How Healthcare.gov Will Not Drive Federal IT Acquisition Reform

Photo by ActiveRain

After weeks of reports about the debacle known as healthcare.gov (here and here), the latest news and actions around preventing the next IT boondoggle are now headed in the direction of reforming IT acquisition.

Although President Obama got in on the action, I do not expect any significant reforms to take place, until the root cause of the problems are addressed. Further, “fixing” IT acquisition is not a silver-bullet endeavor, but as the Professional Service Council highlights in their latest report, there are some fundamental approaches to improving the current situation that do not require any new legislation or further regulations (thankfully).

Nonetheless, if real IT acquisition reform is to be realized, the answer is to dig deep and not focus on outlying issues. Not an easy proposition.

Fixing IT Acquisition: Strip It Down to the Bolts

Just weeks before the failed launch of healthcare.gov, I was having an interesting and enlightening debate with Clay Johnson on LinkedIn regarding innovation and RFP-EZ. Clay is CEO at The Department of Better Technology and one of the original Presidential Innovation Fellows of the RFP-EZ project.

He and I were debating about the need for IT innovation and its definition, in addition to creating software and technologies that provide rapid capability at a fraction of what most IT projects cost. That is to say, it is possible to create and deliver technologies and capabilities that meet end-user expectations for functionality without breaking the bank or requiring being hauled before Congress.

My main concern regarding RFP-EZ is that this technology already exists; mainly through Federal Business Opportunities or FedBizOpps.gov. Wasn’t RFP-EZ a redundant technology? Shouldn’t we be more focused on fixing the real IT acquisition issues, like the workforce?

No question infrastructure, human capital, and execution are major problems, but after seeing healthcare.gov rolled out, and Clay’s remark about the possibilities that exist to solve the issues of IT in the federal space, I believe his vision to reform how government purchases technology is what can lead to real change.

“Big Bang” Means “Big Bucks”, With Little To Show For The Investment

One of the biggest issues I see is simply culture, as government is fully entrenched in purchasing large programs with thousands of disparate requirements and no clear vision of what capabilities are desired. Combined with an aversion to change how business is conducted, and further exacerbated by strong business (e.g. lobbyists) interests that prefer the status quo, this will be one of the hardest issues to combat.

Recent federal leadership comments, I believe, illustrate this point. Comments by former Department of Homeland Security CIO Richard Spires and former acting administrator at the General Services Administration, Jim Williams, illustrate this problem. Although their recommendations are very useful and helpful, one has to wonder about the level of success of IT programs at their respective agencies when they held their respective positions. Furthermore, they both effectively state “Next time we undergo another large program like healthcare.gov, we need to do better.”

To realize real change, we need to put the brakes on this “Big Bang” approach to purchasing IT and ensure return on investment is at the forefront of future technology acquisitions.

Photo by BCW, UK

Innovation Can Not Happen With “Big Bang”

Everyone talks about how there is ample competition in the federal acquisition marketplace, and how regulations promote this competition. If you really believe this, I have a bridge to sell you.

There is a reason that such a vast majority of federal business is won by a small number of firms, and this entrenched environment is part of the “IT Cartel” that former Federal CIO Vivek Kundra discussed. Although this moniker was regrettable, and pounced on by large government contractors and the media, his analysis was very accurate.

Although his “25 Point Implementation Plan To Reform Federal Information Technology Management” laid the groundwork for real transformation, I would argue that little has been done to fully execute these initiatives, outside of cloud computing and data center consolidation.

Until government understands that huge multi-million dollar IT programs simply are a continued recipe for waste and little innovation, we will continue to build more projects like healthcare.gov.

What Does Real Change Look Like?

For starters, Requests for Proposals (RFPs) that are hundreds of pages of requirements, that no one understands (especially with requirements that are TBD), go away. After 30+ RFP amendments and months, if not years to award the final contract where the technology requirements are now obsolete at contract award, who thinks this is a good idea anymore?

Further, getting more small businesses in the federal technology space is what will drive more innovation in technology, and improve the level of technological capability that IT projects deliver. As opposed to the business model of requiring large businesses to run these massive legacy systems at enormous expense that total billions every year, smaller firms are simply closer to cutting edge, ground-breaking technological capability that is required to change the paradigm, and improve the level of services the federal government delivers.

All at a fraction of the cost, I might add.

The requirement for Open Systems Architecture would also go a long way to improving capability, since the current environment is to purchase “Commercial-of-the-Shelf” technologies, then spend hundreds of millions of dollars to customize the software for government use that ultimately creates proprietary software, and a nightmare for data rights and licensing fees. This only encourages less competition, since usually only the incumbent (a large business) has the resources to manage these enormous undertakings, or compete on them for that matter. Security issues, for the most part, are also nothing more than a red herring at this point.

