Saturday, November 14, 2009

Increasing Competition Means Raising the Bar on Value

As part of the Obama Administration's call for reform of the federal acquisition process, the Office of Management and Budget (OMB) recently issued a second set of memos with guidance on increasing competition for better outcomes. These memos are a continuation of original OMB guidance released in July, which outlined ways to improve acquisition processes, make better use of information related to contractors' past performance, and balance the blended contractor and federal workforce. These initiatives are designed for agencies to achieve a 7 percent cost savings of their baseline contract spending by fiscal 2011, with overall expected savings of $40 billion annually.

In an effort to achieve these goals, OMB guidance states that improved acquisition outcomes through increased competition can be achieved by focusing on requirements and outreach to potential vendors. While this guidance can certainly go a long way to improve acquisition outcomes, OMB has fallen short in providing the specificity agencies need to execute these initiatives. Moreover, OMB also fails to mention one of the fundamental weaknesses in the current state of competition, which is to improve the quality of the vendors competing on federal contracts. OMB falls into the trap of focusing on quantity, which only exacerbates the competition problem by continuing the fixation of focusing on symptoms and not the disease. It does not help the government be a more strategic buyer nor promote innovation.

Many firms that offer innovative solutions are often brushed aside by the archaic decisions by agencies that award contract vehicles acting as gate keepers for who can compete on federal contracts. These processes are designed to treat all firms the same, but therein lies the problem. By restructuring these processes, improvements in competition quality can be realized, as the government can review the experience of firms and what they bring to the government in their totality. If higher quality businesses could qualify for such contracting vehicles and opportunities to compete, value could increase and costs could decrease.

The guidance also fails to provide clear instruction on collaboration, where real opportunities exist to leverage tools and technologies to exchange information with industry and improve knowledge transfer. The ability to leverage Acquisition 2.0 methods, as piloted in the Better Buy Project, demonstrates the potential of these initiatives that can and should be rolled out government-wide in an effort to standardize and improve how the government buys. These collaboration tools can help execute on the OMB guidance, which is to better understand the market, improve requirements development, and create opportunities for increased competition. This will ultimately set the stage for creating a performance-based acquisition construct and allow for a focused approach on oversight and accountability. Acquisition leaders who view these tools and techniques as unrealistic or time-wasters are not only missing out on real opportunities, but also possibly preventing the transformation of the acquisition process into a world-class, 21st century buying organization that these tools could help realize.

Only through the improved caliber of the supplier base can increased competition and quality be achieved, and it is the responsibility of government leaders to not only provide guidance, but the tools and techniques agencies need to accomplish the President's goals for improving acquisition outcomes.

Tuesday, November 3, 2009

Acquisition Reform Should Include Protest Actions

Recent reporting by Federal Computer Week (FCW) highlights an issue that is not being addressed by acquisition reform initiatives; reforming the contract protest process.

Writing in the Editor’s Notebook blog at Washington Technology, Nick Wakeman discusses the protest by Unisys and General Dynamics of TSA’s contract award to Computer Sciences Corp for the agencies information technology infrastructure.

According to FCW:

…the number of protests filed with the Government Accountability Office jumped 17 percent between fiscal 2007 and 2008, according to a December 2008 report. Part of that can be attributed to an increase in GAO’s jurisdiction. But even if you take that out, Wakeman notes, that still leaves a jump of 10.9 percent, which followed an increase of 6 percent the year before. In contrast, the number of protests had declined 2 and 9 percent in the preceding years…

I see three fundamental issues at play here that need to be addressed regarding this rise in protests:

1) Business Strategy

With such large awards like the TSA contract seemingly the norm for information technology, many companies cannot afford to not have the business. These contract wins are often built into the bottom line profit projections, so protests are a vehicle to open competition, or even go on fishing expeditions in hopes of finding errors in process that can sustain a protest. Further, there is now an understanding in the market that protests are almost a given for these large acquisitions, therefore companies competing for opportunities are creating internal process teams as part of proposal centers to execute protest actions as part of capture management.

