The Right Thing Is Also the Hard Thing in Federal Contracting

Inputs or outcomes?

For technology services company CEOs like me, that’s a no-brainer. Results are the lifeblood of industry, and leaders are held to account if they fail to deliver them. My counterparts in the public sector would surely agree, especially those in the federal acquisition business, who work tirelessly to produce better, more timely results.

And yet, federal service contracts remain predominantly structured to emphasize the delivery levels of input over mission outcomes.

The current government service acquisition model—based on labor hours or staffing levels—is obsolete. The model lacks agility and flexibility, leading to cost increases, limited innovation, and lackluster mission performance. President Trump acknowledged as much in a recent interview: “Time and material means you’re going to get your [butt] kicked. Who ever heard of time and material?”

Of course, acquisition reform has long been a goal for Congress, industry, and the executive branch alike. Death, taxes, and acquisition reform, right?

But countless past reform efforts have focused on hardware acquisition, even as procurement for the Defense Department and Intelligence Community is increasingly focused on services. Indeed, recent statistics show that service acquisitions amounted to 45 percent of total DoD contract obligations and 68 percent of total contract obligations for the rest of government, with similar trends seen in the IC. With services consuming ever-larger portions of federal acquisition budgets and with mission objectives ever more demanding, we can no longer rely on a model which, though familiar and comfortable, fails to focus on results.

Fortunately, there is a better way: a performance or outcomes-based approach, which emphasizes the purpose of the work to be performed (expressed in statements of objectives), rather than how the work is done (statements of work). Outcomes-based acquisition, paired with firm fixed-price contracts, rewards contractors who most effectively produce measurable results in advancing mission goals. This emphasis on performance over methods has the potential to substantially reduce costs and speed delivery of what matters most: mission performance. Such an outcome-based model has been shown in numerous studies by the nonpartisan Intelligence and National Security Alliance to be in the mutual interest of both industry and government.

This model is not new; it has been the preferred approach to acquisition since as early as 1991, and stands today as the favored approach, enshrined in statute and in Federal Acquisition Regulations. Yet despite the promise and policy, outcome-based services have yet to be widely embraced by either industry or the government. Although several government departments and agencies are warming to the approach, it remains the exception. Why is this?  

It’s both true and trite to explain the problem as cultural resistance to change. But the nub of the problem (as documented by the Government Accountability Office and DoD Inspector General) is that outcome-based service delivery is intellectually challenging.  

For the government, it must formulate performance metrics that express the mission outcomes agencies seek. That requires clarity of purpose. For contractors, it means they must understand exactly what tangible outcomes they can deliver, when, and at what cost—and with sufficient confidence to assume the risk of a fixed contract.  

Finally, outcome-based acquisition entails mutual trust of the partners to risk this new path, and a willingness to iterate and innovate when they encounter inevitable problems.

CSRA seeks to lead this admittedly tough cultural shift in digital services and software development. We have already partnered with several government customers, including the National Institute of Health’s IT and Applications Center and the Department of Veteran Affairs’ Enterprise Self-Service Portal, helping them migrate to outcome-based, fixed-price contracts.

The coming decade promises unremitting mission demands during a time of debt-laden budget pressure. There is only one way ahead.

Outcomes over inputs. Every time.

Lawrence B. Prior is the President and CEO of CSRA Inc., providing next-generation IT services and solutions to the federal government.