Improvements to how agencies buy goods, services bear out little fruit

In part 4 of Federal News Radio’s special report, The Obama Impact: Evaluating the Last Four Years, we examine progress the administration has made in the acquisition arena. We rated one initiative as effective (green), three as ineffective (red) and two as more progress needed (yellow). View the details of each initiative through our interactive dashboard.

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ACQUISITION

Strategic Sourcing   DoD Acquisition Process
High-Risk Contracts
  Insourcing / Inherently Governmental
Small Business Contracting
Industry / Government Relationship

President Barack Obama put improving the federal acquisition process at the center of his management initiatives. Over the last three years, the Office of Federal Procurement Policy focused on three broad goals:

  • Demonstrating fiscal responsibility – OFPP wants agencies to ensure competition, reduce the number of high risk contracts, such as time and materials and labor hours types, and improve the efficiency of their buying by, in part, moving toward strategic sourcing to take advantage of the government’s size.
  • Strengthening the acquisition workforce – The goal is to have a better trained and equipped contracting officers and contracting officer’s representatives.
  • Performance of inherently governmental and critical functions – Agencies have been reviewing the makeup of their contractor and employee workforces and figuring out the best balance of the two, paying close attention to jobs that should only be done by federal employees.

None of these areas are new. Under other administrations, OFPP’s goals would have looked very similar.

The biggest difference, however, is the attention many of these goals received from the White House. And that’s why the expectations, in some regards, were greater than ever before. At the same time, the attention to reducing agency budgets led to a more in-depth focus on better acquisition performance.

In part 4 of Federal News Radio’s special week-long multimedia series, The Obama Impact: Evaluating the last Four Years, we focus on how the administration performed against many of their top acquisition initiatives.

Strategic sourcing

The administration decided to dust off the idea that the government is one big shopper and not 130 medium sized ones as part of its Campaign to Cut Waste.

Other White Houses have tried and failed to get agencies to take advantage of volume discounts. But the Office of Federal Procurement Policy’s push over the last three-plus years finally has resonated with agencies.

Former OFPP Administrator Dan Gordon on the benefits of strategic sourcing (interview)

Former OFPP Administrator Dan Gordon issued a memo in December 2009 detailing strategic sourcing as a priority.

The General Services Administration reenergized the office supplies contract and created a blanket purchase agreement for 15 companies. It also is moving print management, mobile devices and service plans and IT commodity hardware strategic sourcing vehicles.

On Performance.gov, OMB said the government is saving $40 million a year on office supplies, expects to save 30 percent off printing and copying costs, and expects to save at least $100 million on wireless devices by the end of fiscal 2013.

Additionally, several agencies — the departments of Commerce, Homeland Security, Interior, Agriculture and the Air Force — have issued memos requiring or strongly encouraging the use of the office supply BPA, meaning agency buy-in is stronger than ever before.

Congress also is seeing the benefits of strategic sourcing. Sens. Scott Brown (R-Mass.), Susan Collins (R-Maine) and Joe Lieberman (I-Conn.) co-authored the Acquisition Reform Bill in 2011 to require more robust use of federal strategic sourcing vehicles, which allow the government to consolidate its shopping lists and buy in bulk, rather than have each agency pursue its own procurements.

Strategic sourcing isn’t without its detractors. Small businesses, especially who sell office supplies to the government, are feeling the brunt of the impact of these contracts and are being cut out of the process. Others say the government isn’t saving money because they are reducing competition.

Inherently Governmental

Many believed the Obama administration would turn the government 180-degrees from the Bush administration’s push for competitive sourcing under Circular A-76. Initially, many thought there would be a major effort to bring jobs back into government through insourcing.

OFPP said the initiative was not about bringing jobs back into government, but finding the right balance between the contractor and federal employee workforces.

David Childs, program manager at Management Analysis, Inc., and Jacob Pankowski, chairman of Greenberg Traurig’s government contracts group, discuss government insourcing efforts (interview)

Then-OMB Director Peter Orszag issued a definition and rules around inherently governmental, creating two new categories closely related to inherently government and critical functions.

But after this initial thrust, little has come of it.

As of October 2009, the Government Accountability Office found “None of the nine civilian agencies we visited met the statutory date for developing and implementing their insourcing guidelines and procedures. Although one agency issued preliminary guidelines, and two others had drafted but not issued their guidelines as of our review, most of the agencies’ efforts are still in their early stages.”

Soon, the Defense Department realized that effort wasn’t saving the government money.

In February 2011, the Army put the brakes on insourcing, finding the service needed to more analysis.

The acquisition workforce has grown, but not by leaps and bounds. DoD insourced 17,000 positions, according to the GAO, but few other agencies followed suit.

Industry/Government Relationship

Over the last decade, the communication between contractors and agencies revolved around industry days, request for information and a host of steps to ensure fairness across the board.

What got lost in the concern over making sure everyone receives the same information is the importance of real discussions about how to solve agency problems. Then OFPP Administrator Dan Gordon recognized this long-standing challenge, writing in the first Mythbusters memo that “… agencies often do not take full advantage of these existing flexibilities. Some agency officials may be reluctant to engage in these exchanges out of fear of protests or fear of binding the agency in an unauthorized manner.”

Steve Grundman, Lund Fellow at the Atlantic Council, on improving the relationship between government and industry (interview)

Gordon issued the first Mythbusters memo in February 2011 detailing 10 common misconceptions and the facts around vendor/agency communications.

In May 2012, OFPP issued Mythbusters 2 to dispel eight more misconceptions.

Both of these memos have had limited success.

