June 2, 2003
MEMORANDUM FOR THE HEADS OF DEPARTMENTS AND AGENCIES
|Mitchell E. Daniels, Jr.
Reducing Cost and Improving Quality in Federal Purchases of Commercial
The federal government plans to spend more than $58 billion on information
technology (IT) products and services in fiscal year 2003. More than 4 million
desktop, laptop, and networked computers serve as essential tools for achieving
the missions of federal agencies. Since each computer uses at least one
commercial software package, federal agencies engage in thousands of licensing
agreements annually. This uncoordinated approach to acquiring common software
is wasteful and ineffective.
If the federal government applied a government-wide approach for enterprise
licenses on common software, there would be substantial benefits to the
taxpayer. Several agencies have negotiated independent department-wide licenses,
creating a wide disparity in prices paid by agencies for exactly the same
software. As an example, the amount that federal agencies pay for common
desktop software varies from under $200 to about $500. If all agencies made
joint use of the best priced software licenses, well in excess of $100 million
could be saved each year. In addition, the broad mosaic of different software
versions installed increases the difficulty and cost of securing federal
There can be no doubt, therefore, that the federal government can become
a smarter buyer of commercial software. Pursuant to Section 5112 of the
Clinger-Cohen Act of 1996, OMB is responsible for improving the acquisition
and use of information technology by the federal government and designating
Executive agents for government-wide acquisitions of information technology.
To assure that the federal government is leveraging its immense buying power
to achieve the maximum cost savings and best quality for commodity software,
OMB has created the SmartBUY initiative.
The General Services Administration (GSA) is designated the Executive Agent
under Section 5112(e) of the Clinger-Cohen Act for the SmartBUY interagency
initiative, and will lead the interagency team in negotiating government-wide
enterprise licenses for software. We expect the GSA led team to negotiate
these enterprise licenses by the end of fiscal year 2003. The SmartBUY initiative
includes commercial off-the-shelf software that is generally acquired using
license agreements with terms and prices that vary based on volume. The
SmartBUY initiative will include the following types of software licenses:
Office Automation; Network Management; Antivirus; Database; Business Modeling
Tools; and Open source software support.
In view of the benefits from enterprise licensing, each agency is asked
to assist and support the SmartBUY initiative. Specifically, agencies must
participate in SmartBUY by:
- Providing information and input on existing agreements, current prices,
unique terms and conditions, and future needs for relevant software.
The SmartBUY team is collecting this information, using a web-based
survey, for consideration in an overall acquisition strategy;
- Developing a migration strategy and taking contractual actions as
needed to move to the government-wide license agreements as quickly
- Integrating agency common desktop and server software licenses under
the leadership of the SmartBUY team. This includes refraining, to the
maximum extent feasible, from renewing or entering into new license
agreements without prior consultation with, and consideration of the
views of, the SmartBUY team.
As discussed above agencies should, to the maximum extent practicable, refrain
from entering into any new or renewal software licensing agreements pending
a review by OMB and the SmartBUY initiative team.
These steps are necessary to better manage information technology resources
and save taxpayer dollars. In fulfilling those IT management requirements,
OMB will work with the SmartBUY team and agencies to ensure success in this
effort, including consistency with the Administration's policies to promote
competition and opportunities for small businesses. Please have your agency
designate a point of contact for this initiative by June 6, 2003, to
Kimberly Nelson of my staff at (202) 395-3787 or by email at KNelson@omb.eop.gov.
Your cooperation in making SmartBUY a success is greatly appreciated.