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CHIPS Articles: SPAWAR Contracting Team Awarded for Performance-Based Licensing Structure Innovation

SPAWAR Contracting Team Awarded for Performance-Based Licensing Structure Innovation
By Kara McDermott, Space and Naval Warfare Systems Command Public Affairs - April-June 2016
The National Contract Management Association (NCMA) has awarded a Space and Naval Warfare System Command (SPAWAR) contracting team the Innovation in Contracting Award for implementing a performance-based licensing structure.

Matt Hudson and his team are being recognized for their work on the Defense Healthcare Management System Modernization (DHMSM) program, which provides for the acquisition of commercial electronic health record (EHR) inpatient and outpatient solutions. The contract's management solution encompasses an innovative software licensing approach that drastically simplifies the administrative burden on the government.

Most large-scale government IT or software contracts rely on a 'by-user' or 'by-seat' methodology for acquiring such software or services. The DHMSM contract utilizes a performance-based licensing structure that acquires an enterprise solution so that the entire Department of Defense (DoD) user base can be licensed at all times as the EHR is deployed on a global basis. This means that the government would not have to track, buy or update licenses as the landscape of more than 203,000 end users inevitably changes over the course of the 10-year contract.

"The approach to utilize a performance-based license structure on such a large contract has never been attempted," said Nancy Gunderson, SPAWAR director of contracts. "Mr. Hudson's innovative idea can be applied to almost any acquisition of commercial software both in the DoD and in other government agencies, which will lead to significant cost savings."

As the solution is deployed to DoD hospitals and clinics, the contractor is awarded a task order that acquires the next corresponding increment, proposed by the contractor, of the enterprise license on a fixed-price basis. By the end deployment, the government owns a perpetual enterprisewide license that covers the use of the EHR for all DoD users regardless of user count or user location.

This unique approach allows DoD clinicians to focus on caring for service members and their beneficiaries and not about which license applies to which user, computer, location, facility or device.

The contract management solution employed by DHMSM, and devised by Hudson and his team, eliminates management burdens entirely by shifting the business of license management to the contractor. The contracting and program offices can now focus all their efforts into oversight of the contractor's performance. This management solution has the potential to save the government in future personnel costs.

While the DHMSM contract has only been in effect for less than a year, the value of the management solution can be corroborated by the staffing plans for the DHMSM contracting office. The contracting office is managed entirely by a staff of two, and future out-year staffing plans to manage the contract's multiple global deployment task orders are currently set at less than half a dozen. Compared to staffing profiles for DoD IT contracts utilizing traditional management solutions, the value of the DHMSM contract's approach is readily apparent.

"We had the perfect situation where we were able to think outside the box to avoid the same pitfalls of other DoD acquisitions," said Hudson. "By hosting multiple industry days and being extremely transparent about our expectations and requirements, we were able to get the solution we needed for a constantly changing environment."

The DHMSM contract was awarded on July 29, 2015 after full and open competition, with an award amount of $4.33 billion.

Hudson and his team's creative solution has already realized significant cost savings for the acquisition of the actual software and will realize even more with the subsequent program and contracting office administrative staffing reductions.

The Innovation in Contracting Award was evaluated based on business impact, maturity, relevance and innovation. Hudson will accept the award in July at the NCMA World Congress in Orlando, Florida.

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