that would advance this effort.
COMMENTS DUE DATE: Comments and information regarding the proposed initiative must
be received on or before December 26, 2000.
FOR FURTHER INFORMATION CONTACT: Comments and information should be sent to
Stanley Kaufman, Deputy Associate Administrator, OMB, OFPP, 725 17th Street NW,
Washington, DC 20503. He can be reached electronically at email@example.com or by
phone at 202-395-6810.
I. Background. Procurement reform initiatives such as the Federal Acquisition Streamlining
Act of 1994, the Federal Acquisition Reform Act of 1996, the Information Technology
Management Reform Act of 1996, and Performance-Based Service Contracting are significantly
changing the way the Government acquires supplies and services, moving from a process-oriented, rules-based, risk avoidance culture to one emphasizing performance outcomes, business
judgment, streamlined procedures, and risk management.
The rules-based culture constrained contracting officials' flexibility to serve as business advisors
focusing on the overall business arrangements. While the cited acquisition reforms provided
contracting officers increased flexibilities in negotiations and communication with contractors,
research by the Army and studies by OFPP and industry found that innovative contracting
methods are being used insufficiently, and effective incentives exist which are not being
Consideration of incentives typically was limited to the fee portion of contracts to the detriment
of other incentives that contractors would find more appropriate and meaningful, such as a
consistent revenue flow and the promise of future business. In addition, incentives too often
focused on the process of the work to be performed vs. the outcomes, thereby rewarding
unnecessary and/or even counterproductive behavior. Furthermore, profit is not an effective
incentive for non-profit entities such as universities and research laboratories. As a result,
contractors often did not provide their best solutions and Government requirements were not
fulfilled in as timely, quality-related, and cost-effective manner as possible.
II. The Project. OFPP is looking to develop a new contracting paradigm that will encourage
acquisition officials to develop joint objectives with contractors and effectively incentivize both
parties to create "win/win" business arrangements.
In pursuing this project, OFPP would like to pull together any experiences and literature
regarding non-fee type incentives. Consultation with the private, non-profit, and public sectors is
hereby sought. A review of current policy, regulatory and statutory guidance will be conducted to
determine any barriers to achieving the project's objective and the need for any additional
guidance to facilitate compliance.
Accordingly, OFPP is seeking ideas, recommendations, practices, lessons learned, etc. on what
works in industry, the non-profit environment, and state and local governments. Such
information tailored to specific industries (e.g., manufacturing, services, construction), subsets of
industries (e.g., information technology, advisory and assistance services, environmental
remediation), types of contractors (e.g., universities, small businesses) and types of endeavors
(e.g., research and development) would be welcomed. We also would welcome any studies or
literature that analyzes, assesses, or validates these practices, as well as information on relevant
training courses and materials.
In examining this information and developing any policy initiative, we will consider approaches
that would fundamentally restructure our contractual relationships to accommodate improving
our business arrangements, and so would welcome any appropriate recommendations as well as
the identification of any impediments (legal, regulatory or policy). OFPP welcomes written
comments and materials, and is willing to meet with individual companies, associations, and
other organizations to hear their views and recommendations. OFPP is concurrently surveying
Federal agencies to ascertain any ongoing innovative practices that could be used in this
We are also considering a public meeting to facilitate the exchange of information between the
Government and general public to explore this issue if sufficient interest exists. Topics could
include: developing alternative incentive strategies; providing recommendations; sharing best
practices and lessons learned; reviewing existing literature; and identifying barriers and potential
benefits and disadvantages for both agencies and contractors. Expressions of interest in such a
meeting would be appreciated.
Kenneth J. Oscar
Deputy Administrator (Acting)
Office of Federal Procurement Policy
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