Speed Over Prudence in Stimulus Spending

Last week at the National Contract Management Association World Congress, we discussed many issues facing the federal contracting community. Among them was the push for transparency and accountability from the Obama Administration, specifically in the oversight that will be associated with Stimulus spending.

I would like to begin that conversation with the article in the Washington Post, which begins with the assumption that waste, fraud, and abuse to the tunes of billions is somehow inevitable in the rush and urgency to spend the money and get the economy rolling again.

…Missing amid all these high-minded calls to protect taxpayer dollars is an awkward question: When the whole point of a major government spending program is to stimulate the faltering economy as quickly as possible, what exactly counts as "wasted" money? After all, if some stimulus cash is misspent -- say an errant official or contractor buys himself a Cadillac or a Harley Davidson, only to suffer the full force of law -- might not such fraud boost the economy more than if the cash languished in a law-abiding state account? All that monitoring, however well-intentioned, may undercut recovery by compelling officials to spend more slowly to avoid hearings, prosecution, or embarrassment in the media… (Emphasis mine)

This is an interesting point that is causing serious issues with how best to keep track of the funds, and may lead to what I call an “analysis paralysis.” Relating this theory to DoD programs, officials often want the best solution, which to DoD means a system that meets 100% capability. Perfection is nice, but is it realistic? Is it in the best interest of the warfighter or taxpayer? Instead, focus on the 80% solution, and get capability quickly fielded and perfected with incremental additions of mature technology. For the Stimulus funding, it is the same theory. Federal officials may be so paralyzed of making a mistake and being called out on the carpet, that spending decisions may be slow-rolled and second-guessed in an environment of risk aversion.

My colleague Steve Schooner of George Washington University makes the point in the article:

… "If the goal for the stimulus spending is to minimize fraud and waste to the point of zero, I know how to do that: All I have to do is not spend the money,"

.. "Are we capable of grasping the concept that in a struggling economy, it's more important to throw money at the problem, even if it's possibly inefficient and possibly inaccurate?"…

The purpose of the Recovery Act was to help push broader policy initiatives for healthcare, energy, and education. Therefore, the stimulus funding needs to have the desired impacts on policy, but also has been placed under the microscope of oversight. Here is the where the paralysis is feared, as some in Congress are keeping a very close eye for even the slightest hints of problems amid association with Iraq or Katrina contracts and pictures of millions in $100 bricks being handed out with little accountability.

The enormous amount of attention to stimulus funding is creating a burdensome process that continues to be defined, and redefined. Agencies and contractors must spend enormous amount of resources creating reports, further burdening an acquisition workforce under siege. There appears to be a lack of commitment on data feeds with Recovery.gov, with complaints on the rise that little useful information is being provided to create the real-time informational reports that were envisioned with its creation. Therefore, just the reporting is becoming a huge impediment to Stimulus will processes and procedures that seem to be conflicting or self-defeating.

Further complicating the issue is what gets defined as "waste," and what is being targeted. Some in Congress, along with Offices of the Inspector General, are concerned with blatant fraud and abuse, while some see anything short of the bill's specific policy aims as a failure. This of course includes political gamesmanship on both sides of the aisle, which will invariable further slow the process and question spending that can be used as a political weapon. Of course the issue of risk aversion is never far away, as stated by Alan Chvotkin of the Professional Services Council:

… the oversight is putting a scare into federal officials whose agencies are undermanned as it is when it comes to contracting and procurement. "Most of the agency officials, the career officials, are risk averse," he said. One such individual he spoke with told him that the White House was behind the official "with a hot pitchfork to get the funds out," Chvotkin said, "yet he knows whatever action he takes is going to be reviewed by a lawyer or his inspector general or Mr. Devaney, so he's saying, if it's going to be [me] in a sling, this is going to be done on my timetable.".. (Emphasis mine)

We seem to be repeating some of the issues and tensions experienced by President Roosevelt, who in 1933 created the Public Works Administration and the Civil Works Administration to get America out of the Great Depression. These two agencies had different philosophies, and different imperatives on stressing speed over prudence. It is a policy focus being fought today, although I fear that prudence may be winning the fight over speed. Some in Congress, however, are bringing important questions to light:

…Amid the calls for oversight, Sen. George Voinovich (R-Ohio) issued a rare dissent. "Does this make sense?" he said at last month's hearing. Officials "are filling out all these reports and they're going to ask the question, 'Do they want us to do [stimulus] or are they more interested in the reports?'…

Some level of waste or fraud is inevitable, but the questions have to be raised about what level we are willing to accept with the broader focus of getting the economy back on track and getting people back to work. I agree with the Interior Department's highly regarded inspector general, Earl Devaney, who stated in Congressional testimony that assuming fraud will be ferreted out with the tremendous amount of transparency and accountability called for in the Recovery Act is naïve. There has to be a proper balance between actual stimulus, and creating so many policies, reports, layers of bureaucracy, etc. that risk aversion takes hold, and the Stimulus becomes a trickle as opposed to the envisioned flood for our struggling economy.

