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.

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.