Volume 3 of the 809 Panel’s report takes on many of the problems of IT procurement. “Recommendation 43” focuses directly on the issue of consumption-based solutions like cloud. The heart and soul of the recommendation is for Congress to create a new subcategory of services called “consumption-based solutions.” These services would be defined as “any combination of hardware/equipment, software, and labor/services that together provide seamless capability that is metered and billed based on actual usage and predetermined pricing per resource unit.”
Importantly, new services or features could be added to contracts at the discretion of the contracting officer, without necessitating a new competition. Bravo. This captures the essence of consumption-based solutions and allows for the government to legally accept dynamic innovation as it becomes available — without having to anticipate or describe it in advance.
Perhaps most importantly, the panel recommends the creation a new contract type called a “Fixed-Price Resource Units,” agreement to become the preferred acquisition method for all consumption-based solutions. This new vehicle type would establish base-line unit pricing, like an hour of computing, set an overall ceiling for the contract value, and then allow the government to pay on an incremental basis for consumption, in arrears, after actual usage. Brilliant. No more pre-payment. Goodbye to the problem of over- or under-committing funds for a solution, prior to actual usage. Frankly, this is the payment model that the National Institute for Standards and Technology has always required for cloud, but one that has been hard for the government to actuate.
That was a nice report from Michael Garland at FCW. He also described consumption-based solutions on Government Matters (Recommended). It could end up slotted into FAR Part 39. The definition is incredibly broad. Basically anything “that is metered and billed based on actual usage and predetermined resource units.” Read the whole recommendation from Section 809 (Vol. 3, Part 1).
So an Uber or Lyft of military transportation would price at dollars-per-mile. But I believe this is applies only to commercial IT, so there could never be an Uber of military transportation. The requirements are just different. You’d have to get a traditional development contract, and then its no longer commercial. Right?
Well, no. Even cloud needs to meet special defense requirements, which Section 809 Panel recognizes. So “commercial” must be somewhat loose. There is nothing commercial about meeting FedRAMP and NIST, for example. Amazon has a whole separate unit for AWS GovCloud. Perhaps “there is a commercial proxy” is sufficient. There is no such proxy for carriers and fighter aircraft.
Certainly there are commercial consulting services, and many of these relate to “information” and “technology.” Could all of consulting fit under the definition? Isn’t it like a Time & Materials contract? “You used X hours of the junior rate, Y hours of mid, and Z hours of senior… The total consulting fee is $$.” Perhaps the consultants are doing something a bit more defense-related, just like the cloud must meet defense requirements.
How about R&D work? Could the government say that it didn’t want to articulate the innovation before-the-fact (which implies the solution is already known), and just ask for fixed units of science and engineering labor? Meter the hours, and if insufficient progress is shown, then cut the contract then and there. Go find someone else that can do it. The reputation spreads. This allows government to quickly shift direction without endless legal disputes that lock-in poorly conceived requirements.
One of the things about tech firms is that unlike a monopolist, they try to prove to the customer how easy it is to switch off of them. It’s a quicker decision to go with a supplier if you know you can cut your losses quickly. Once you’re there, only quality service and improvement keeps you there.
One of the big things Garland says in his Government Matters interview is that if the supplier incrementally rolls out new capabilities, improving the user’s value continually because R&D overhead is priced into the fixed-price resource units, then the government can legally obtain those new capabilities without breaching the contract requirements and forcing, potentially, a new competition for the program. No one should get sued because they gave the government more value for the same money.
This seems like an important recommendation:
Make funding flexible so acquisition professionals can confidently procure consumption-based solutions without fear of running afoul of the Anti-Deficiency Act or Impoundment Act.
Flexible funding implies trust in the agent to get the job done. It implies discretion. How broadly can consumption-based solution be applied? These are preliminary conjectures. We will see how consumption-based pricing shakes out.
Leave a Reply