Forget Talk of Policy: Focus on People

Since coming onboard as new Administrator of The Office of Federal Procurement Policy (OFPP), Joe Jordan has seemingly looked to policy, regulations, and guidance on tactical execution to help solve the procurement woes that are being faced by the federal government.

However, it has been some time since OFPP focused on what really is the problem, the acquisition workforce.

Granted Mr. Jordan discussed workforce in an interview with Federal Computer Week, and I hope he does indeed focus on it.

However, without a highly trained and functioning acquisition workforce, no initiative or improvements in the abysmal track record of government spending is possible.

Most new “initiatives” are treated with either derision, open hostility, or simply ignored due to lack of attention or even awareness. I recently asked a group of contract specialists about their use of open communication techniques, in accordance with OFPP’s “MythBusters” campaign, and you would have thought I was speaking another language by the blank stares I got.

One of the most respected (definitely by me) thought leaders in this profession, Vern Edwards, said it best on a recent post on this very issue:

…In a complex system like acquisition, any attempt to fix deep seated system faults through policy will fail. The only way to get at the deep seated problems in acquisition is through workforce improvement, and I don’t mean numbers. We need well-educated, superbly trained people for the big stuff, and we do not have enough of them. Mismanagement and poor leadership will prompt many of the best of the new recruits to leave. The problems are beyond the reach of management in the organizational structure we have now for the simple reason that no one is in charge. Only someone with the power and the ruthlessness of a Stalin could fix the system. A few purges might be just the thing…

It is the cold, hard truth. We need to focus on people, and not the numbers as I have previously discussed (here, here and here).

Focusing on tactical issues can certainly help, especially focusing on performance based contracting, better requirements development, and better communications and collaboration with industry. Nonetheless, the state of the acquisition workforce gets worse every day, and the hole keeps getting deeper.

You won’t hear that in any Presidential debate or attack ad. It is easier to focus on the symptoms rather than the disease. 

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.

Protest Accountability: Time For Enforcement

Protests are back in the news, although they never really left. I have been writing about this issue for some time (here and here), but the problem has only exploded in the last five years with the economic implosion, and now sequestration and budgeting Armageddon possible on the horizon.

A recent report from IBM’s Center for the Business of Government also highlight similar issues, but some of the recommendations made in the report are either not realistic or have no chance at implementation.

The current state of the acquisition workforce, and I am including the program office who will (or should) be evaluating a proposal, simply will not allow many of these recommendations to see the light of day.

The report should have focused on the only issues that need leadership support, which is to create confidence in the contract award decision, and to ensure industry understands the requirements, evaluation criteria, and why they did not win a contract.

Nonetheless, the current state of affairs when it comes to protests is only going to worsen unless accountability is brought into the fray.

Looking at the recent Government Accountability Office (GAO) report on protests, it is hard to not think that protests are out of control. Here is where I strongly agree with IBM’s report, as I have been an advocate of protest accountability for some time. How can one argue that some protests are not simply frivolous? I know of a company, an incumbent on a contract that lost a recompete, who admitted filing a frivolous protest to bilk the government for another three months of revenue while GAO made the decision. The basis for the protest bordered on absurd, but how often does that happen? More often than you think. It is a business decision no doubt, but only at the expense of the taxpayers and the mission.

Protests are disruptive, and firms need to be held accountable for reimbursing the government for losing protest after protest. Further, this is a demonstration of a bad actor, and should also be included in a firm’s past performance rating.

Conversely, firms should automatically be compensated for protests fees should they be upheld. It is a two-way street, and needs to be treated as such.

Protests are a fundamental right by a firm to correct a deficiency by the government. However, the data indicate that this right is being abused. Let’s bring this situation under control, and move forward.

Saving Money Is Now A Good Thing: The Great Paradigm Shift

I always have to scratch my head at the curiosity of how the federal government operates in regards to budgetary matters. Although commercial best practices are all the rage in government, such as trying to leverage technologies and become more efficient, innovative, and agile, the one area that always seemed to be polar-opposite was the budget.

Commercial entities, specifically publically traded companies, have accountability to their shareholders and Wall Street (mostly Wall Street). As such, increasing productivity and lowering costs has always been a critical driver in efficient corporate operations. Unlike federal leaders, corporate leaders are held accountable for what is viewed as wasteful or excessive spending.

Although the federal government has made several initiatives as of late to increase productivity, it has always been, and continues to be, the accountability issue that has lagged the commercial sector.

That trend has seen a recent reversal. With the focus on cutting contracts, saving money is now a requirement. The Office of Management and Budget recently sent out a memo directing agencies to further tighten their belts, especially given the “TravelGate” scandal from the General Services Administration.  

Cuts are also hurting industry, as salaries, benefits, and jobs are being shed to withstand the environment of lower margins, and lower rates on bids.

…Agencies typically wait until contracts are up for renewal or entering another option year to negotiate with vendors for a better deal. But Hancher's reduced budget drove her to bargain with the agency's help desk support contractor, Computer Sciences Corp., in the middle of an option year…

Different negotiating tactics are being employed, but it is the low-price model that has really taken a solid grip on how the government now buys.

…Donna James, owner of Accent Global System Architects, which helps agencies map their IT network systems, said she started noticing last year that agencies were more focused on price than best value. She lost every bid she competed for based on price.

To be more competitive, her company cut back contributions to employees' health savings accounts and is hiring new staff at lower salaries, she said.

