Fair and Square?

Fair and Square?

by / September 7, 2006

Have government contracts become so risky and one-sided that reputable IT companies are sitting out major procurements? We raised that question after hearing some grumbling in the industry, and after seeing what appeared to be tepid response to several large RFPs in Government Technology's home state of California.

As you'll see in our article, it's an issue with lots of interconnected factors and few clear answers -- par for the course with government contracting, I suppose. But my sympathy lies with government procurement and IT professionals charged with negotiating large-scale technology deals.

When it comes down to signing a big contract, agency CIOs -- who may be in the market to replace a major system every five or 10 years -- find themselves across the table from teams of industry lawyers who negotiate complex procurements for a living. There are plenty of sophisticated CIOs and lawyers in public service, but they usually aren't contracting specialists. So the playing field is hardly level.

Furthermore, government officials pay a steep price when big projects go south. Unlike the private sector, where troubled initiatives often can be quietly disposed of, the ugly details of faltering government IT deployments play out in the public eye -- often at legislative hearings with CIOs and agency managers in the hot seat.

Of course, tightening contracts to the extent that they no longer make economic sense for IT companies is bad for everyone involved. At some point, major IT providers -- which typically earn about a quarter of their revenue from public-sector sales -- could walk away from that business, particularly if a thriving private-sector market is ready to pick up the slack. That means less competition for government procurements, raising prices and reducing innovation.

But there's little consensus that the situation has reached that point. And CIOs like California's Clark Kelso appear willing to review contracting provisions that may go beyond industry standards.

Anyone familiar with government purchasing will tell you that the market is cyclical, swinging like a pendulum from one extreme to another. Procurement rules are relaxed to encourage flexibility and creativity. Then they're tightened to exert control and correct "abuses."

Given what's at stake for governments and taxpayers, who can blame CIOs for trying to swing the pendulum in their favor on major procurements?
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