Tuesday, September 28, 2010

Your Taxpayer Dollar$ at Work: Volume I

As reported by the Washington Post, there seems to be a culture of corruption and massive waste, fraud, and abuse according to several Inspector General reports investigating operations of the U.S. Postal Service (USPS).

Upon reading this article and other IG reports, the waste, fraud, and abuse that seems to be cultural at USPS is hard to swallow. However, I have been inspired to start a new piece here on The Acquisition Corner: Your Taxpayer Dollar$ at Work. My first edition!

…Dozens of former top executives and hundreds of former employees have returned to the agency in recent years as private contractors, sometimes making double the salaries they made as full-time workers, according to one of three watchdog audits released late last week…

I do not believe anything is really wrong with that, per se. Many federal government employees leave their federal positions, start companies or work as contractors, and make more money doing so. There are conflict of interest laws in place. What is wrong with that?

…"It appears unethical to hire back former executives at nearly twice their former pay to advise new executives who were placed in their position based on their expertise and years of Postal Service experience," the report said…{Emphasis mine}

…The Postal Service has awarded more than 2,700 contracts to former employees since 1991 and awarded 17 no-bid deals to former executives between 2006 and 2009, according to one of the audits. Most of those executives earned six-figure sums, the report said. One unnamed executive received a $260,000 no-bid deal in July 2009 to train his successor just two months after retiring...{Emphasis mine}

Hired as a contractor to train and get up to speed your replacement? How does that even happen?

…The reports said the cash-strapped Postal Service is doing a poor job tracking its use of no-bid contracts, contributes more to worker health and life insurance benefits than other federal agencies and should consider closing more of its regional offices to help address an expected $230 billion, 10-year budget gap.

…The Postal Service is set to report billions of dollars in losses this week because of declining mail volume. It is also awaiting permission from regulators to raise postage rates and is locked in negotiations with two of its largest unions…

…Beyond employment contracts, the Postal Service improperly classified the status of 5 percent, or $910 million, of its $18 billion annual contracting costs, according to the report…

What a mess. It seems that that the mechanisms to provide contract oversight and surveillance are not only negligently poor and inadequate, but actually appear to make the oversight mechanisms for Iraq and Afghanistan sound like the equivalent of a well-oiled machine. Further, the USPS unions appear to be also obstinate and inflexible, in the face of a needed overhaul in how the USPS does business. Not just to improve, but to survive.

Better go out and get those “Forever” stamps, as postage rate hikes will be going up, in perpetuity.

Saturday, September 25, 2010

Procurement Efficiencies Through Multiple Award Contracts

As reported by Federal News Radio, The Office of Federal Procurement Policy (OFPP) is pursuing several short-term initiatives to reign in the proliferation of multiple award contracts (MACs)

"Progress has been made in improving some aspects of interagency acquisition," said Jeff Zients, acting director of the Office of Management and Budget in its annual report to Congress on interagency contracting.

"Most agencies have advised OMB that their buying organizations are strengthening internal management controls to improve the processes used to evaluate if an interagency acquisition is likely to be beneficial as well as those to manage the roles and responsibilities each agency bears in such an arrangement. However, on other fronts, progress has been insufficient and uneven. In particular, there continues to be concern that the agencies, through both single-agency and multi-agency contracts, may be duplicating each other's contracting efforts and creating redundant contracting capacity."

There is no question that the explosion of MACs has created excessive waste and administrative burdens to both the government and industry. Reigning in this problem requires a two-pronged attack strategy: stop unnecessary new MACs from being created, and consolidate the ones that currently exist.

According to the report, OFPP guidance expected later this year would require agencies to prepare business cases that describe the expected need for the contract vehicle, the value that its creation would add, and the agency's suitability to serve as an executive agent. Business cases should be mandatory for all new MACs. The focus, of course, needs to be effective resource management, not to mention a comprehensive requirements development and stakeholder analysis to ensure internal and external MAC sources are not available to meet the new requirement. OFPP guidance should also make it clear that any new MAC needs to be justified my ensuring no other vehicle can be used to execute the need. There exist few legitimate arguments, in my opinion, that can justify this explosion of MACs. What I see is continued waste through little collaboration across government and distrust in other agencies MAC products to ensure lower prices.

I believe industry would also appreciate the opportunity to cut a lot of the expensive and burdensome administration of having to compete and manage multiple MACs for similar products and services. The government has created a culture of redundancy for industry by a "Pay to Play" construct. I do not mean anything nefarious, but firms are forced to spend resources to be on multiple MACs that offer similar services. Take a look at the average website for firms that provide goods and services to the federal government, and you will see the numerous vehicles, with the subsequent overlap and redundancies.

What about small business participation and ensuring consolidation does not turn into a bundling exercise? Accountability is the answer. Ensuring small business participation and execution of small business objectives for MAC awardees is crucial to ensure small businesses can compete. Also finding ways to include small business only MACs, such as Alliant Small Business (Alliant SB), is another appropriate activity.