Also reported by FCW earlier this year was a piece by Robert J. Guerra, a partner at consulting firm Guerra and Kiviat, who was horrified to receive an e-mail advertising a seminar titled “A Successful Bid Protest Can Produce a Contract Win.”

…“It is appalling that in a time when government acquisition personnel are under increased stress to conduct ever more complex acquisitions, we as a community should seek ways to protest more contract awards,” Guerra wrote in a Federal Computer Week column. “It isn’t bad enough that we already have protests that in many cases are ‘fishing expeditions.’ Now we want sales reps and managers pursuing protests as a way to make their quotas.”…

I also wrote about this phenomenon in a piece for Defense AT&L magazine, as the increase in protests is a sign that more companies are competing against one another for smaller shares of a shrinking market for multibillion-dollar projects. As a result of poor source-selection practices and award decisions, the government has opened the door for the opportunities to protest. Industry is simply taking advantage.

2) Acquisition Workforce

I do not think anyone is under any illusions that workforce issues are a common denominator for many acquisition problems, and protests are no different. There has been a significant decline in solicitation quality, with the subsequent rise in the number of mistakes or lack of adherence to policy and regulations being committed by personnel conducting source selections. Further, these issues have been exacerbated by poor leadership that allows this to happen.

This goes back to a constant theme of mine that the skills of the acquisition workforce need to be restructured to encompass the life cycle of contract management, to include requirements development, contracting, and program management. Business advisors, and well-trained ones at that, are what the workforce should be, combined with having the technology and tools to increase productivity and quality. Mistakes often happen because source selections are often conducted by disinterested parties with little to no background in contracting, the requirement, or training on process. Again it is not a focus on numbers, although obviously a larger workforce is needed, but also the quality and caliber of new hires that bring business management skills to the table. Knowledge transfer is also vital from the experienced contract managers for success on this front, to help reduce mistakes and errors that are easily corrected, and shut the door to protest opportunities.

3) Accountability

It seems that there was a time when companies that protested contract after contract received a reputation for being troublemakers, or unethical. Further, these companies were often shunned by industry as well for poor management and toxic reputation. Those days are now gone.

The fact of the matter is that there are little to no consequences for companies to protest, whether it is for one contract or many. This needs to change. Although I am not advocating for industry to lose the right to protest, there does need to be a balance of accountability to the taxpayers. The way the system is structured now, firms can protest at will without having to reimburse the Government if they lose, or reimburse the Government for damages, lost time, and expenses for defending the protest. Further, firms that often protest are no longer treated with any animosity, as it is just business as usual. Under these circumstances, what does a company have to lose? Very little. In fact, the current system encourages companies to protest since there are no consequences for being wrong, or filing what can be viewed as a “frivolous lawsuit.”

There needs to be punitive consequences for firms that protest. Certainly if protests get upheld, that is one thing. But firms that habitually protest and lose must be held accountable for the lost time and costs of defending the protest to the program. Further, firms that lose a certain number of protests in a given period should also be held accountable, such as being barred from competition for a set period of time.

I disagree with a statement submitted to Congress by GAO General Counsel Gary Kepplinger:

…Well-meaning attempts to ward off such protests “may have, on balance, the unintended consequence of harming the federal procurement system by discouraging participation in federal contracting and, in turn, limiting competition.”…

I believe these measures would actually help improve the quality of vendors who compete, as companies that waste taxpayer money will think twice before filing protests without actual justification. Only when firms are held accountable for their actions will we see real change. This is contract management and acquisition reform 101.

Although protests are not going away anytime soon, I feel that the current system needs to be relooked, as we cannot afford a process that allows industry to protest with impunity, bully and intimidate contracting officials, and waste taxpayer funds. A balance is needed, and badly overdue.