Procurement Efficiencies Through Multiple Award Contracts

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

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

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

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

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

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

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

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

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

Behind the Curtain: Communications in the Acquisition Process

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

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

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

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

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

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

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

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

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

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

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

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

Insourcing: More Specific Guidance from OMB is Needed For Success

Under guidance from the Office of Federal Procurement Policy (OFPP), expected later this summer, agencies will need to develop a business case before launching a multi-agency contract (MAC). According to the preliminary guidance, the business cases will require agencies to address the government’s ability to leverage its buying power with the creation of the new ability vehicle.

“We believe it is prudent for an agency to develop a business case before moving forward with that approach,” said OFPP Administrator Daniel Gordon.

Although this guidance is long overdue, and is a significant step in helping stem the tide of further waste and consolidating buying, what remains undone is the needed guidance and specifics on dealing with insourcing.

The Government Accountability Office (GAO) issued findings last fall about how insourcing policy was being developed, and the results remain disappointing. In March 2009, Congress enacted section 736 of the Omnibus Appropriations Act, which required all federal agencies except the Department of Defense (DOD) to devise and implement guidelines for insourcing new and contracted-out functions by mid-July 2009. Curiously, section 736 does not specify a role for OMB in the development and implementation of the civilian agency insourcing guidelines, which has resulted in failures to properly address this critical issue to the government workforce.

Nonetheless, OMB has issued guidance to facilitate the management of the federal government’s multi-sector workforce through an approach that uses best practices to human capital management and costs analysis, but clear guidelines for creating proper business cases continues to be missing or unclear. Further complicating this issue is the continued review of the term “inherently governmental,” and lessons learned from the multi-sector workforce pilots.

OMB must take the lead in developing the guidelines and providing the oversight and approval of agency-specific guidelines, as agencies claim these insourcing guidelines are complex and involve many agency functions. This exacerbates workforce issues that are difficult enough in dealing with multiple management initiatives in addition to regular core duties. OMB must provide government the direction necessary to ensure that insourcing is done correctly, which includes business cases and stakeholder analyses to ensure agency missions are performed with the right set of skills and capabilities.

What has happened is that confusion as to when a cost analysis is needed, in addition to the appropriate methodology to conduct the cost analysis, has made defining procedures necessary to sufficiently address cost issues challenging. Standardization is necessary, as GAO stated that OMB’s criteria do not specify the procedures for conducting a cost analysis or define what constitutes full cost of performance, while some agency officials insist they need to have the flexibility in determining how it should conduct cost analyses when making insourcing decisions. This is a recipe for disaster without uniformity and proper service-contract data, which also remains difficult to gather and analyze.

It also appears that OMB guidance is being viewed as a directive. More pressure is being put on acquisition workforce to use fixed-price contracts, regardless of requirements. This also appears to be the case in how insourcing is being conducted, as illustrated by the case of Rohmann Services Inc., a small business who successfully challenged an insourcing decision by the Air Force due to improper cost analysis in its reasoning for its decision.

There needs to be consolidated, overall guidance on insourcing across government, and the DOD should not be excluded. OMB should have a coordinated effort to help ensure insourcing is conducted in a proper and fair manner for all parties involved, and proper business cases get conducted to ensure the taxpayer gets the best deal.

Blended Workforce Done Strategically is Right Sizing

The insourcing debate seems to have heated up this month, as competing forces are all at play and all are trying to be satisfied. The Office of Management and Budget (OMB) continues to provide guidance on inherently governmental functions, public comments continue on the proposed rules, and groups to help small business seem to forming in an effort to organize resistance to “non-strategic” insourcing that will disproportionally affect their business and possibly their survival. 

Along those lines, recent testimony talked to the difficulties and challenges that result with strategically insourcing:

"In many cases, overreliance on contractors may be corrected by allocating additional resources to contract management," said Daniel Gordon, administrator of the Office of Management and Budget's Office of Federal Procurement Policy, in prepared testimony for the Senate Homeland Security and Governmental Affairs Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia. "In other words, rebalancing does not require an agency to insource ... provided the agency can hire, retrain or reassign sufficient federal employees with the requisite skills in managing contractors to maintain control of their activities."

