Deloitte & Touche director and former U.S. Rep. Tom Davis asked former colleagues on Capitol Hill Tuesday to adopt a procurement model that delivers profits to contractors only when they make good on promised cost savings to government agencies.
Typically dubbed performance-based contracting, it’s a buying strategy that has gained and lost appeal over the years: Companies get paid when certain business results are achieved. To Davis, a Virginia Republican who testified at a hearing of the House Oversight and Government Reform Committee, those business results are cost savings.
“The formula is simple – [companies] bear the risk of actually delivering on what they say they can do,” Davis said in prepared remarks. “If they are successful, they make money; if not, they don’t. A criticism of this approach often is that the government ends up giving away too much of the saved revenues, but that misses the point entirely. There would have been no savings at all had the share‐in‐savings approach not been used.”
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