The best example of the lack of progress is a Homeland Security Department draft vendor guidance from the National Protection and Programs Directorate. While NPPD never issued the vendor communications checklist, it showed a lack of penetration of the Mythbusters memo.

IBM Federal General Manager Todd Ramsey told Federal News Radio in June a lack of communication too often is the biggest problem between vendors and agencies. He said the Mythbusters campaign is not as effective as intended.

A Federal News Radio survey of Chief Acquisition Officers in December 2011 found 43 percent of the respondents said Mythbusters hasn’t had an impact yet on their agency. In a second Federal News Radio survey of CAOs in August, 37 percent of the respondents said Mythbusters is not effective and another 12.5 percent said it’s losing steam.

Small Business Contracting

Every administration comes into power with the rhetoric highlighting the importance of small businesses, declaring a common pronouncement: “Small businesses are the engine that runs the economy.”

President Obama highlighted the importance of small businesses in his weekly address to the nation in March 2009 and several more times over the past three years.

Multimedia report on small business contracting

The President created a small business task force in April 2010 to increase federal contracting opportunities for small firms.

But more than two years later, agencies again failed to meet the 23 percent governmentwide small business goal and most of the other socioeconomic targets. It’s been six years, since agencies reached the governmentwide goal.

Not only did they miss the mandated goals, but the amount of money going to small firms dropped by more than $6 billion in 2011 as compared to 2010. So far in 2012, agencies are reporting that they meet only one of the five governmentwide goals.

House lawmakers also want to increase the small business goal to 25 percent, but the White House has not come out in support of or against the bill.

The task force was suppose to recommend innovative strategies, suggest how to remove barriers, expand outreach to small companies and establish policies to help these firms win contracts.

OFPP and the Small Business Administration highlighted best practices based on recommendations from the President’s Management Advisory Board in a June 2012 memo. It’s too early to tell what impact that memo is having.

The one major accomplishment for the White House is with the passage of the Small Business Jobs Act, agencies now can set-aside for small businesses specific task orders under multiple award contracts. The Federal Acquisition Regulations Council issued an interim rule in November 2011 detailing how task orders should be set-aside for small firms.

High Risk Contracting

Agencies flocked to use time-and-materials, labor hours and cost reimbursement type contracts over the past decade. In a July 2010 memo, the White House said between fiscal 2000 and 2008, total spending on cost-reimbursement contracts increased to $135 billion from $71 billion. Agencies also saw a huge jump in the use of time and materials/labor hours (T&M/LH) contracts, awarding $29 billion in 2008 up from $8 billion in 2000.

Special report on reducing high-risk contracts

The Office of Management and Budget directed agencies to cut by a lofty 10 percent T&M/LH and noncompetitive awards.

While some agencies made progress, governmentwide results were disappointing, according to a November 2011 Government Accountability Office report. The report showed agencies cumulatively reduced the use of newly awarded high-risk contracts as a share of base contract spending by just 0.8 percent — falling far short of the ambitious 10 percent goal.

In individual categories, agencies made some progress, reducing the percentage of dollars awarded in new T&M/LH contracts by 19 percent between 2009 and 2010, according to a July 2011 report from OMB.

Despite the failure to meet the goal, experts told Federal News Radio OFPP’s initiative raised awareness about the importance of matching the proper contract type with an agency’s mission.

OFPP has yet to report 2011 progress on reducing these types of contracts.

DoD Acquisition Process

The Defense Department accounts for 70 percent of all government procurement. Over the last decade, flush with cash from the war on terrorism and pressed with urgent operational needs, the military managed its acquisitions less carefully than it might have under today’s somewhat more austere circumstances.

In 2010, Ashton Carter, then the undersecretary of Defense for acquisition, technology and logistics and now the deputy secretary of Defense, said his goal was to drive unnecessary costs out of the $400 billion DoD spends each year on goods and services.

Carter introduced the Better Buying Power Initiative in September 2010. The 23-point strategy focused on affordability, controlling cost growth, providing incentives for contractors to be productive and innovative, promoting competition, reducing red tape and improving how the DoD buys services.

Progress has been slow, but real, according to Defense officials.

Frank Kendall, who now is the undersecretary for AT&L, said the successes of Better Buying Power have led to the acquisition community grasping the idea of “should cost” management. Under this approach, which took a while to catch on, the DoD should manage programs in accordance with what they should cost, not what history has suggested they would cost.

Kendall also said DoD has done a good job in setting affordability caps for individual programs so that cost and schedule are fixed and a program’s technical requirements meet those variables rather than the other way around.

He said the next challenge is actually enforcing those caps and pushing the military’s operational communities to throw niche technical requirements overboard when they prove to be unafforable.

DoD will revise the Better Buying Power effort in the coming weeks.

Kendall said the new guidance will emphasize that the government has multiple contract types for a reason and that acquisition employees should choose the best type for whatever they’re working on.

He said the Pentagon also is rebooting the earlier effort to expand the Navy’s preferred supplier program across the rest of DoD. Kendall said it didn’t work in the first incarnation of the initiative because no one could agree on the details of the program. The Navy is taking it back and developing something the entire department can use.

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More from the special report, The Obama Impact: Evaluating the Last Four Years

Obama administration a mix of successes and failures

Part 1: Evaluating the Obama administration’s management initiatives

Part 2: Technology reforms gives agencies a needed lift

Part 3: Administration recognizes quality of work depends on quality of workforce

Part 4: Evaluating Obama’s acquisition initiatives

Part 5: What would a second-term for President Obama mean for feds?