Of course, holding those accountable for failure is also woefully lacking in the federal environment. Only in the federal government can you manage a program that wastes millions of dollars, only to have it fail, and possibly canceled, and the only response seems to be a shoulder shrug.

Risk taking and bad management are two separate things, and the former is what needs to be encouraged. Combined with using more Agile development techniques, and a renewed focus on workforce capabilities and not just box-checking certification requirements, are further areas of improving the status quo.

We do not need the next healthcare.gov to drive change. I think we taxpayers have had enough.

Accountability Update: Is Anybody Listening?

Our recent blog post about accountability had some good discussions on the GS-1102 LinkedIn group (closed group) about who actually is responsible for accountability. Should it rest squarely on government? What responsibility does the contractor have when the government is asleep at the switch?

A recent issue seems to have blurred that line, prompting the people responsible for being taxpayer watchdogs to testify incredulously about the lack of concern and the seemingly “sweeping under the rug” of the topic of accountability all together.

John Sopko, the special inspector general for Afghanistan reconstruction, recently took the Army Corps of Engineers to task for ineffective management and oversight of work by DynCorp, which is owned by affiliates of New York-based Cerberus Capital Management LP, from responsibility while long-standing deficiencies remained for work on a garrison at Camp Pamir in Kunduz province.

“The Corps’ own internal review says they didn’t make DynCorp pay to fix their shoddy construction, they didn’t collect the liquidated damages that DynCorp owed them, and they violated their own settlement policies,” he said.

“But they still think the settlement was ’proper and reasonable.’” Sopko said. “That wasn’t a settlement, it was a mugging.”

An isolated incident, and a difficult one no doubt, but it is nonetheless disconcerting when an agency seemingly ignores such damming evidence, but decides it is best to sweep it under the rug and move on.

Given the billions that have already evaporated into the sands of Iraq, yet more evidence of how the lack of accountability is hindering progress coming out of Afghanistan is not surprising.

Having performance conversations early and often is the critical component of performance measurement, and then executing lessons learned for continuous improvement. Most, if not all contracts require some rudimentary form of performance measure (i.e. weekly status reports, monthly reports, performance meetings, etc.).

Other than killing trees, what is the point of doing all this if we are not going to mutually benefit and ensure proper outcomes and meeting contractual requirements?

Buying In Now Effectively Policy Across Government

In a recent breakfast  hosted by the Coalition for Government Procurement, Office of Federal Procurement Policy Administrator Joe Jordan effectively punted on the notion of best value versus the realities of federal procurement; lowest priced offers win contracts.

…Generally speaking, he said industry likes best-value procurements. They allow companies to propose higher prices, since officials will consider other evaluation criteria beyond price. On the other hand, the government is pushing low price and not always fully analyzing the entire lifecycle of a project, Jordan said. Both sides have good arguments, so the contracting officer's judgment is the final arbiter….

Due to the intense focus on budget cuts, and sequestration still casting a very ominous shadow on the federal government, price has become the most important factor in any source selection, and will remain so for the foreseeable future.

Any talks of best value are out the window, so agencies should state as such in their solicitations. The issue really is about how do determine technical acceptability, given the foundations of what are normally poorly defined requirements.

Firstly, requirements for proper use of Lowest Price, Technically Acceptable (LPTA) should be very standardized, commodity based purchases that require no other factors other than price. That means just the commodity itself through very rigid, specific, and accurate requirements. No opportunities for customer service, shipping, transport, customization, etc. These requirements require the use of best value, and the ability to offer better service.

You get what you pay for. There lies the rub.

Often times, the government simply does not know what it wants. It thinks it does, so it puts horribly written Requests for Proposal on the street, that result in dozens and dozens of questions, since the requirements are either redundant, confusing, circular logic, not achievable, unrealistic, boilerplate and not applicable, etc. Further exacerbating the problem is the lack of engagement with industry during the pre-acquisition phase, assuring poor requirements. Lack of leadership, poor capabilities, and the excuse of lack of time are the usual suspects.

The pressures to save money are overwhelming, so prices are driven downward to unrealistic levels. Is anyone still doing cost realism assessments? You know the answer.

How often does the Government Accountability Office sustain a protest where the losing offeror, and often an incumbent, claims they lost to a competitor who underbid them by 40%, even though the incumbent knows exactly what the real cost of doing, at a satisfactory level, entails?

This vicious circle ensures performance will fail, and it is the lack of a long-term focus that is troublesome. Poor leadership, combined with continued declines in the skills and capabilities of the acquisition workforce (I include PMs in that bunch) have created a perfect storm of continued poor performance and waste. Just look at the fiasco that is the System for Award Management (SAM) for a perfect example of this.

