FACT SHEET: Biden-⁠Harris Administration Announces New Better Contracting Initiative to Save Billions Annually

Today, the Biden-Harris Administration is announcing the next phase of the Federal Government’s enterprise approach, the Better Contracting Initiative (BCI).  The BCI is a four-pronged initiative to ensure that the Federal Government is getting better terms and prices when purchasing goods and services.  The BCI also ensures the Government is deliberate about who we buy it from, including small and disadvantaged businesses.

The Biden-Harris Administration is committed to a Government that delivers for the American people, which requires that we have the right goods and services to best serve the public.  Last year alone, the Federal Government purchased $700 billion of goods and services.  While Federal agencies have unique needs and purchase highly-customized items, such as fighter jets and space telescopes, most of the goods and services purchased by agencies are common commercial items that most agencies use – such as IT hardware and software, facilities maintenance, and package delivery services. 

For decades, however, Federal agencies have often paid inconsistent prices and often too much when compared to market price.  To address this, the Obama-Biden Administration pushed the Federal Government to begin to take an enterprise approach to the common goods and services it buys, resulting in better deals that have avoided $90 billion in costs for taxpayers since FY 2016. 

As Federal agencies face increasing resource trade-offs in light of a constrained fiscal environment, agencies need more data and tools to receive better value.  With many of the largest Federal contractors operating at historically high margins, resulting in costs to taxpayers that are simply too high,[1]  agencies must act as an organized enterprise now more than ever.  The Biden-Harris Administration expects that the results of the BCI will generate more than an additional 10 billion annually in savings and cost avoidance while improving the performance of Federal contracts.

The four-pronged BCI strategy includes:

1. Leveraging Data Across Federal Agencies to Get Lower Prices and Better Terms. The Federal Government enters into four million new contracts and orders each year.  While many agencies share data within the agency to make smarter, value-based buying decisions, limited central capacity for analytics and insights has hindered the ability to compare prices and terms across agencies.  As a result, taxpayers are not getting the full benefit of the U.S. Government’s scale as a buyer. The Government has billions of acquisition and pricing data points, that if shared appropriately would result in significant savings for taxpayers by arming contracting officials with information that would strengthen their negotiating position with contractors. Under the BCI, the Office of Management Budget is launching a new centralized data management strategy, which will create a Hi-definition framework for sharing and analyzing acquisition data across the Federal enterprise.  Improved data-sharing will strengthen acquisition in many ways from enhanced market and supply chain intelligence, to more realistic cost estimates and better solicitations. This information will be provided to agencies and their contracting professionals using on-demand tools and resources commensurate with the largest and most sophisticated buyers in the world.  For example, the Administration will soon roll out the first iteration of a new tool that, when fully implemented, will provide contracting officers with unparalleled access to centralized product pricing data derived from federal sales and commercial benchmarks, along with information on vendors and contracts, so agencies can confidently identify a best value solution for common needs, such as laptops, servers, and office furniture and supplies.  The tool will help advance equity by enabling buyers to focus their searches on information that could support a decision to use a small business set-aside either on an existing contract or the open market.
2. Negotiating Common Enterprise-Wide Software Licenses. The Federal Government spends over $70 billion on IT products and services annually, with billions of dollars spent on software licenses across agencies.  Already, new IT procurement strategies have allowed agencies to avoid $3 billion in costs annually, but there are substantial opportunities for more savings.  Currently, prices routinely vary up to 20 percent for the same software across agencies. Under the BCI, GSA will lead the Government in negotiating a government-wide IT software license agreement with a large software provider.  This change will help to reduce price variance, secure more favorable terms and conditions, and capture 25 percent in efficiency gains, avoiding the wasted effort of having each agency individually plan, research and negotiate for the same common requirement.  Agencies will also continue to leverage best-in-class enterprise contracts for a wide range common goods and services, consistent with practices that grow small business participation in the Federal marketplace and strengthen diversity and resilience.
3. Saving Money and Avoiding Waste by Getting Contract Requirements Right the First Time. Each year, agencies buy more than $110 billion in professional services – including management, advisory, engineering, and technical services – but the contracts often don’t clearly reflect the agencies’ needs, resulting in expensive modifications.  In the coming months, OMB will issue guidance that directs agencies to use a proven methodology to pinpoint requirements for high priority acquisitions.  This protocol leverages agency facilitators to conduct acquisition workshops which help teams of program, acquisition, supply chain, IT, and other experts translate their needs to each other and build performance-based requirements to capture better more cost-effective outcomes.  Over the coming months, GSA will continue to sponsor a series of facilitated requirements development and acquisition planning workshops for services contracts with acquisition teams across the Government.  GSA will also partner with the agencies’ acquisition leadership to help train individuals that can facilitate workshops within their own agencies.  OMB will work with agencies to identify appropriate parameters for embedding workshops into the acquisition lifecycle.  Simultaneously, the Administration will continue to strengthen and expand workforce development opportunities, including through the new professional workforce certification model.
4. Getting Better Value from Sole Source and Other High-Risk Contracts. Sometimes agencies do not have the best choices of vendors because of the particular products they must buy.  Agencies need special tools to ensure they still have the capability to negotiate good deals in these difficult situations.  DoD has successfully deployed some strategies to mitigate the risk in these circumstances, including instituting peer reviews where independent procurement teams review terms to deliver a second opinion and leveraging special teams of cost and engineering experts like the Navy “Price Fighters,” to reduce the risk of inflated prices.    

Between FYs 20-23, expert pricing advice offered during peer reviews helped the Department realize cost avoidance of nearly $300 million with an investment of just under $2 million. Select civilian agencies that have significant sole-source contracting or priority programs with underperforming contracts will engage with the Price Fighters or other engineering or cost experts to participate in inter-agency peer reviews.  Agencies will also increase use of “hybrid” contracts for appropriate acquisitions.  This type of contract allows for multiple types of payment (e.g., cost-reimbursement, labor-hour, fixed-price) to better align with levels of risk during different parts of the lifecycle of a large acquisition for development and production.  For example, hybrid contracting strategies have successfully been used for financial systems modernization, weather satellites and environmental clean-up.  Hybrid contracting models were recently recognized in the interagency-developed Periodic Table of Acquisition Innovations – the Government’s knowledge management portal for new and better ways of contracting.

Additional Background on Federal Contracting:

During the Biden-Harris Administration, Federal agencies have made significant progress in using contracting as a catalyst to advance national priorities, from putting new government-wide acquisition rules in place to increase domestic content of U.S.-made end products under the Buy America Act, to advancing diversity in the federal marketplace through record spending with businesses in underserved communities.  To sustain and accelerate these efforts, the Administration has modernized workforce development opportunities, including through a new professional workforce certification that promotes lifelong just-in-time learning, doubled the number of innovation labs and ideation spaces to test and share innovative business practices that make competing for federal work more affordable, especially for small businesses, and sought Congressional approval for legislation that will ensure agencies have access to the resources their workforce needs to keep up with a continuously evolving procurement environment. 

[1] A recent report by Deltek, a consulting firm that services Federal contractors, finds contractor profit margins have grown to 15-17%, above historical norms of 6-10%.