Accordingly, Administration officials and Congress appear to understand that the effort to “rebalance” the workforce must be done deliberately.

…"Rebalancing the federal workforce will not simply be a job conversion process," said subcommittee Chairman Daniel Akaka, D-Hawaii. "This effort will take considerable workforce planning to determine what federal positions should be created and what contracting functions eliminated."…

…"We must ensure that the goals we are asking agencies to achieve with respect to insourcing can be achieved using current hiring tools," said Sen. George Voinovich, R-Ohio. "If not, the administration or Congress must supply agencies with sufficient flexibilities to get the job done."…

Although the debate has many aspects and stakeholders across the Government, it is the small businesses and firms affected that seem to be lost in this debate about insourcing the right way. Where is the strategic nature of these actions?

Although a provision in the fiscal 2011 Defense authorization bill, approved by the House Armed Services Committee, would prevent the Pentagon from establishing "any arbitrary goals or targets to implement DoD's insourcing initiative," it does not seem that DoD is taking this measure seriously.

Earlier this month, Professional Services Council President Stan Soloway, sent a letter to Defense Secretary Robert Gates to raise concerns that the Pentagon's plan to bring thousands of contracted positions back to the Pentagon has gone off track. I am not sure if there has been a response yet by the Secretary or DoD, but there seems to be lack of any concerted effort to show demonstrated savings or any cost analysis that warrant the actions or create the best deal for the taxpayer.

…"From a budgetary perspective, the [Defense] components are simply eliminating fully burdened contract costs with less than fully burdened personnel costs," Soloway wrote. "Moreover, market competition, which the president has repeatedly identified as the key to improving performing and reducing costs, is not even being considered in DoD's and the components' planning. Rather, for work that does not fall into the categories you identified as being critical to the department, DoD is substituting a sole-source model for a competition-based model of management."…

Rebuffing these claims of improper costs analysis has been Christine Fox, director of Defense's cost assessment and program evaluation. Ms. Fox issued guidance earlier this year for comparing the labor costs of civilian and contract support. Falling short of the guidance, however, are a number of costs that should be attributed to the government, which include training and development according to Mr. Soloway. The guidance also cites the expenses incurred by DoD for contract administration and oversight, but does not include similar information when the work is performed by federal employees. Why the disconnect? An oversight or trying to fit a position into an argument?

The insourcing pressure at DoD is intense, as Secretary Gates has called for DOD to reduce the number of support service contractors from its current level of 39 percent of the workforce to its pre-2001 level of 26 percent, with acquisition positions being the largest increase.

…"As a result of this lack of process discipline, we are witnessing thousands of contractor employees, many of them members of a union and/or employees of small businesses (some of which face the potential of literally going out of business), having their jobs terminated, in many cases leaving contractor employees without work," wrote R. Thomas Buffenbarger, president of the International Association of Machinists…

There are many competing forces at stake, but It is unfortunate that strategic analysis seems to have gone by they wayside to fulfill policy that benefits narrow interests and seems to be opposed to what is in the best interest of the taxpayer and the mission.

Performance Based Contracting Needs a Continued Push through Acquisition 2.0

Why has it been so difficult to execute performance-based contracting? Certainly the complexities of modern-day service contracting play a part, but as Steve Kelman, former administrator of the Office of Federal Procurement Policy points out, it has been a frustrating and slow moving initiative making little headway in proper execution of these methods.

…There is one obvious reason for this: If you haven’t included performance metrics in your contract, it involves a lot of work to change it into a performance-based contract when you go to recompete it. And there are other reasons. Sometimes it is genuinely difficult to develop relevant performance metrics for contractors, just as it is for in-house activities — for example, what are relevant outcome-based metrics for State Department diplomacy? Finally, there is the sometimes vexing issue of changing and adding to performance metrics during the life of a long contract as technology and user requirements change…

The issue is beyond metrics, as it starts with understanding the outcomes and objectives of what performance-based contracting is all about. It requires a different mind-set, a different set of skills and capabilities, but most important, it involves understanding that culture is probably the biggest barrier of all.