The General Services Administration can claim SAM was best value, but price is kingmaker. “Buying In” is seen as an improper business practice per Federal Acquisition Regulation 3.501, but it seems to be standardized now.

Investment analysis is a foreign concept, since saving a few bucks today will lead to inevitable rise in costs tomorrow, failed programs, and poor performance.

Awarding to the lowest bidder is a disaster waiting to happen. Only when innovation is desired, through the use of performance-based contracting, combined with properly written requirements and effective contract management and execution, can best value be realized.

That is the best outcome for the taxpayer. Easier said than done.

Your Taxpayer Dollar$ at Work: Final Iraq Audit Report Edition

The “final” report on Iraq reconstruction was released recently, and I have seen little media attention to the astonishing level of waste, incompetence, and outright theft that the report highlights.

How much money is unaccounted for? According to the report, nobody knows. After years of trying to account for the billions we poured into the rabbit hole of Iraq, the government can only say that billions were wasted, but not how much.

Some on the highlights from the report:

…"billions of American taxpayer dollars at risk of waste and misappropriation"...

..."The precise amount lost to fraud and waste can never be known," the report said….

The auditors found huge problems accounting for the larger sums and complex projects, but it was also the smaller sums that also added up to hundreds of millions of waste and fraud:

…"Given the vicissitudes of the reconstruction effort — which was dogged from the start by persistent violence, shifting goals, constantly changing contracting practices and undermined by a lack of unity of effort — a complete accounting of all reconstruction expenditures is impossible to achieve," the report concluded…

Although the Office of the Inspector General (OIG) has spent more than $200 million tracking the reconstruction effort, and producing numerous reports, some accountability has been realized. The OIG investigations resulted in 87 indictments, 71 convictions and $176 million in fines and other penalties.

Among those held accountable are civilians, military personnel, and contractors accused of kickbacks, bribery, bid rigging, fraud, embezzlement and outright theft of government property and funds.

Nonetheless, these actions are just a drop in the bucket trying to account for the outright criminal behavior and complete lack of governance and oversight of taxpayer funds.

One of the major overlying issues was the lack of trained, competent contracting personnel to oversee the mission. In some cases, invoices were reviewed months after they had been paid due to the lack of contracting officers.

The OIG highlighted a case in which the State Department had only one contracting officer in Iraq to validate more than $2.5 billion in spending. No contracting office representative, no help. Further, lack of any invoice review whatsoever was the modus operandi. It is easier to not ask questions, and sign the checks, as opposed to the improper micro-management of contracts on the other spectrum.

Further, the IG goes on to say:

…"As a result, invoices were not properly reviewed, and the $2.5 billion in U.S. funds were vulnerable to fraud and waste,"

"We found this lack of control to be especially disturbing since earlier reviews of the DynCorp contract had found similar weaknesses."

The report did highlight that some funds were recovered ($60 million), but how much was wasted? Again, nobody knows.

It is easy to sit behind a keyboard and Monday-morning quarterback these failures, given the level of violence and danger, shifting sands of priorities and goals, and difficulties in securing the country. However, these failures did not occur overnight.

Endemic waste, fraud, and corruption were rampant, and the lack of trained acquisition personnel was known, or should have been known. Where are the government leaders who allowed this to happen?

The OIG report is silent. Silence seems to be acceptance.

Time versus Money: Taxpayers Take a Bath Again

A recent disturbing story about facilities management by the General Services Administration (GSA) in Chattanooga is a perfect template for how poor (or little) acquisition planning, combined with inadequate market research, creates an environment where questionable acquisition strategy decisions are created. The result is a typical one, where sole-source contracts are created at prices that almost invariable go in only one direction, and quickly surpass any budgets or estimates.

…Taxpayers will foot a $5.75 million rental bill over the 10-year term. The new offices will cost the federal government $1.35 million more than the U.S. General Services Administration's initial estimate over the next decade and triple the amount now spent to house federal prosecutors in Chattanooga…

Here we go, time to buckle up:

…But real estate experts question why the government didn't solicit bids for needed space, which will cost $23,366 per employee for the first five years in the new fifth-floor office at Warehouse Row.

For that much, the U.S. attorney's office could double its number of attorneys and staff to 56 and pay each new worker $11.23 per hour. For the same amount, the feds could buy a median-priced home for each of its employees within the next seven years…

According to the Department of Justice (DoJ), who was the federal customer that GSA was serving, security and proximity where important factors, combined with accessibility standards.

Translation – Our requirements are so unique that our “market research” shows only one source able to meet these requirements. 

