Monday, April 13, 2009

Speed Over Prudence in Stimulus Spending

Last week at the National Contract Management Association World Congress, we discussed many issues facing the federal contracting community. Among them was the push for transparency and accountability from the Obama Administration, specifically in the oversight that will be associated with Stimulus spending.

I would like to begin that conversation with the article in the Washington Post, which begins with the assumption that waste, fraud, and abuse to the tunes of billions is somehow inevitable in the rush and urgency to spend the money and get the economy rolling again.

Missing amid all these high-minded calls to protect taxpayer dollars is an awkward question: When the whole point of a major government spending program is to stimulate the faltering economy as quickly as possible, what exactly counts as "wasted" money? After all, if some stimulus cash is misspent -- say an errant official or contractor buys himself a Cadillac or a Harley Davidson, only to suffer the full force of law -- might not such fraud boost the economy more than if the cash languished in a law-abiding state account? All that monitoring, however well-intentioned, may undercut recovery by compelling officials to spend more slowly to avoid hearings, prosecution, or embarrassment in the media… (Emphasis mine)

This is an interesting point that is causing serious issues with how best to keep track of the funds, and may lead to what I call an “analysis paralysis.” Relating this theory to DoD programs, officials often want the best solution, which to DoD means a system that meets 100% capability. Perfection is nice, but is it realistic? Is it in the best interest of the warfighter or taxpayer? Instead, focus on the 80% solution, and get capability quickly fielded and perfected with incremental additions of mature technology. For the Stimulus funding, it is the same theory. Federal officials may be so paralyzed of making a mistake and being called out on the carpet, that spending decisions may be slow-rolled and second-guessed in an environment of risk aversion.

My colleague Steve Schooner of George Washington University makes the point in the article:

"If the goal for the stimulus spending is to minimize fraud and waste to the point of zero, I know how to do that: All I have to do is not spend the money,"

.. "Are we capable of grasping the concept that in a struggling economy, it's more important to throw money at the problem, even if it's possibly inefficient and possibly inaccurate?"

The purpose of the Recovery Act was to help push broader policy initiatives for healthcare, energy, and education. Therefore, the stimulus funding needs to have the desired impacts on policy, but also has been placed under the microscope of oversight. Here is the where the paralysis is feared, as some in Congress are keeping a very close eye for even the slightest hints of problems amid association with Iraq or Katrina contracts and pictures of millions in $100 bricks being handed out with little accountability.

The enormous amount of attention to stimulus funding is creating a burdensome process that continues to be defined, and redefined. Agencies and contractors must spend enormous amount of resources creating reports, further burdening an acquisition workforce under siege. There appears to be a lack of commitment on data feeds with, with complaints on the rise that little useful information is being provided to create the real-time informational reports that were envisioned with its creation. Therefore, just the reporting is becoming a huge impediment to Stimulus will processes and procedures that seem to be conflicting or self-defeating.

Further complicating the issue is what gets defined as "waste," and what is being targeted. Some in Congress, along with Offices of the Inspector General, are concerned with blatant fraud and abuse, while some see anything short of the bill's specific policy aims as a failure. This of course includes political gamesmanship on both sides of the aisle, which will invariable further slow the process and question spending that can be used as a political weapon. Of course the issue of risk aversion is never far away, as stated by Alan Chvotkin of the Professional Services Council:

the oversight is putting a scare into federal officials whose agencies are undermanned as it is when it comes to contracting and procurement. "Most of the agency officials, the career officials, are risk averse," he said. One such individual he spoke with told him that the White House was behind the official "with a hot pitchfork to get the funds out," Chvotkin said, "yet he knows whatever action he takes is going to be reviewed by a lawyer or his inspector general or Mr. Devaney, so he's saying, if it's going to be [me] in a sling, this is going to be done on my timetable.".. (Emphasis mine)

We seem to be repeating some of the issues and tensions experienced by President Roosevelt, who in 1933 created the Public Works Administration and the Civil Works Administration to get America out of the Great Depression. These two agencies had different philosophies, and different imperatives on stressing speed over prudence. It is a policy focus being fought today, although I fear that prudence may be winning the fight over speed. Some in Congress, however, are bringing important questions to light:

Amid the calls for oversight, Sen. George Voinovich (R-Ohio) issued a rare dissent. "Does this make sense?" he said at last month's hearing. Officials "are filling out all these reports and they're going to ask the question, 'Do they want us to do [stimulus] or are they more interested in the reports?'…

Some level of waste or fraud is inevitable, but the questions have to be raised about what level we are willing to accept with the broader focus of getting the economy back on track and getting people back to work. I agree with the Interior Department's highly regarded inspector general, Earl Devaney, who stated in Congressional testimony that assuming fraud will be ferreted out with the tremendous amount of transparency and accountability called for in the Recovery Act is naïve. There has to be a proper balance between actual stimulus, and creating so many policies, reports, layers of bureaucracy, etc. that risk aversion takes hold, and the Stimulus becomes a trickle as opposed to the envisioned flood for our struggling economy.

1 comment:

  1. One way to control the funding is to get off the one year budgeting cycle and hold the agencies who will be administering the stimulus money to a 5 year plan.

    As a good project manager you know all about base management, EVMS, justifiable works scope changes, management reserve and all the other good tools that have proven themselves useful over the years and have in fact been imposed by the government on large federal contractors to avoid "White Elephants"

    I freely concede that these tools can be "Gamed",but at least we have the transparency to discover when we are being had. Hold the agencies to to good project management.

    Having been on the inside of the funding process in the government contracting industry (both large and small business) for over 40 years through many administrations and much frustration I can assure you that you have hit upon a major weakness in the huge machine we call the federal government.

    About mid-summer every agency begins to get paranoid about whether or not they have spent all their money, worried about having to return some and be cut back the next year. They flood the market with sources sought notifications and open solicitations to get the money committed. Many of these projects are meaningless.

    Then during the last fiscal month (September) proposals are stacked up all over the place and everything is bottle-necked. If you are a small business trying to get the paperwork processed and be under contract before the new fiscal year starts you are facing a major challenge. Many companies go out on risk to continue multi-year procurements with no guarantee on paper that they will get the funding from the government in the new year due to the backlog.

    In October the flood gates open and everything is plussed up.

    This process must be changed as we scale down the size of the federal machine. Lets face it. We are broke and we are operating on credit here. The stimulus is just that - our children's future credit bills.

    We should be able to plan five years out and fund accordingly. Most well managed organizations do and with the size of this machine right now I agree with the others who have commented here that it is almost impossible.

    We are about to pump "Stimulus" money (really credit with huge coat tails) in the billions into this already preposterous machine and we expect reasonable management? They do not have the infrastructure, the capability or the inclination to manage it.

    They will outsource the job to companies who can perform the process, establish the IT and lend a hand. I have hundreds of SCORE clients right now who are getting in line to get qualified to become a federal government service contractors in these fields. I don't blame them. They will get the first money injection to keep the GAO happy and prop up the agency heads that will be overwhelmed.

    We will be forced to give up the annual budget cycle. It has become a ludicrous exercise we can no longer afford and our government is choking on it.