Sustaining Government Leverage through Increased Use of Multiple Awards

I just got off a call with several federal acquisition officials asking about ways to increase their integrator's performance, which led me to think about how the public sector market for services could be improved. From my perspective, the market’s characteristics, including its somewhat fixed 'supply of demand’, regulations, and common contract structures lead me to conclude that the most ideal contract structure for most larger contracts is multi-award. There’s no denying that the private sector is motivated and driven by a desire to achieve financial profit – and the only meaningful way to sustain quality and value over the life of bigger and longer contracts is to keep the threat of losing revenue real over the entire period of performance.

We’ve all seen SLAs, award fees, and performance metrics embedded in contracts and individual tasks but the effectiveness of these mechanisms is easily minimized by feds and contractors alike. In addition, option year contract structures don’t address the level of effort necessary to create a new competition and the flux of transition leaving organizations better off accepting the pain of the current state over the pain and risks of another service provider. By awarding a vehicle to multiple firms who must continue to compete for tasks and revenue over the course of the contract, the government mitigates many of the systemic issues plaguing federal acquisition.

First, these contracts are often like a blind marriage. Acquisition regulations often force government organizations into awarding work to firms with which they have no prior experience. Anyone can sound great on paper; and orals are simply one blind date before the marriage. 4, 7, even 10 years with one firm with few levers except an early re-compete? Why take the risk?

Second, in markets with more elastic or discretionary demand, private sector organizations are forced to focus heavily on innovation and value in addition to price to incent investment. In the public sector, with a relatively fixed ‘supply of demand’, private sector organizations focus more heavily on increasing their piece of the fixed pie through reduced pricing. The lever for price reductions is typically resource quality. Multi-awards create a natural incentive for awardees to place more emphasis on value and quality as well as price for sustained revenue over the course of the contract.

Lastly, with a major shift in a lot of federal organizations from stable day-to-day operational activities to more project-oriented activities, the impact on the organization from using services from multiple contractors is decreasing. With more natural breaks between work units, the more feasible that work can be addressed by multiple firms.

Bottom Line: the multiple-award contract provides the government with a stick – leverage throughout the life of larger and longer contracts through sustained competition to better incent a focus on value. When you’re engaged in acquisition planning, look to maximize the use of multiple-awards wherever possible and practical to provide your organization options and your suppliers incentive to focus on quality.