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.

Policy Reviews Will Not Improve Government Procurement

As part of the continuing push by the Administration to reduce the amount of redundancy and to cut red tape through a review of existing federal regulations, agencies recently announced their final plans that describe what they will begin to consider as possible reforms to current regulations to execute on the President’s Executive Order.

The plans look at variety of issues, including increasing competition, payments to small businesses, and vendor communications with government. In addition, the final plan for regulatory reviews also includes conflicts of interest, how to properly review a company’s past performances, and working with the Small Business Administration to update rules for using set-aside contracts and small business subcontracting plans.

Although the regulatory review plans are long overdue, and definitely needed, I am not sure the fundamental issues at the heart of the problems are regulatory in nature.

In July, the Department of Defense (DOD) proposed changes to the Defense Federal Acquisition Regulation Supplement’s rules on how DOD gets a fair or reasonable price from a company when only one-bid is received. Under the proposed new rules, Contracting Officers would have to re-compete the solicitation for at least another 30 days, and would have to determine prices to be reasonable through price or cost analysis or they can enter negotiations with the company that made the bid. However, the proposed regulatory change does not even discuss a comprehensive review of requirements or acquisition strategy, which more than likely led to the one-bid in the first place.

Regulatory reviews also plan to look at FAR 15, and regulatory obstacles to vendor communications. In fact, the regulations are clear on best practices and what is permissible prior to RFP release, even though it is not getting done. Dan Gordon, administrator of the Office of Federal Procurement Policy (OFPP), plans to discuss the rules about communications, and provide more guidance via a proposed memo by the end of 2011.

This memo would be a continuation of the OFPP's Myth Busters Campaign that discusses the misconceptions about government and industry communications. The Better Government IT initiative was created to help in this effort, but it is through this crowdsourcing that best practices can be reviewed, not through a review of regulations.

Mandating the use of current policy and regulations does not seem to be a viable option for ensuring government executes on these issues. It is through concerted leadership to execute existing policy and actively solicit best practices that we can expect to see effective change.

Eliminating burdesome policies and regualtions that create barriers to entry and create costs to government and industry would be welcome, but I am not sure this policy review will be as productive as might expected by its proponents.

MythBusters Call For Participation

Continuing the ongoing campaign to improve government and industry relations through the "Mythbusters" initiatives, the American Council for Technology (ACT) - Industry Advisory Council (IAC) has put up an initial list for comment and expansion to deliver on finding the "Top Ten."

Please visit the BetterGovernmentIT.org site to offer your comments and suggestions, and to vote on the top ten vendor-friendly strategies. The site will be active until 9/9! Help us help Government – visit bettergovernmentit.org and provide your input!

Your Taxpayer Dollar$ at Work: Volume II

Last year I started a series to highlight outrageous cases of waste, fraud, and abuse by the federal government. In the current environment of complete political theatre and legislative dysfunction leading to budget crises, debt ceilings, and continuous resolutions, I can probably write a book with so much material. However, I wanted to focus on a truly outrageous case of fraud and waste that is shocking, even when we succumb to the worst stereotypical fears of our government.

According to a recent inspector general report at the Department of Veterans Affairs (VA), $540 million dollars annually worth of business is being awarded to companies that fail to meet eligibility requirements for veteran owned small businesses or service-disabled veteran owned small businesses. The report stated these results were extrapolated from audit results, which assumes $540 million, and could add up to $2.5 billion over the next 5 years. The report further estimates that factoring out ineligible businesses, the VA only awarded 12 percent of its procurement dollars to actual veteran owned small businesses (VOSBs) and 10 percent to service disabled veteran owned businesses (SDVOSBs), as opposed to the 23 and 20 percent it said it did during fiscal 2010. Half a billion in estimated fraud? Give me a break.

The main culprit, not surprisingly, is the lack of accountability, according to testimony before the House Veterans Affairs' subcommittee on oversight and investigations by Belinda Finn, assistant inspector general for audits and evaluations at the VA OIG.

…Ineligible businesses received awards because VA's office of small and disadvantaged business utilization was not thoroughly reviewing business documentation and performing site visits to verify the veteran-owned status, said Finn. The OIG also found that contracting officers did not always check VA's enterprise veterans database, business size classification codes, or properly assess subcontracting and partnering agreements…

Once again the lack of resources and strain on the acquisition workforce was blamed, although this is a false argument. There is absolutely no excuse for not verifying eligibility of a firm for these types of set-aside programs, not to mention the subcontracting and partnering agreements. Where is the protection of the public’s trust?

