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US Government wants to simplify how it buys software - but bigger challenges lie ahead…

Derek du Preez Profile picture for user ddpreez January 5, 2016
The Federal government in the USA is making moves to simplify and consolidate its software procurement. But if the UK is anything to go by, bigger challenges lie ahead.

United Kingdom and USA miniature flags
The US Federal Government is making moves to change the way that agencies buy, procure, manage and share software licences, in a bid to save taxpayers millions and millions of dollars.

Just before Christmas, the Office of the Federal Chief Acquisition Officer and the Office of the Federal Chief Information Officer released for public comment a directive to Federal agencies to drive greater efficiencies in how government manages and buys software.

The memo states:

The Office of Management and Budget (OMB) is proposing a new policy to improve the management and acquisition of commonly-purchased enterprise software.

The draft memorandum establishes policies to reduce redundancy, increase accountability of agency officials, and promote best-in-class software agreements across the Federal Government.

To read between the lines, it turns out that the US Federal agencies are terrible at buying software licences and have got themselves into a mess over the years.

However, this story isn’t uncommon amongst the public sector globally. In fact, it’s pretty much the norm. Here in the UK we embarked on a journey to sort out a similar mess a number of years ago and established new commercial objectives that allowed central government departments to act as ‘one buyer’, as opposed to several distinct purchasers, in an attempt to save money on our software bill.

This led to a number of new agreements with software providers, including the likes of Oracle, Microsoft and Adobe, and it was hailed as a big step towards UK civil servants becoming more commercially savvy.

However, what we have since learnt is that this was the beginning of a number of uphill challenges and that whilst software buying can be improved, changing the way that government works as a whole is the bigger challenge to overcome.

Driving change

But (for a change) the US is several years behind the UK in this area and Anne Rung, chief acquisition officer, and Tony Scott, chief information officer, explained in a recent blog post about why the US government needs to address this issue.

They said:

Each year, the U.S. Government spends more than $9 billion on software through more than 50,000 transactions, which results in a fragmented and inefficient marketplace. A recent report by the Government Accountability Office (GAO) indicates that agencies buy and manage software licenses in a decentralized manner, struggle to create accurate inventories, often purchase unneeded capabilities, and generally do not share pricing, terms, and conditions across Government to facilitate better purchasing.

Furthermore, most agencies do not have a designated central oversight authority to manage software agreements, and agency personnel often lack sufficient experience and expertise to effectively negotiate and manage large software agreements. Today’s guidance addresses these and other challenges in information technology management, specifically software licenses.

Even as we finalize our policy, we are already taking concrete steps to improve how the government buys and manages software. For example, in support of the Federal Information Technology Reform Act (FITARA) and the Administration’s category management initiative, General Services Administration (GSA) is working with the government’s largest buyers of geospatial software, such as DoD and the Department of the Interior, and will soon have in place a new government-wide solution that will save taxpayer millions of dollars and allow agencies, for the first time, to take advantage of government-wide volume discounts, to reduce unnecessary duplication, and increase transparency of existing agreements.

Simply put - up until this point, buying and management of software has been ad-hoc and shambolic.

The recent report (mentioned above) by the Government Accountability Office (GAO) found that Federal agencies are not adequately managing their software licenses because they general do not follow leading practices in this area. The table below lists such ‘leading practices’ and the agencies that have fully, partially, or not implemented them:

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The report highlighted that on major federal agency reported saving approximately $181 million by consolidating its enterprise license agreements, even though its oversight process was ad hoc. That gives you an idea of how much there is to be gained by this.

Simplifying procurement

About a year prior to the most recent memo being released, chief acquisition officer Anne Rung wrote a blog post about how government needs to improve its procurement practices. She noted that Federal agencies have more than 3,300 contracting units, but there is very little sharing of information and best practices across them.

Rung said that the result is that government has a “lot of duplicative efforts”. For example, in 2013 agencies had more than 23,000 awards for HR training and services alone.

As a result, Rung issued guidance to agencies about the ongoing actions that the Federal government is taking to improve on this. These include:

  • Buying as one through category management - “By bringing common spend under management, including collecting prices paid and other key performance information that allow easy comparisons, we will ensure that agencies get the same competitive price and quality of performance when they are buying similar commodities under similar circumstances. We will also free up agency acquisition personnel to focus on complex agency-specific procurements.”
  • Deploying talent and tolls across agencies & growing talent within agencies to drive innovation - “Opening the acquisition system to greater innovation is critical to ensuring the best results from our contracts. We must embrace practices that encourage new and better ways of thinking and expand access to the most innovative companies. As part of this effort, within 180 days of the date of this memorandum, the Office of Federal Procurement Policy (OFPP) will work with the Office of Science and Technology Policy (OSTP) and other agencies to develop a plan for increasing digital acquisition capability, and the U.S. Digital Services, in partnership with OFPP, will pilot a program to train agency personnel in digital IT acquisitions and deploy trained personnel back to their agencies to encourage innovative acquisition practices Government-wide.”
  • Building stronger vendor relationships - “Early, frequent, and constructive engagement with industry leads to greater innovation and better outcomes. Such engagement is particularly important for complex, high-risk procurements, including those for large IT projects. We’ve taken several steps toward that end, including the launch of our first online national dialogue with industry earlier this year, and a pilot for a new tool for vendors to provide constructive feedback on agency acquisitions. These were important first steps. But we need better customer-facing tools and more ways to get feedback from industry on a regular basis.”

Lessons from the UK

The comparison between what the US is saying and the actions of the UK a few years ago are striking. All the same problems and it seems very similar responses. And that’s not a bad thing, the UK saved millions and millions of pounds by doing exactly this - consolidating contracts and acting as one buyer.

But what the US should keep in mind (without sounding too patronising) is that these sorts of deals and changes do deliver great short term savings, but they don’t necessarily achieve the long-term results that are required.

And by long-term results I mean changing the way that government operates and shifting its approach to digital development.

This is what the UK is having to think through now with government-as-a-platform. Whilst that

may not absolutely be the correct answers, it shows that making some savings on existing contracts and buying software in a different way wasn’t enough.

Culture remained a problem, procurement teams refused to adapt, outsourcing still happened and ‘new’ services were essentially lipstick on a pig.

What the US needs to be thinking about is what comes next? Are they going to attempt the platform route too? Is this just about savings or are they willing to make investments too? What are they doing to do about government systems at a state level? What are they going to do about skills?

All of these things have proved to be fundamentally challenging for the UK - and the US should be looking at where we have gone wrong so that they can side-step the same mistakes.

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