…"They would be paying the highest rate in the city," said David DeVaney, president of NAI Charter Real Estate. "You can find space in Chattanooga all day long at $22 per square foot, for full-service, including a generous build-out."

The rent is more than double the previous rate in the same building -- $14 per square foot -- and well above Warehouse Row's advertised lease rate of $16 per square foot.

By not using competitive bidding, federal officials ignored more than 1 million available square feet of office space downtown…

Sole source justifications are of course a vital tool in any procurement toolbox. However, adequate justification is required to circumvent regulations and guidance for ensuring taxpayers will not take a bath.

Regarding the requirements for justification to lease the space that met all the DoJ requirements, which was the impetus for the lack of competition, not to mention the fuzzy math estimates:

…But those justifications weren't mentioned in the original no-bid request…

So the reasons for the sole-source contract were not explained in the justification? Really?

"With the current lease set to expire and facing the need for additional space, the U.S. attorney's office in Chattanooga worked in conjunction with GSA to find an office in proximity to the federal courthouse that met all suitability and security requirements in accordance with applicable regulations," Killian wrote in an email. "GSA conducted a market analysis and determined that the Warehouse Row location was the only location that met all requirements that would serve the office and the community."

However, neither Killian nor the GSA would say what, exactly, drove the rent to the top of the charts.

Translation: We needed the space and we need it yesterday. We checked the boxes, so let’s move forward.

Competition drive price reductions, and in the case of real estate, allows for the government to aggressively negotiate better prices, as real estate managers need tenants to make money. Unused real estate just sits there unproductive.

According to these real estate experts, presumably aware of the DoJ’s requirements, they all unanimously agreed that this was a bad deal.

Translation - Taxpayers lose again.

Contractors Are Mission Critical, Not a Necessary Evil

Former head of the Coalition for Government Procurement Larry Allen, now President of Allen Federal Business Partners, wrote a spot on article recently calling out the absurdity of the current environment of anti-contractor sentiment running rampant throughout the federal government.

Recent examples of these activities, among many, includes the Office of Management and Budget’s recent directive to ramp suspension and debarment operations, and the Air Force’s actual debarment of Iron Bow Technologies. Although this debarment was later overturned, it seems that this action was a direct result of the “get tough” policies.

Of note was the actual reversal, as a direct result of the Air Force and Iron Bow working together to address the issues leading up the debarment, and mitigation strategies to prevent any future occurrences. In other words, actions that should have occurred without the need of the seemingly knee-jerk debarment by the Air Force.

Further exacerbating the “greedy contractor” paradigm, and as noted by Allen, is Shay Assad, the director of pricing for the Department of Defense, announcing a more stringent pricing policy with contractors, in addition to the directions to cut service contracts by another 20 percent. Now with the Senate passing a Defense Authorization Bill that caps executive pay for contractors at $400,000, it seems that senior federal officials feel the need to squeeze the vice even further.

With the government continuing to freeze pay and hiring in critical areas, in addition to offering early buyouts, the expected outcome can only be further erosion of performance. With fewer government personnel, in addition fewer qualified and trained personnel since training is also getting cut, waste, fraud, and abuse will keep the Government Accountability Office (GAO) and Inspector Generals gainfully employed. On second thought, GAO is also cutting staff. Perhaps the Commission of Wartime Contracting will reopen its doors in the near future to report on billions in waste, and just drop the Wartime from its title.

Contractors perform vital functions, and more pressure will be put on industry to perform more with less. However, it is being done in an environment where profit margins are being cut to the bone, lowest cost is now the only variable, and many small businesses are in danger of extinction with cuts to contracts, and subcontracts.

The fact is this: Contractors perform messy services that no one else wants to do. They fix things that break in the middle of the night. They are absolutely essential to the efficient running of the enterprise. They should be treated with the respect commensurate with the role they play. Mistakes happen, and bad actors exist. But it’s past time to give credit where it is due.

We would be better served working together, and stopping this animosity.

GAO and Success: Acquisition Workforce the Common Factor

With the collapse of the Congressional “supercommittee’s” budget deal on deficit reduction, federal managers, and their industry counterparts, are being told to prepare for the worst , as possible mandatory cuts are on the horizon for 2013.

In the mean time, federal managers will need to continue to find ways to save money and do more with less. To help programs succeed, the Government Accountability Office (GAO) recently came out with a report that highlights best practices for IT acquisition and execution. Combined with the Office of Management and Budget's 25 point IT reform plan, these two products create a powerful blueprint for what programs should be doing to improve outcomes, and be considered successful by meeting cost, schedule, and performance goals.