However, most of the contracts she competes for still call for highly skilled workers with special certifications, James said. "They want the sun, moon and stars and they don't want to pay for it."…

The federal government has turned into a buyers market, with procurement executives making difficult requirements without the opportunity for best value. I have seen a marked increase in small businesses getting squeezed to deliver, as the low-price model ensures that margins are squeezed as close to zero as possible just to stay viable. Best value is nothing more than lip service.

Several agencies seem to be getting the message, however, that early and upfront collaboration with industry is vital to understanding what is available, but also, what is affordable.

…At the Veterans Affairs Department, acquisition and IT executives meet with vendors early on about expectations and pricing, so there are no surprises on either side, said Luwanda Jones, VA's executive director of IT acquisition strategy and business relationships…

Nonetheless, we’ll see how the end of fiscal year buying season turns out; the period between July and September that I refer to as the “Feeding Frenzy.”

Will agencies continue to spend like drunken sailors in this period, or will senior leaders demand cuts and finding ways to not spend end-of-year money?

Stay tuned to see if this paradigm shift actually occurs… 

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.

Service Contract Inventories: Missed Opportunities For Transparency

Last month, the Government Accountability Office (GAO) released a new report in April 2012 detailing a continuing issue at the Department of Defense (DoD) that is not foreign across government; the lack of transparency when it come to service contracts.

The GAO report looks at two issues inherent in the struggles at DoD; lack of clear oversight on service contracts and the continuing issue of contractors performing inherently governmental functions.

One issue identified was the reliance on the Federal Procurement Data System-Next Generation (FPDS-NG) for the inventory for most defense components other than the Army.

DOD acknowledged a number of factors that limited the utility, accuracy, and completeness of the inventory data. For example, FPDS-NG does not identify more than one type of service purchased for each contract action, provide the number of contractor full-time equivalent personnel, or identify the requiring activity. As before, the Army used its Contractor Manpower Reporting Application to compile its fiscal year 2010 inventory. This system collects data reported by contractors on services performed at the contract line item level, including information on labor hours and the function and mission performed. DOD officials noted that the Army’s current process complies with legislative requirements.

What the GAO recommends is for DoD to create processes and adopt similar systems such as the Army, since the other services use their own methodologies, processes, or simply do not follow the requirements.

This problem is endemic across government, and I do not understand why GAO is recommending separate processes for DoD. This is a “big data” problem, as the requirements for transparency are not possible given the current data collection processes and systems anywhere.

The overall issue is one of workforce, and the need to analyze spending on the biggest expenditure, which is on service contracts. Without comprehensive, accurate data, how are decisions to be made on insourcing, continuity of service contracts for mission performance, and ensuring contractors are not performing inherently governmental functions.

The guidance from the Office of Federal Procurement Policy is more than adequate, and agencies are in full swing providing the information. However, the jury is still out on the utility of the information, let alone the accuracy. Further, the information on FTE counts is still mostly a work in progress, which seems to be a vital gap in this data collection exercise.

Most beneficial across government is not to create new systems, but to simply retool FPDS-NG to ensure that the data being collected is complete to meet the overall reporting requirements with a simple data field. Current contract management systems should automate this process, such that the complete data sets are collected from the contract file, which should include contract management data.

Combined with this relatively simple and inexpensive fix (let me take a deep breath as I write that), the Office of Management and Budget should provide more clear guidance on how to use the inventories in decision making regarding manpower, and the appropriate use of contractors.

This is a solid opportunity to consolidate a vital data issue that is common across government, but the GAO recommends that DoD and federal agencies should continue the fragmented approach to collecting this data.

This is one area where the “uniqueness” argument across organizational boundaries does not hold water. Transparency and the ability to make workforce decisions with complete and accurate data is a federal government issue, not just one for the Defense Department.

Ensuring Small Businesses Representation: Enforce the Rules

The issue of subcontracts management is a badly needed topic that has gotten little attention recently, either through proposed legislation, or anywhere else. I attended the Acquisition Excellence 2012 Conference a few weeks ago, jointly sponsored by the American Council for Technology (ACT) - Industry Advisory Council (IAC) and the General Services Administration, discussing with several procurement officials the need for subcontracting accountability. Mainly, ensuring that percent and dollar amounts in subcontracting plans were being adhered to and measured, in regards to performance. All the officials discussed what should happen, but all also acknowledged that not enough was being done.

This is perhaps one of the most important ways that small businesses can be represented in federal contracts. Most contracts have performance reporting requirements, but very rarely do they include a holistic approach to the contract. How is the prime performing on adherence to the subcontracting plan? The importance is usually on lines of code and spend rates, even going so far to manage firm fixed priced contracts like time and materials. An effective tree-killing exercise, but not a very productive one.

Subcontractors have little options when needing to address grievances against large firms. Some small businesses have had contracts terminated, positions taken, or simply not having promises made to them kept.

Procurement officials do not want to get involved, and small businesses have recently taken to the media and the courts for relief.

Performance on a contract should also entail integrity and honesty in dealing with subcontractors in regards to past performance, as the government does itself no favors in dealing with bad actors that don’t adhere to promises and contractual requirements in subcontract execution.

The continued focus on small business is certainly a positive, but the holistic approach and institutional issues endemic to small business contract failures need to be addressed.

Government can achieve its small business goals, no question. It is the desire to change, along with a concerted effort by leadership, which is required to succeed.