So over the past eight years, there has been a five-fold increase in commercial item regulations. This not only complicates vendors’ compliance efforts but also adds new complexities to negotiating contracts.
Joe Fengler, who leads AIA Commercial Items Working Group, said at the recent Section 809 panel meeting in Arlington, Virginia, the extraordinary increase in acquisition regulations are costing agencies and vendors time and money.
“The flow down requirements are huge for contractors and subcontractors,” said Fengler, whose full-time job is director of government affairs for Honeywell. He is a former staff member of the House Armed Service Committee and spent eight years as working on the budget and finance issues for the Army. “Over the last eight years, through the 5200 series guidance, the number of flow down requirements increased to 61 for companies and their supply chains. Companies are required to certify these requirements, and it’s a huge problem, especially when selling and buying on price.”
Fengler is referring to the DoD’s swing to using lowest-price technically acceptable (LPTA) in the mid-2010s.
He said regulations such as the “don’t text while driving program” that the FAR Council promulgated in 2012 are examples of the difficulties of overseeing many of these regulations.
Few would argue that texting while driving isn’t dangerous and something we all shouldn’t avoid, but asking a company such as Lockheed Martin or Boeing to make sure an employee of a tier-two subcontractor isn’t doing the equivalent of texting while driving appears to be unrealistic.
And that’s where the Section 809 panel can help.
Congress authorized the Section 809 panel in the 2016 Defense Authorization Act to review acquisition regulations related to DoD and make recommendations to streamline and improve the efficiency and effectiveness of the process to maintain the military’s technological advantage.
The panel, which includes current and former acquisition experts such as the panel’s chairwomanDeirdre Lee, the former head of Defense procurement and administrator in the Office of Federal Procurement Policy; Elliott Branch, the Navy’s deputy assistant secretary for acquisition and procurement; Maj. Gen. Casey Blake, the Air Force’s deputy assistant secretary for contracting; and Claire Grady, the director of Defense procurement and acquisition policy.
By the third quarter of 2018, the Section 809 panel is supposed to deliver Congress a report detailing whether each regulation should be kept as-is, changed or repealed.
At the most recent meeting in April, Fengler tried to make the case for the panel to address this eyeopening increase of commercial item regulations.
And Fengler said all of these regulations around commercial items impact how the government, and DoD more specifically, are viewed as customers.
“Through these laws and regulations, as a commercial company we recognize that the customer comes with 141 regulations that aren’t required when we sell, for example, to Gulf Stream,” he said. “Honeywell and most commercial aerospace companies are not cost accounting standards (CAS) compliant. We do have standard costs. We have standard costs to repair an engine, for example. But under CAS, the government wants to know how many exact hours it will take, or what is the exact price of the products? For Honeywell or any large company to be CAS compliant on production items, it would require us to change the entire process.”
Of course, the larger the company, the more costly it is to meet these regulations, and whether the government wants to admit it or not, those costs are passed back to them in the form of general accounting and overhead fees.
This review of commercial items becomes even more important when you consider the spending rate by agencies.
In fiscal 2016, 52 percent of all DoD actions were commercial in nature. These accounted for about 16 percent of all obligations with the Defense Information Systems Agency, the Defense Logistics Agency, Washington Headquarters Services, the Army and the Defense Health Agency being the top five buyers of commercial items.
Among non-DoD agencies, 53 percent of the Homeland Security Department’s actions were commercial with the Coast Guard (48 percent) and the Transportation Security Administration (33 percent) as the top components.
This is why federal acquisition experts are pushing for the Trump administration’s new OFPP administrator to make reducing regulations a top priority.
Roger Waldron, the president of the Coalition for Government Procurement, wrote in February that the executive order opens the door wide to review procurement regulations.
“Across the procurement landscape, there is no better opportunity to reduce regulatory costs in accordance with the EO than the General Services Administration’s portfolio of governmentwide contract vehicles, including the Multiple Award Schedule program,” Waldron wrote in his blog. “GSA has an opportunity to reduce regulatory costs, streamline processes, and increase access to the commercial marketplace. Immediately, GSA should engage in a wholesale review of its procurement processes, focusing on commercial item contracting, including the GSA Multiple Award Schedules program, to identify and eliminate costly and unnecessary government unique terms, conditions, policies, procedures, and requirements.”
The Procurement Roundtable, a group of former federal acquisition experts, wrote a letter to President Donald Trump in January offering their recommendations on how to improve federal procurement.
While leadership is among the most important factors, the experts say the 18,000-page FAR is just too cumbersome and daunting, particularly for firms new to the government market.
The roundtable recommended the Trump administration conduct a review of all acquisition regulations and policies with a goal of reducing them and including sunset provisions in existing ones to force a periodical review.
David Drabkin, a former GSA senior procurement executive, said the administration also could add a cost-benefit analysis to determine the costs to both contractors and agencies. He said that’s analysis particularly for agencies is rarely if ever done.
The push coming from experts, associations and companies to reduce and reconsider many of these commercial regulations is more than just a coincidence and agencies should pay attention to this trend line and even get ahead of the curve.