The one common denominator for program success is a steady, skilled acquisition workforce to execute these other principals. This should not come as a surprise. However, what was surprising is that the Defense Information Systems Agency's Global Combat Support System-Joint program did not list this fact as a critical success factor (similar to 6 out of 7 dentists recommend flossing for healthy teeth? Who actually goes to that one dentist?)

Putting aside the other factors, having a skilled, trained and stable acquisition workforce is critical to success in any program, and more than now than ever. The acquisition workforce, especially in contracting, must be able to act as business advisors and really lead the way in helping shape sound business practices. This includes pre-acquisition through contract execution. The program manager, in addition to the use of Integrated Program Teams, also are critical to ensuring that everyone is building requirements properly, proper contracts and metrics are in place, and then of course executing using the sound business practices categorized in the GAO report.

Regretfully, these budgets cuts and contract reductions can only be a detriment to implementing these best practices. With hiring freezes, reducing training budgets, and mandates to cut services contracts (such as acquisition support contracts), fewer opportunities will exist to improve performance. Coupled with the "low price at all cost" contract selection methodology, a thousand cuts are on the way to an environment of even further reduced performance, in addition to more fraud, waste, and abuse.

GAO and Inspector Generals will be quite busy in the next 24 months, but reports of program success will more than likely be a distant memory in this future timeframe.

Your Taxpayer Dollar$ at Work: Volume III – Muffin Edition (Update)

So the $16 muffin is back in the news as the Department of Justice (DOJ) Inspector General made updates to its previous report by correcting the record, and bowing to the sensationalist media coverage that yes, the muffin itself did not cost $16. 

Correcting the record is a good thing. However, what the sensationalist media forgets, and what seems to be ignored, is the fact that the DOJ, in addition to the federal government itself, is not doing enough due diligence to ensure that the these expenditures are in the best interest of the organization or that they are being good stewards of taxpayer funds. The report correction goes on further to say that all-inclusive lunches cost $76. Will this be the subject of the next series of reports?

Putting aside the full court press of public relations activity by the hospitality industry, how does government know they are getting the best value? Having done this myself over the years, I have always tried to negotiate better pricing for conference space, refreshments, meals, etc. by playing venues off one another to get the best deal for my needs. I do not doubt that the venues are being flexible to get my business, but how can the government buyers say with a straight face they too are getting the best prices? Further, what options are being explored to find more cost effective means of holding these conferences and training (i.e. videoconferencing, other federal spaces, etc.)?

It is this willful ignorance that explains why we can continue to expect the inability to create budgets, more focus on nonsense, and putting aside effective governance and accountability for the foreseeable future.

Performance Outcomes: Judgment Day is Coming

So Fiscal Year (FY) 2011 is now in the books, and the new government FY 2012 begins. I don't think anyone can argue that this end of FY was one of the most challenging end of FYs in recent memory, with budgetary issues and Continuing Resolutions adding to a sense of doom in industry, if not outright confusion and desperation in most government procurement shops. Many of the acquisition divisions at federal agencies did not have a clear sense of what the budgets and fiscal environment for the rest of the year would be, thanks to a dysfunctional political system and a Congress willing to sellout stable government operations in the name of political sensationalism and outright partisanship at the expense of the nation.

From what I have seen over the last few months and winding up this FY, coupled with the bleak fiscal horizon in the next few years, government operations are in serious trouble. Frankly, if you think government operations are bad now, you ain't seen nothing yet. The Government Accountability Office, Office of Management and Budget, and other watchdog groups and organizations can expect their workload to increase to the point of trying to move a mountain with a shovel.

One only need taking a look at what is happening with alarming regularity, and will no doubt continue as the government continues to find ways to save money and reduce the amount of contractor support and contracted dollars; low price is the only price.

Granted low price, despite illusions of "best value" has always been around, things seem to be spiraling out of control. I have seen with alarming frequency contracts be awarded to low-priced bids, at prices that are ridiculously low compared to both other bidders and government estimates. Sometimes 20% or more below. So much for price not being the most important factor. Price reasonableness and realism? Looking at the bottom-line figure is not enough. Sometimes performance costs money, and should actually save money in the long-run. That is a concept seemingly lost on procurement officials right now.

Although "buying in" is a prohibited practice according to the Federal Acquisition Regulation, it has now become a sanctioned activity. Expect to see many more fixed priced contracts, despite the requirement, in addition to modification after modification. Performance will be an afterthought, as multipliers in industry (the final amount that a contractor bills the government for a dollar of labor, often referred to as “loaded” cost) get lower and lower. Anything less than 2.4 is considered inexpensive; with 2.4 – 2.7 the norm and anything greater than 2.7 considered expensive. I have heard of firms lowering their multipliers to 1.9 to be competitive. Competitive? How can you be profitable?

