Managing Large-Scale Federal Contracts

Nadine Bounds and Teri Hoffman-Boswell

Government agencies need new acquisition approaches to address challenges associated with concurrent management of contracts for operations and maintenance, integration among multiple interdependent projects, and modernization changes that are implemented over several years. For example, new contract vehicles would combine:

• Flexibility in allowing the government to define system requirements incrementally over a long period of time.
• A single prime contractor responsible for, and incentivized to accomplish, enterprise system integration.
• Multiple contract types that allow the government to assign risks appropriate to the acquired product or service and, where applicable, to share risk with the contractors.

Some large government enterprise modernization programs have engaged a single prime contractor to perform system development and integration for their enterprise modernization programs, using task orders to issue the work incrementally. A primary goal is to prevent stovepiping of management and implementation processes on modernization programs. While the enterprise task order concept seems appropriate, in practice some prime contractors have taken a more tactical approach and have focused on meeting requirements of the individual task orders for development projects within their cost structures rather than on the long-term goals and integration needs of the program.

Lessons learned from this experience are that enterprise-level performance requirements should be mandatory from the onset with greater incentives tied to their successful execution, and task order issuance should always tie back to the enterprise level. One significant contract management issue that needs to be resolved is how to develop an incentive mechanism that encourages the prime contractor to maintain an enterprise view while meeting the required outcomes of individual task orders.

Performance-based contracts may ensure that the prime integration contractor shares risks with the government sponsors, since the contractor can best control the management of many risks. Additionally, external incentives for contractors, such as market positioning or inter-company partnership agreements, which could conflict with the government's goals and incentives, also need to be identified and factored into the process for balancing task order performance incentives.

Currently, CEM and its sponsors are re-examining incentive structures and realigning them with a more efficient and effective task order strategy. Implementation of an enhanced acquisition strategy, with larger incentive fee pools tied more to performance-based enterprise-level outcomes, should help balance enterprise and task incentives to better accomplish program goals.

For more information, please contact Nadine Bounds or Teri Hoffman-Boswell using the employee directory.

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