The tools of the Acquisition 2.0 community can have a role in changing this culture, as one of the central tenets of this methodology is about collaboration, specifically between industry and the government. Using initiatives such as the Better Buy Project, outside parties, as well as those inside the government, can add value to the dialogue:

…Program managers need to recognize that some of the things that add to the time it takes to get a contract awarded are good investments that ensure faster and better execution of the contract in the long run. In that case, the evidence is overwhelming that using performance metrics — whether for in-house or contracted activities — can improve performance by motivating and focusing employees and facilitating feedback, which is a necessary tool for organizational learning. We need to bring those benefits to contracting…

Of course, determined leaders acting as change agents will always be needed to push for new ways of doing business. Deborah Broderick, the FBI’s new senior procurement executive, seems to understand these responsibilities and has taken a lead in changing the culture at FBI and its mixed track records of procurement outcomes. 

One of her approaches was to actively engage training where it counts, to help program managers, contracting officers, and the contracting officer's technical representatives in developing proper performance-based contracts with objectives at the time of actually writing the bid. This approach has allowed for innovation, and the ability to focus on outcomes. Further, the approach measures those outcomes through development of proper performance metrics and other contract provisions specific to the procurement in question and not generic metrics made for manufacturing or other boilerplate metrics that are used for the sake of speed and cutting corners. As Dr. Kelman points out, these methods will take time, and leaders must help offset the pressure for speed and sacrificing doing what is right. This pressure is often short-sighted, and may help contribute to the status quo; cost, schedule, and performance issues.

Acquisition 2.0 tools can help aggregate the ideas for performance metrics through crowd sourcing, as both industry and government know what has worked, but more importantly, what has not worked. We have to understand that performance-based contracting is not a silver bullet. However, when investments are made in these techniques, the return on that investment has the potential to be great, and go a long way in improving government management overall. 

Acquisition 2.0 Starts With FAR 2.0

Originally posted on BetterBlog, this official blog of the Better Buy Project.

Let me first apologize to Andy Krzmarzick (@krazykris on Twitter), as I have been promising a post on performance-based contracting and how it relates to the Better Buy Project and the Acquisition 2.0 initiative. I actually started that post, but put in on hold a bit as I found something of interest that I have also been meaning to discuss.

At the Better Buy Project forum at the National Association of Public Administration (NAPA) last December, I was discussing with Mary Davie of the General Services Administration the need to reform not only acquisition, but the Federal Acquisition Regulation (FAR) itself. We both commented that we often get curious looks when we mention this in conversation, but part of the rebuilding of the acquisition mission is to look at the FAR, as it seems ripe for an overhaul. In fact, the FAR can be fertile ground for change, and that change can certainly be done under the umbrella of Acquisition 2.0 tools and methodologies, much like performance-based contracting.

The FAR, in my opinion, has become a snake-pit of over-regulation; a maze of parochial interest. As lawmakers turned to help constituencies and thus narrow interests, or through well-meaning yet poorly planned and poorly though out policy, the current FAR is an example of simply how not to conduct world-class buying.

I was revisiting a wonderful piece of common sense approaches to reform by the Procurement Roundtable (PRT) that are very relevant to the current transformation discussion, not to mention illustrative of how difficult reform can be as the report is dated December, 1999.

The recommendation regarding policy guidance I believe to be spot on, and concur with the PRT that the way forward is much less regulation and far fewer detailed procurement laws. The reform process would work in an Acquisition 2.0 construct, where mission and broad policy statements commence the process of the final outcome; a digital, e-procurement guidance or FAR 2.0.

Under FAR 2.0, guidance should focus on outcomes and mission by concentrating on National or agency goals and objectives. This guidance would not be regulation, and would certainly not be details about how to perform the mission.

The next step is recreating FAR 2.0 would be a crowd sourcing initiative, much like the Better Buy Project. The acquisition community would be able to comment on eliminating the redundancy and over-regulation, focus on commercial best practices, and eliminate those existing statutes, agency regulations, and other directives that burden procurement and detail how to perform the mission. This approach is what the PRT referred to as a "zero-based" approach; which is to start with a blank sheet and add only what can be thoroughly justified.

