Policy & Practice | August 2019

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By Carole Hussey

Modernizing Technology Procurements: A Performance-Based Contracting Model

T he advent of modern technology solutions offers many advantages to public-sector agencies. These solutions include agile development methods, software-as-a-service (SaaS), and commercial-off-the-shelf (COTS) software. These options are attractive with a value proposition of reduced capital investments and speed to market through rapid con- figuration. Many states are also opting toward smaller, module-based procurements, aimed at reducing risk and increasing competition. As a result of this changing market, however, some organizations are struggling with how to effectively purchase and ultimately manage con- tracts with technology vendors. Traditional approaches to procure- ment and contract management are not typically aligned with modern approaches to solution design and implementation. Deliverable-based (often fixed price) contracts worked (somewhat) for waterfall develop- ment methodologies and custom-built solutions that took years to deliver. Unfortunately, those models don’t work in an agile world or with COTS solutions, where you would not typically produce volumes of project documentation. Those models also do not always yield the desired results. The reality is that a project can be produced on time, on budget, and for the defined scope without adding real business value or resulting in what would be called a “successful” project. While an organization may have a new system, that system may not be any better than the legacy system that they replaced.

using platforms and products that are easier to maintain and support. Sounds simple, right? I’m especially excited about this opportunity and really want to help her make a difference. Performance- based contracting offers opportunities for innovation and encourages com- petition in the market. Shifting from traditional procurement and vendor management methods in public-sector environments will not be easy, but it is necessary to get the most from a technology investment. This shift will not happen overnight. And … it is not just the procurement office that needs to figure this out. Here are some thoughts on how we can all affect this change over time. Here are some tips

At PCG, we often help clients with procurement planning and manage- ment. We are sometimes limited by how creative we can be in our counsel, depending upon the appetite for change. Recently, a client asked us to help her think through a new way of managing technology projects from a performance lens. She had come from the private sector and was shocked to learn how long it takes to procure and implement an information technology (IT) project. She wants to change that. She wants better solutions, imple- mented faster. She wants payment tied to performance. She wants solutions that affect real program- matic improvement. And, she wants to reduce total cost of ownership by

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August 2019 Policy&Practice