NASA was the federal agency to put the first man on the moon. Now it is leader in another strange new landscape: incentive-based IT outsourcing. The Outsourcing Desktop Initiative for NASA (ODIN) has happily outsourced 45,000 desktops and 40,000 telephones in a 12 year, $13 billion multi-vendor contract.
ODIN transfers the responsibility and the risk for providing and managing the vast majority of NASA’s desktop, server and intra-center communications assets and services to seven vendors who have won the ability to bid on NASA’s needs. Currently, three suppliers are working on contracts from ODIN. They include Intellisource, OAO Corporation and Science Applications International Corporation.
Faced with a fixed budget and a decreasing workforce, NASA was forced to find a way to use its IT dollars most effectively. In addition, the space agency had a problem recruiting and retaining skilled IT professionals without paying salaries that were headed toward the moon.
Moreover, technology life cycles were growing ever shorter; it was a full time job for NASA scientists to keep up. Finally, computers and land lines were also light years away from the space agency’s core missions that included “launching the space shuttle, training astronauts and looking at the earth and beyond,” says Mark Hagerty, NASA program manager for ODIN.
Being a government agency added to the difficulty. NASA often purchased many of its computers only if there were dollars available at the end of a fiscal year. Then the agency would have to keep the computers five years or longer even after they became as obsolete as an Apollo rocket. “That’s a crazy way to plan for your IT needs,” says Hagerty.
Buying Bundled Services by the Seat
Outsourcing allows NASA to buy bundled services by the seat from its preferred providers. If an employee leaves, NASA simply turns in the seat and doesn’t have to pay for a computer or phone line that’s sitting idle. If a visiting scientist or a summer intern arrives for a three month stay, NASA’s vendors can supply the equipment they need for that short term.
Outsourcing gave NASA a 24/7 help desk for the first time. The ODIN contract also contains a technology refresh plan “that actually makes sense,” says Hagerty. The contracts require the vendor to deploy new software suites within 12 months of their commercial release.
NASA’s staff negotiated a master contract with its seven providers. (The others include Computer Sciences Corporation, DynCorp, FDC, and Wang.) Now, whenever one of the eleven NASA centers wants to outsource NASA services, they go through an established delivery order selection process. Since the bulk of requirements are already clearly delineated in the master contract, the center simply customizes its needs. Any of the seven suppliers can compete for this work. The winner signs a three year delivery order.
Incentives form the foundation of the contract. ODIN has two retainage pools. The performance retainage pool is subjective, Hagerty explains. NASA withholds 3 percent of its monthly invoice in the performance pool. Every six months the ODIN manager at each NASA site evaluates the supplier’s performance, then forwards the report to Hagerty. The executives take a telescopic look at the relationship, discerning how well the primary provider is working with other ODIN providers at the site as well how effortless the operation seems to be.
The Metrics Retainage Pool
Metrics are the basis for the second retainage pool. NASA withholds 1 percent of its monthly invoice for this pool, which is distributed monthly. This pool is solely based on numbers.
NASA tracks three metrics for this incentive pool. “We tried to keep this as simple as possible to keep our overhead as low as possible,” Hagerty explains. The supplier must meet all three metrics to qualify for the cash. The three metrics are:
- Availability. The network and the desktops must be available 98 percent of the time.
- Service delivery. The supplier must complete the requested service from two hours to three business days (depending on the service level selected) 98 percent of the time.
- Customer satisfaction. Ninety percent of the customer surveys have to be favorable.
The pools began in May 1999. To date the suppliers have had no trouble meeting the availability metric. In fact, they have never missed it. However, the customer satisfaction metric and the service delivery metric performance seem to hover on the edge of the metric.
Since then NASA has distributed 16 or 31 percent of the available pools. This year performance has improved; Hagerty expects greater distributions in 2000. He says NASA set up the incentives so that it would encourage the vendors “to get these dollars.”
Private Companies Come Calling
Creating the incentives forced NASA to clearly enunciate its expectations and goals, which aided the suppliers in understanding what they had to do. Hagerty likes the incentive contract because he can budget more precisely. It also transfers asset management to the supplier so NASA doesn’t have to worry about obsolescence.
After 16 months Hagerty says the ODIN service model, which is currently servicing six NASA centers, is “holding up extremely well.” Word of its success is spreading through the federal government. The Health Care Financing Administration used the ODIN contract to outsource 4,800 desktops.
Hagerty reports that representatives of State Farm Insurance visited his office recently to learn how to outsource a large number of seats using an incentive contract. The government usually lags behind the private sector in most business functions, but not this time. NASA has blasted ahead of everyone.
Lessons from the Outsourcing Primer:
- Outsourcing allows NASA to buy bundled IT services by the seat, paying only for the seats it actually uses.
- NASA scientists can concentrate on core capabilities like training astronauts and launching the space shuttle instead of keeping up with technology, which had become a time-consuming process.
- The space agency uses two retainage pools as incentives. The performance pool (3 percent) is subjective. The metrics pool (1 percent) is based on statistics.
- Writing the metrics forced the customer to clearly define its expectations and goals, giving the supplier clear instructions about what was expected.