Size is the answer, as only very large firms can absorb that type of contract strategy. Make it up in volume, and the modification circus that poorly written and "cheap" contracts is also another outcome. This strategy simply decreases competition, especially for small businesses, and will result in even further poor contract performance. Just what we need. Forget about even developing proper requirements, as that is now a cost driver.

So how to you staff these contracts if you are "lucky" enough to win a contract? Answer: on the cheap. Hire know-nothing consultants straight out of college or inexperienced staff to support the requirement, pay them rock-bottom salaries with little if any benefits, and put them through the sausage grinder for a couple of years. Repeat the process. How will government get any decent performance? The current environment and abilities of the acquisition workforce are not conducive for governance and oversight as it is. Now you're going to expect them to provide even more?

Industry: How are you planning to succeed in this environment? What adjustments are you making? What experiences have you had in this "new" low-cost paradigm?

Government: What are you doing to ensure performance with such a low-price? What price reasonableness and realism checks are being done? What technical acceptability checks are being done?

Your Taxpayer Dollar$ at Work: Volume III – Muffin Edition

This week's news of the absurdity of waste, fraud, and abuse across government comes from the Department of Justice (DOJ) Office of the Inspector General (OIG) Audit Division. Their report, titled Audit of Department of Justice Conference Planning and Food and Beverage Costs is a follow-up to a previous September 2007 which examined expenditures for 10 major DOJ conferences held between October 2004 and September 2006. That audit found that DOJ had few internal controls to limit the expense of conference planning and food and beverage costs at DOJ conferences. This report highlights the same story, and little to no corrective actions by DOJ to mitigate this waste. Makes you think fondly of the $50 hammers and $500 toilet seats of Defense back in the 80s, doesn't it?

Of course politicians and the media jumped on the story for easy press, zeroing in on the $16 muffins and nearly $10 cookies served to attendees at one event. Emily Ingram of the Washington Post created a good competitive landscape of the muffin offerings in Washington, and only at government conferences will those prices apply. What is even worse is that DOJ officials basically stated they thought they were addressing the issue:

...Justice officials did not dispute most of the findings. The department did not offer an official to speak by name, but a spokeswoman who was not authorized to comment publicly said the agency “agrees that excessive spending of the types identified in the report should not occur” and has taken steps to prevent it. She said conference costs have been cut this year as part of an effort to curtail non­essential spending, though she could not specify an amount. 

Justice Department officials gave auditors a variety of explanations for the expenses, saying consultants they hired to help plan events had valuable knowledge and that the department had done its best to control costs. Officials from one Justice office said they thought they were saving money by serving muffins and other snacks instead of full meals...

You're not saving money DOJ, you're wasting it needlessly.

The OIG recommendations are pretty straight forward: itemize costs and ensure you have adequate price analysis to ensure "best value." These controls need to go much further by commoditizing these expenditures, of course itemizing all costs (both direct and indirect), and ensure no surprises and real best-value. There are many other quality, yet reasonable, venues that can accommodate these functions other than the Ritz Carlton.

Adequate market research must be conducted, lessons learned applied, and opportunities for strategic sourcing and leveraging the buying power of the government must be utilized. Further, perhaps this is an opportunity to consolidate BPAs across government and further leverage buying power, in addition to possible using reverse auctions to drive down prices. Cost savings of these types of expenditures are really low-hanging fruit, akin to eliminating free coffee or soda in the break room, which makes this report even more shocking at the level of waste rampant in government.

We obviously have a long way to go in reducing spending, although a thorough spend analysis of these commodity-type of expenditures could probably find millions, if not billions, in needless waste and efficiencies. The opportunities to save money are everywhere. Just look in the snack basket apparently.

How Do You Stop A Contracting Disaster?

In light of the new inherently governmental rules that have been published by the Office of Federal Procurement Policy, decision making by the government in regard to acquisition strategy comes to mind. When it comes to hiring contractors to assist in performing acquisition functions, it is very much a caveat emptor situation.

Contracting is a difficult subject, that requires expertise. There are many IT and Program Management firms that continue to receive contracts to provide acquisition support, although they do not have the competency or the skill set to provide it. They just happen to be there providing other support services, are an 8(a) so you can sole-source a contract, or see these opportunities because of the desperate need by government. So why not assist with procurements? It is just paper-pushing anyway, with little value-added service, right? Hardly.

What is happening is that IT Program Managers with a few DAU classes under their belts are making incompetent recommendations related to contract type, acquisition strategy, and requirements. Because the federal IT clients do not understand contracting, and the acquisition shops are overloaded and not providing sound business advice, the government relies on poor advice in its decision making.