Focusing on How to Spend Stimulus Funding

Many of us in the federal acquisition arena understand the issues around spending for 2009 American Recovery and Reinvestment Act. The issues include how the money will be spent, how the money will get reported correctly and quickly on Recovery.gov, and how the funds will be adverse to waste, fraud, and abuse. Oversight and contract management will be critical areas of scrutiny for effectiveness of the Act.

The research firm IDC, in a new report (fee required), is claiming that billions in stimulus funding will be in the form of IT, and that the money will not be spent via traditional channels. NextGov also reported on the story:

NextGov, March 19, 2009:

"This once-in-a-lifetime flood of new technology money requires a new way of finding and following opportunities," the report states. "Due to the aggressive timeline, success will not come from the traditional business development via relationships and requests for proposals."

Most of the estimated $101.2 billion in technology spending that IDC says agencies will spend during the next four years will be focused on the energy and health sectors. IDC estimates $78 billion will be spent on implementing more efficient alternative energy technologies and agencies will spend about $21.1 billion on health information technology. The act also sets aside $2.5 billion for individual IT projects in federal agencies.

The IDC report claims much of the money will be distributed in the form of grants and “accelerated acquisition contracts,” which IDC claims will lead to innovation in procurement and government engagement. The report also advices potential government vendors to focus on those identified objectives and not be focused on the means of distributing the stimulus funds via the procurement process.

"Vendors should be promoting their ability to add value to those industries, not so much chasing the dollars, but solving the problems the stimulus is supposed to solve," said IDC analyst Thom Rubel. "It's mission-focused IT procurement. The old way is not good business strategy. It tends to focus on dollars instead of the outcome the government is trying to achieve."

Although I have not seen the IDC report (a $4500 price tag for 13 pages of research), it is encouraging to learn that agencies have already created a foundation for knowledge-based acquisition, by developing an outcome- focused approach to stimulus spending acquisition planning in the form of objectives, cost savings and benchmarks of success in critical programs.

Not encouraging is the apparent recommendations by IDC for vendors to not focus on the dollars and the procurement methods. As I have stated before, agencies will be under enormous pressure to spend stimulus funds. As the already overburdened contracting community gets squeezed for action, there is a risk of increased contract bundling, and unjustified sole source awards for large contracts and to large contractors, specifically for energy, healthcare, and IT. The General Services Administration (GSA) should see a subsequent increase in use of GSA Schedule awards, and the use of already established Blanket Purchase Agreements (BPAs) and Government Wide Acquisition Contract (GWACs). Vendors, especially small business, will need to focus on these procurement methods to allow for increased competition and small business participation in the Recovery Act.

Vendors will focus their solutions on their respective value propositions and to fill needs across government. That is their priority in answering solicitations and expectations of receiving stimulus awards. In other words, that is why they are in business. However, advertising their contract vehicles available to purchasing agencies is the other side of the equation. I am not sure that not helping government recognize the solutions and vehicles available to them is a prudent strategy.

Spending Stimulus Funds

With the push for stimulus funding to be spent quickly, GSA and GovWorks should see a tremendous increase in activity in the next few months.

Government Executive.com, March 17, 2009:

Existing contracts offer the best option for getting stimulus money out the door quickly, a General Services Administration senior official said on Monday.

Mary Davie, assistant commissioner of GSA's Federal Acquisition Service, told members of the Industry Advisory Council and American Council for Technology that the agency is marketing its schedules and governmentwide acquisition contracts for spending under the 2009 American Recovery and Reinvestment Act.

"If you can use existing contracts... it's going to help you on the time frame immediately," Davie said. "It will help you with the firm fixed-price aspect, and it will help you with competition. Agencies should look first to existing contracts."…

Using existing contracts is certainly the preferred option with Stimulus funding. As agencies will see increasing pressure to spend, acquisition personnel will not have the time to start a new requirement from scratch. Having pre-negotiated pricing vehicles already in place, GSA schedule buys are a great way for government to act quickly.

My fear is that with the rush to spend, and increasing pressures on an already overwhelmed acquisition workforce, the doors will be open to waste, fraud, and abuse. Further, time requirements to spend will no doubt shrink, eliminating time for competition and seeing more to sole-source awards. Both possibilities are worst case scenarios, and with the announcement of several awards made by GSA to help with these issues (here), the hope is these concerns will not come to fruition.

Nonetheless, many acquisition centers are struggling to cope with the workloads and do not have the infrastructure in place (here).

We will need to keep a careful eye on how these funds are spent, and hope that acquisition centers continue to reach out to industry and across government to find the personnel and the skills they will need to ensure taxpayer money is spent wisely.