Further input would of course be proposals for re-creating and streamlining the buying process, changing the new FAR to make it a "what, not how" model of world-class procurement. The rule for streamlining and creating FAR 2.0 would be to follow those commercial processes that allow for a fair and open acquisition process, and allow for real transparency and accountability to the taxpayer. This new process would be based on constant innovation; eliminating and revising any existing guidance or policy that does not allow for the leveraging of new information technology. The goal is to build an acquisition process for the 21st century, and executed by a right-sized and blended 21st century acquisition workforce with the right skills and capabilities to leverage this new process.

Not an easy task, no doubt. However, recognizing the institutional challenges that have hampered reform in the past are the first areas to attack by change agents and leaders who claim to want real, meaningful reform, and who are also demanding accountability and transparency. Some agencies will continue claiming uniqueness, and Congress may the biggest obstacle. However, the Acquisition 2.0 forum and the collaborative nature of this FAR 2.0 initiative can use the successes and lessons learned from Better Buy to involve all the concerned stakeholders, including the organizations that published the overly prescriptive guidance and have legitimacy to claims of uniqueness. Only by taking risks and exploring innovative ideas can we expect to see change that matters.

Portraying Government Procurement: Is It The Media Or The Culture?

Recent testimony by Steve Schooner, co-director of The George Washington University's Government Procurement Law Program, and others before the House Armed Services Committee's Defense Acquisition Reform Panel, helped paint the picture and made valid points about how the media portrays the federal acquisition environment and the current state it is in.

"The pervasive anti-contractor rhetoric emanating from the media, not-for-profit organizations, the legislature, the executive branch (including, among others, the Justice Department, Defense Contract Audit Agency and the inspectors general) colors public perceptions of contractors and the acquisition profession," said Mr. Schooner. "There is more truth to black humor in Jacques Gansler's popular new moniker for the current environment -- the 'global war on contractors.' "

However, I believe this is only half the story. I believe the media is simply reporting on what is becoming a culture of “Insource at All Costs,” with little regard to quality of the acquisition workforce, and thus creating the term that Mr. Gansler referenced.

The current environment and culture of the acquisition workforce that new hires enter into is not a pretty picture. For years the workforce has been neglected, with little attention to building skills or future capabilities. Furthermore, the environment has been one of risk aversion, exacerbated with little need for innovation or developing the tools necessary to be true business advisors and partners for programs. The result is that the acquisition workforce has stagnated on many fronts, and new hires seem to be lost in developing their own skills.

The average professional in the current workforce is very experienced, but it is becoming more and more difficult for them to train and mentor new hires, which tend to be younger and less experienced. I do not believe this is a result of generational friction, which may the case in some instances, but more of a function of the lack of resources. Many simply do not have the time, or leadership does not see it as a priority. This very fact was further discussed by Steve Kelman in a recent blog post on this topic.

The federal procurement process is a maze of bureaucracy and mind-numbing regulations that takes years of experience and know-how on navigating these difficult waters. But as Mr. Kelman pointed out, new hires seem to be given very little focused training to the point that the new hires he was talking to had received no guidance on learning anything about the products or services they were buying. The overall feedback he received was alarming, as was the lack of innovation and underutilization of these talented people who want to serve. Chairman Rep. Rob Andrews, D-N.J, said it best:

…"If you make the proper investment in experience and skill, if you motivate and reward experienced and skilled people and empower them to do the things that need to be done, they can make improvements that can turn the whole system around."

Ultimately these issues need to be solved by changing the culture and environment, and driven by the supervisors, senior contracting officials, and acquisition leaders at the agencies to create the 21st century acquisition workforce. Further, empowering the next generation is ultimately necessary to succeed, and not be treated as a necessary-evil but a strategic imperative by leadership.

However, the guidance from the Office and Management and Budget seems to be more distressing, as I see further evidence of the counter product attitude that seems to be emanating from the various institutions Mr. Schooner identified in his testimony. Leadership is vitality needed to help solve these daunting issues, as industry and government need to be working more collaboratively, expanding ways they communicate, and fining solutions together. However, it seems that the pervasive attitude is for the pendulum to drastically swing in the government’s direction, vice finding the right balance to perform the vital missions of government to ensure the best outcomes for cost, schedule, and performance.