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Contract Management: Commercial Use of Share-in-Savings Contracting

GAO-03-327 Published: Jan 31, 2003. Publicly Released: Mar 04, 2003.
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The Congress and federal agencies are increasingly turning to performance-based contracting methods to enhance the delivery of government services. Share-in-Savings (SIS) contracting--in which the contractor assumes more risk by investing upfront costs but also receives a share in any savings generated by its efforts--is one performance-based technique that Congress is trying to promote. We were asked to examine its use by industry in terms of whether there were any key conditions that needed to be in place to make this technique successful. In conducting our review, we found that the form of SIS used in a commercial contract varied by contract. Some contracts employed a basic SIS approach, in which a contractor's total compensation was paid entirely through sharing a portion of a client's savings or increased revenues. And some employed a tailored approached in which contractors were paid for at least some portion of their time and materials costs, even if savings or increased revenues were not realized. We performed a detailed analysis on four specific contracts to identify conditions that fostered success.

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Contract administrationProgram evaluationContract performanceFederal agenciesCost savingsEnergy savingsEnergy efficiencyPerformance measurementEnergy conservationCost control