I am not a big believer in reinventing the wheel, but yet another government database to capture even more data that exists? Really OFPP? I believe this already exists in the Interagency Contract Directory (ICD). Not the best system in the world, but with investment and increased capability, it can be very effective so long as the interfaces and information in Federal Procurement Data Systems-Next Generation (FPDS-NG) are correct and robust.

Overall, a lot of work is needed to improve this process, but it must be done through a standardized and centralized approach. There are way too many contracts for similar products and services these days, and the government will not be able to effectively implement any consolidated, strategic sourcing without a real push by leaders across government to get on the same team and work for the taxpayers vice their own self-interests.

Thursday, September 2, 2010

Behind the Curtain: Communications in the Acquisition Process

With the end of the fiscal year comes the right of passage for government contracting personnel and contractors alike; the end-of year budget dump or as I like to call it, the end of fiscal year feeding frenzy. This time of year is characterized by the worst practices in federal contracting: lack of any real acquisition planning, abundance of improperly justified sole-source contracts, and the overall lack of meaningful competition.

Coming off the heels of a new report by GAO on the lack of competition, one clear issue is the woefully inadequate communication between industry and government.

The SBA takes the general position that a procuring agency does not need to document in a contract file any other prospective sources if the agency selects an 8(a) participant to perform the requirement, offers it to SBA, and SBA accepts the requirement into the 8(a) program. SBA officials note that it is the procuring agency’s responsibility to conduct market research to determine whether the requirements of the Small Business Act can be met, and then to determine the appropriate contracting vehicle to use. However, SBA considers market research requirements to be satisfied when a participant in the 8(a) program self-markets its abilities to a procuring agency and is subsequently offered a sole source 8(a) requirement. When we discussed this issue with procurement policy officials at DHS, they said that, while these activities may meet the regulatory requirements, in practice they like to see additional market research so that the offer to the 8(a) firm has a more solid basis. {Emphasis added}

Get it off one’s desk seems to be the prevailing attitude, along with the closing down of accepting any new requirements to handle the end-of-year rush to get dollars out the door. Is it just simple correlation that more procurement activity carries more risk of protest? If so, then something has gone wrong.

To improve competition and get meaningful best value outcomes, communication with potential vendors is an essential part of the market research process. Common forms include written exchanges of information (e.g., submission of marketing materials or responses to Requests for Information), in addition to also meetings with potential vendors.

However, it is the risk aversion and untrained contracting officials, combined with poor integration with program management and contracting that often makes this process difficult. A recent article in Government Procurement magazine shared a similar sentiment:

This concern can have a chilling effect on communication with vendors. In response to a request for a meeting prior to release of an RFP, one state official recently wrote: “If I meet with them even as an introductory meeting, then I assume they understand they will be precluded from bidding on any project we bid out the next six months.” Is this level of concern by state and local officials warranted? We think clearly it is not.

Nor do I. In fact, Federal Acquisition Regulation (FAR) Part 15, “Contracting by Negotiation,” balances the dual goals of “openness” and “integrity” in the procurement process by specifically encouraging pre-RFP meetings and exchanges of information between public officials and potential vendors. Good acquisition planning needs open communications, not to mention the FAR specifically identifies “one-on-one meetings” as an appropriate means of accomplishing these exchanges. Program Managers needs to ensure they know what is appropriate, and Contracting Officers need to provide this guidance and act as business advisors in this process. Simple processes to help alleviate end-of-year fiascos before they happen.

What really are the goals here? Openness, transparency, and fairness for starters. Procurement official must treat all potential vendors impartially and provide equal access to all. This ensures the process is fair. For these reasons, I believe initiatives like the Better Buy Project are an important tool to meet these procurement goals, since crowd sourcing is the foundation for access to all, along with Acquisition 2.0 tools that continue to provide the transparency and openness required of the contracting process.

An informed understanding of current industry capabilities and practices results in both better RFPs and better contracts, since industry will have participated in requirements development to ensure fairness, but also realistic objectives and schedules to also help ensure positive outcomes.

More communication with industry promotes more competition, better solutions and better pricing. Ambiguity in the final RFP translates to misaligned solutions or risk for a vendor who responds with higher pricing. The latest developments, especially in such complex fields as information technology, healthcare and environmental sciences, are difficult to harness unless you put industry competitors to work for you.

Let’s capture innovation and stop reinventing the wheel, as I too believe it is ridiculous to think that government officials are so easily manipulated or influenced with these approaches that communications and Acquisition 2.0 initiatives will rig procurements. It is risk aversion and the lack of accountability indicative in the procurement process that acts as barriers to success. Continued advancements through Acquisition 2.0 pilots will hopefully not only demonstrate the potential of openness and transparency, but also provide guidance on transforming the way government does business and allow for accountability to the taxpayer, which should be the ultimate goal.