Contracts worth millions, sometimes hundreds of millions, are being made in this dysfunctional environment. The government continues to bleed, and incompetent contractors continue to be paid. The inherently governmental rules allow contractors to provide guidance and advice, but little vetting of competency and skill set seems to be happening due to pressures of desperately needing support, and the need to increase contract throughput. These services, when done right, can be very critical to supporting this crucial government management mission. I am not advocating they go away, but in looking at inherently governmental functions, the government really needs to be careful what it is getting and why.

How can we honestly discuss acquisition reform when this environment exists?

Contingency Contracting Failures: It's About the People

The big story before the Labor Day holiday was the release of the final report by the Commission on Wartime Contracting in Iraq and Afghanistan (CWC). According to the Project on Government Oversight (POGO), the enormous dollar volume of waste and the assumption of the over-reliance on contractors for contingency operations was the focus of the report. I very much respect POGO's work, but I respectfully disagree.

The major issue is the quality of the acquisition workforce. In agreement was Sen. Claire McCaskill (D-MO), who stated that two areas in the report that jumped out to her was the Defense Department culture and the lack of qualified and too few contracting professionals as main reasons for the waste. Although I normally focus on quality, it was the quantity on this issue that was also a major failure.

..."I think the dirty little secret that has now been exposed-in fact this goes governmentwide and not just in wartime contracting-is that if you don't have the personnel that work for the federal government, rather than increase the personnel and the costs associated with that, go out and contract," she said. "This has occurred to a large extent in the Department of Homeland Security, it's occurred in a number of places and we have been doing that while we have hollowed out our acquisition personnel. We need to make investment in government employees that know how to police this and we frankly have dropped the ball in that regard."...

What the report simply fails to address is the political realities made with these decisions. Hearts and minds needed to be won, and thus materialized the pictures in Iraq of U.S. personnel sitting a top pallets of U.S. currency, handing it out like candy to win favor in line with local cultural norms. In Afghanistan, bounties were paid to find "terrorists,"so locals sold their neighbors up the river to win favor with the U.S., make more money than they ever have before, and take over land and settle old scores. Warlords also were paid off, although sympathies to al Qaeda and Taliban forces continue to be difficult to determine. How much waste went to the enemy? Perhaps that is the $30 Billion that the report mentions in possible unaccounted for waste. Any oversight with these issues?

The realities for personnel are that contingency contracting may be one of the most difficult areas of contract management, as local customs and norms may interfere with transparency and oversight, making the glaring lack of adequate training even more difficult to comprehend. Further, how many people across Defense, State, and USAID have any formal training? Obviously not enough. It got so bad that Defense was actually considering giving every lowly grunt going into theatre some form of contract training!

Coordination and collaboration across these agencies means creating a Contingency Contracting Corps, shared among the agencies, that can perform the contingency contracting mission across the globe. They would be the "special forces" of contracting; the tip of the spear to ensure accountability to the taxpayer. This of course requires a massive overhaul in the training curriculum available to the acquisition workforce, which of course needs to include revamping services contracting and commercial item acquisition. A much broader skill set would also need to be considered, one that needs to be factored in for hiring or designation to this mission.

After 10 years of war, and the 15 strategic recommendations made by the Commission, I hope that Congress understands the issues at stake. We need to invest in the acquisition workforce, and fully fund these initiatives that can have vast returns with upfront investments. I would like to think that government management of this scale would easily be an election year issue, but perhaps it will not make effective sound bites.

Past Performance Accountability Should Not be Punishment

The Commission on Wartime Contracting in Iraq and Afghanistan met recently to raise concerns that large defense contractors are getting a pass on fraud and poor performance. However, some on the Commission seem to think that solutions should not be bilateral, or even going so far as to seemingly having a "Save me from myself" mentality.

The focus of the testimony was the effectiveness of the government’s current methods for assessing oversight and surveillance of the current $200 billion that has been spent on contracts and grants since 2002 to support military, reconstruction, and other U.S. operations in Iraq and Afghanistan. According to the Commission, the United States has wasted tens of billions of dollars of contract dollars in Iraq and Afghanistan, but of course the blame game is always the first line of defense for failing to get at the root cause of not only the failures of oversight in Iraq and Afghanistan, but in how the government evaluates performance overall.

Laying the blame squarely on industry, Commissioner Charles Tiefer called five large companies that do business with the Defense, among them KBR, the "Flagrant Five" for continuing to receive work despite claims of fraud, misconduct and poor performance.

.…"I'm beginning to get the picture that bad performance could be good business," Tiefer said at a commission hearing Monday…

Also joining in on bashing industry was The Project on Government Oversight's general counsel Scott Amey.

