A focus on outcomes brings program success to government and industry
By Thomas Romeo
Since its founding more than 200 years ago, our government has worked toward one common goal: to serve the American people. But over time, the needs of citizens have changed – and in response, the government’s needs have evolved as well. Agencies must be more modern, efficient and effective than ever before in order to deliver the services that today’s citizens require while also operating within the current austere budget conditions.
This shift in the way that government must serve citizens creates an incredible opportunity to transition toward a different approach to contracting – one that encourages more innovation, the delivery of cost-effective services, equitable risk sharing between agencies and contractors and maximum return on investment for taxpayers.
Outcomes-based: A modern approach to mission success
Common contract models such as cost-plus, time and materials and firm fixed price have been used for decades to facilitate the delivery of goods and services to government. Now, a new approach to meeting mission goals has begun to gain traction with U.S. procurement officers and agency leaders.
Outcomes-based contracting is an approach to procurement that encourages accountability on the part of the government and the provider by linking payments to a contractor’s ability to achieve a set of defined outcomes. In other words, in an outcomes-based model, contractors are paid only for the results they deliver.
By focusing on outcomes — rather than processes and outputs — contractors are incentivized to perform quality work because their compensation is dependent on delivering measurable, sustainable results. The approach benefits the government further in lower cost for recompetes and contract options, and also improves the partnership between the government and contractor by ensuring the statement of work is aligned to its desired result. Unlike other program models, the government doesn’t assume all of the risk, because the contractor is held accountable for its ability to achieve the stated outcomes. If the contractor does not deliver the full intention of the contract, the government does not pay the full amount of the service fee. As a result, there is little or no “gray area” between the contractor’s delivery, the agency’s mission and the end-customer’s expectations.
Current and future successes
Governments in the U.K., Australia and others have been using an outcomes-based procurement methodology for years with remarkable success, and the same principles can readily apply to the U.S. market. When executed effectively, this type of procurement model incents the contractor to more effectively leverage expertise and resources to yield tangible, meaningful results.
This new contracting model has already achieved success in the U.S. as well. One program using its approach is the District of Columbia Temporary Assistance for Needy Families (D.C. TANF) jobs program, which supports participants and their families in overcoming barriers to employment.
Traditional government employment programs are evaluated by metrics such as the number of interviews an applicant goes on or how quickly they are placed in a job. Yet because that approach rewards the process, not the result, it encourages the contractor to send the candidate to many interviews, but not necessarily ones that could lead to employment that will build long-term self-sufficiency. In contrast, the D.C. TANF program measures its success based on long-term job placement, and compensates the contractors according to their efforts to support the program at four milestones: initial engagement, job placement, 45-day job retention and 90-day job retention. This focus on finding the candidate sustainable employment versus merely achieving specific tasks puts the onus on the contractor to help individuals establish routines, achieve stability, position themselves for career advancement and, ultimately, transform jobs into sustainable careers.
Outcomes-based contracting has important future application as well. Right now, leaders across the political spectrum are engaged in the bold and necessary legislative thinking that may result in federal immigration reform. Implementing these reforms involves engaging millions of people, many of whom have no permanent records under their true identities, lack proper documentation, or formal legal status. Reforms may also significantly impact the worker Visa programs forcing new registration, monitoring and labor market assessment activities.
Federal, state and local governments would likely turn to contractors for help in enacting the law because the private sector can supply both flexible and scalable solutions to meet the wide-ranging needs of such an effort. Within each contract rests an opportunity for ensuring that budget dollars are put to the best use and tied to the results that the Congress and President have for immigration reform. Whether reform occurs via sweeping legislation or piece by piece, these are significant changes that can impact our nation in a time of great fiscal challenge. Immigration reform is an ideal arena for outcomes-based contracting to make a positive contribution to the overall effort while managing costs and achieving measurable results for citizens.
Industry has been presented with an incredible opportunity to make a lasting impact on government during this time of change. Through an outcomes-based approach to mission success, we can share the responsibility for delivering cost-effective results to citizens while also adding tremendous value to the service they receive, whether through health care, immigration, employment or other citizen programs. During a time of transformational change within citizen services, outcomes-based contracts have an important role to play as vehicles that drive performance, encourage innovation, share in both risk and reward and motivate positive change in program operations for the long-term success of both government and industry.
Thomas Romeo is President of MAXIMUS Federal Services, a subsidiary of MAXIMUS Inc. dedicated to providing business process management solutions to federal government agencies and programs.