Also of note is that only 30% of service disabled veteran contracts are with the VA, so this is a widespread issue. Obviously unethical firms and individuals are taking advantage of the lack of oversight, but there is no reason why VOSBs and SDVOSBs should be self-certifications. These programs should have formal certification processes similar to 8(a).

Although the VA has verification programs in place through its Center for Veteran Enterprise, it is woefully inadequate and cumbersome. You need your DD-214, adjudication letter from the VA (for SDVOSB), and corporate documentation showing 51% ownership and control. That is it. The current document requests are intrusive, and privacy is a risk. Explain to me how requiring 14 voided checks proves I am eligible?

Taxpayers are at risk in this program, and I hope the government, especially at the VA, understand the depths of this massive fraud being per perpetrated on taxpayers and veterans.

Industry and Government Relations Continue To Be A Challenge

Recently at the National Contract Management Association’s World Congress in Denver, the clouds and storms that rolled into the mile-high city were harbingers of things to come for the week as the relationship between government and industry seems to continue a downward trend at a time when it needs to improve. However, it is the current adversarial atmosphere that was on full display at the conference and illustrated the difficulties that lay ahead in improving and creating an environment of productive communications.

The conference kicked off with an address by Linda Hudson, CEO for BAE Systems, who explained the difficulties that businesses currently face, and the troubles that are on the horizon. A panel session proceeded immediately following the speech, aptly entitled “Show Me the Money—Corporate Survival in Tough Economic Times.”

It is simply a matter a fact that budgets will shrink or remain flat for the foreseeable future, and businesses must adjust to this reality. However, another reality is the ever increasing pile of regulations, oversight, and scrutiny that contractors must continue to deal with. From new ethics regulations, numerous reporting requirements, and ever increasing mandates on security, contractors must comply with this new environment and the subsequent increases in costs of doing business. There simply is no choice, either comply or fold. It is this compliance with current, and what can only be more and more future regulations and increasing oversight, that creates the choices for industry in how they can try to remain competitive. These choices will result in increasing layoffs, scaling back of benefits, decreasing small business subcontracting opportunities, and a restructuring of the industrial base to remain viable and profitable.

Further exacerbating the issue is the continued focus on risk-transference to industry through more and more focus on fixed price contracts, regardless of requirements. Because requirements continue to be poorly or inadequately defined, the result is increased costs to both industry and government in time and money to adhere to a construct that should have never been developed in the first place. This leads to industry having to continue readjusting their pricing strategies to remain competitive through lower and lower priced bids, to the point where margins are razor thin and profitability suffers even more.

I was disappointed at remarks made by Dr. Steve Kelman on his FCW blog, as he seemed to ignore the fact that industry is facing the most difficult period in some time, and will continue to suffer. Barely mentioned is the vulnerability of small businesses, who will face fewer opportunities and even more risk through insourcing. This issue was barely addressed by both the panel and Dr. Kelman, a significant deficiency that I addressed to the panel via a question, but it did not get answered. It is comments like Dr. Kelman’s and the environment he describes that illustrates the work ahead.

The real factor to working in this environment productively is through increased and transparent communications between government and industry, and an understanding that both sides actually do have the same objective. That is, completing a mission on time, and within budget. However, that reality and the current environment for industry seem to be lost on government, and the tone at the NCMA conference exacerbated the “us versus them” attitude. Both sides need to understand the mission from each side’s perspective, and understand the impacts actions have on completing that mission. This is of vital interest to effective government management, and deteriorating relationships will make getting the job done that much more difficult for all parties in the challenging times that lay ahead.

Improving the IT Acquisition Process

Federal Computer Week ran an interesting article recently on the many ideas and suggestions for improving the IT acquisition process. Their report was the result of the “Smarter Federal IT Initiatives: High Quality, Cost-Effective and On-Time” event sponsored by the Association of Management Consulting Firms in March. This event, featuring a panel of subject-matter experts, offered ideas for improving each aspect of the acquisition life cycle. Their ideas were certainly intriguing, from both a perspective of what was said, and what was not said.