…Companies involved in misconduct are a "necessary evil" required to get work done. "This might be the contracting version of ‘too big to fail,'" he said…

Amey also went on to state that the Air Force issued multiple waivers in order to continue business with firms accused of wrongdoing, in addition to the Interagency Suspension and Debarment Committee not issuing the annual reports required to document federal agencies' suspension and debarment activities.

These activities bring up an interesting issue about why the government is not doing its job in providing the proper level of oversight, surveillance, and past performance reporting. Lack of time? Not wanting to correct a problem and "slow down" the process? Really?

Most of the testimony focused around the report issued a week before about the vital need for contingency contracting reform, with a particular focus on debarments and suspensions as seemingly a punitive weapon and silver bullet against contractors. Although the report discusses the failures of government, clearly malfeasance also seemed to be the root cause of waste.

...."For many years the government has abdicated its contracting responsibilities -- too often using contractors as the default mechanism, driven by considerations other than whether they provide the best solution, and without consideration for the resources needed to manage them," the commission concluded. "That is how contractors have come to account for fully half the United States presence in contingency operations."...

Not all the voices on the panels were one-sided. Dan Gordon, Administrator for the Office of Federal Procurement Policy, discussed in his testimony the facts about debarments and suspension.

...The regular evaluation of contractor performance and the use of those evaluations in decisions for future awards motivate contractors to perform well, and help ensure that we avoid doing repeat business with firms that don’t perform well. Suspending or debarring entities can help to protect taxpayers from the abuse of contractors who have been convicted of fraud or other criminal or civil offenses indicating a lack of business honesty or integrity, or who otherwise behave unethically, or engage in poor performance of government-funded work. The system works, however, only if we are willing and able to suspend or debar entities when we shouldn’t be doing business with them, and if all agencies check to be sure they are not awarding a contract to an entity that has been suspended or debarred...

Past performance data collection is the actual root cause of many of these issues. Past performance completion rates are not only low, but the reports are not being entered into the Past Performance Information Retrieval System (PPIRS) database. So accountability needs to be the first step in this reform analysis, by ensuring the information about wrong doing is available to government. However, the understanding of what and how suspensions and debarments are supposed to be used is currently a major issue that seemingly is lost on the Commission.

... Among 32 recommendations made in a report released last week, commissioners want agencies to:

• Give a written rationale for not pursuing a proposed suspension or debarment.

• Increase use of suspensions and debarments.

• Revise regulations to lower procedural barriers to contingency suspensions and debarments...

These activities are not supposed to be punitive, but that is exactly what the commission seems to be implying. The report itself lists almost double the number of activities targeted to punishment, vice creating solutions to prevent the fraud, waste, and abuse from happening in the first place.

I am not implying that some companies have not acted in the best interest of the taxpayer. Fraud, waste, and abuse has definitely occurred, and regretfully has been a part of war profiteering that goes back to the founding of the nation. However, advocating the use of debarments and suspensions as a punitive weapon will not solve the problem. I hope the Commission realizes that treating the symptoms and not the disease is simply a recipe for failure, and will be further adding to the waste it has been formed to help prevent.

Your Taxpayer Dollar$ at Work: Volume I – Follow Up

I recently started a new piece here on the The Acquisition Corner, as a result of the complete fiscal mismanagement of the U.S. Postal Service (USPS).

The Federal Times reported this week that the issues with the USPS are not only severe, but at the point that radical change is necessary if the USPS is to survive:

…Postmaster General John Potter warned Friday that the U.S. Postal Service could go broke by next September.

"If things go as expected, we will perhaps be able to get through the year and literally run out of cash in September of 2011 because we will have exhausted all of our borrowing authority," he said at a news conference.

He said losses in the fiscal year ending yesterday widened to about $6 billion…

It gets worse:

…This has been a devastating week for the Postal Service. Besides ending the year with a $6 billion loss, the agency's bid to raise stamp rates was rejected by the Postal Regulatory Commission on Thursday. The proposed rate hike would have increased first-class stamps from 44 cents to 46 cents starting in January.

Potter said the agency is studying its options in the wake of that decision. Among those options: Appeal the decision to a federal court; refile the rate request; or seek to raise rates by an amount tied to the inflation rate. That last step would not require the PRC's approval, although the commission would have to verify that the increase is no higher than a cap linked to the Consumer Price Index. According to the latest available numbers, that formula would permit an average rate increase of about 1.5 percent, a PRC spokesman said today…

What about consolidating operations, cutting costs, and other tools to improve performance to help the fiscal crisis facing the USPS? Perhaps it was not reported, but I have not seen much effort coming from USPS management on these issues other than possibly cutting Saturday delivery. The forever stamps may be an option as I commented, but hopefully they will still have utility.

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.