Steve Cooper, director of IT and CIO at the Federal Aviation Administration’s Air Traffic Organization, discussed business value and how it is measured, or not measured, in federal technology programs.

…What often occurs with many projects delivering IT-enabled solutions is a lack of agreement at the beginning of the project on what business value will result from the project and how best to measure it. A worst case might be no discussion of business value occurs at all. With every project, we need to respond to the question, "Was this the best use of taxpayer dollars?" and then be able to prove it…

…The toughest challenge is agreeing on how to measure and prove the realization of that expected value. Discussion upfront can prevent the use of a metric that will require inordinate amounts of effort to collect…

How on Earth are projects getting approved with no business cases, or poorly defined business cases without a discussion of return on investment? I agree that a project does not always have financial returns, but those benefits need to be addressed, along with a plan on measuring during the execution phase. This in itself is one of the main concerns; the poor quality of data across government. Office of Federal Procurement Policy Administrator Dan Gordon recently issued a memo concerning this issue, along with guidelines on how to improve data quality, and more importantly, accountability for ensuring its viability. The government is drowning in data, and most of it is of such poor quality that good decision-making is stunted, or impossible.

David Swatloski, a major defense acquisition program manager at the Department of Defense (DoD), seemed to be speaking from recent experience in the poor state of requirements development process at DoD:

…Market research allows the government to determine what potential solutions are available that might meet the government’s needs. This is not an insignificant problem to address properly. If the government need is communicated in terms of a problem statement with a desired outcome, business can respond with more potential solutions. In a great number of cases when this approach is used, more solutions and capabilities are disclosed…

Leveraging industry’s knowledge of technology is critical to the pre-acquisition phase, but it first starts with an acknowledgment from the DoD that they no longer have the institutional knowledge they once had. Only through an outcome-based approach to developing requirements can DoD have the opportunity for the innovation and the variance in solutions and competition it desires.

…The federal acquisition regulations do not preclude hands-on, face-to-face discussion and open communication to understand capabilities during market research. Face-to-face discussions, demonstrations and visits to see capability are the best ways to conduct market research. These methods improve communication and understanding…

The risk-averse nature of government, coupled with the lack of leadership and support for risk taking have created a calcified environment where treating industry fairly means not to deal with industry at all. This is a significant cultural issue that needs to be rectified to have the two-way knowledge transfer take place to improve requirements, and thus the likelihood of successful programs. Failed programs always fail at the beginning of their life-cycle; the pre- and acquisition phases. It has ultimately developed into a seemingly caveat emptor environment.

A.R. “Trey” Hodgkins III, senior vice president of national security and procurement policy at TechAmerica, discussed the importance of trust and how communications can go a long way to improving the entire arena of government contracting

…Building trust is about building relationships, and success can be found in good relationships. When government and industry enter into the kinds of large IT contracts that are the intended beneficiaries of the Office of Management and Budget’s 25-point plan for IT management and acquisition reform, they become partners that are mutually joined in the success or failure of the undertaking…

…The impact of better trust — and the communication and engagement that builds that trust — is a better outcome for the government acquirer, industry and the taxpayer. A perfect example would be a lessening of the use of bid protests. Industry frequently feels that the lack of communications in the lead-up to an RFP, in the competition phase or after an award leaves them little choice but to file a bid protest in order to get information about the government’s decision…

This is one focal point of the Better Government IT project that I co-chair with ACT-IAC. Communication is the cornerstone of any successful relationship, and government contracting is no different. Building a strategic partnership with the contractor is ultimately what should be established to ensure mutual success by the government. However, the government wrongly assumes ethics and integrity issues where they do not exist. How exactly can a program be successful if communication and information is not exchanged properly? Making the contractor submit yet another report is not the answer. Creating an environment where government and industry can discuss issues openly and honestly is part of the solution.

James Bryan, vice president of technology solutions at the Center for Organizational Excellence, discussed the use of pilot projects and the need for prototypes in large-scale technology efforts.

…Most agencies realize that the day of major technology implementations that produce a “big bang” outcome after a prolonged development cycle are coming to a close. But that doesn’t mean the need for agency-transforming technology disappears. In order to meet the need for change and increase the likelihood of successful IT implementations, agencies should consider pilot implementations, combined with agile development methodologies, whenever possible.

With pilot projects, agencies have an opportunity to test or prototype a solution on a small scale in order to validate the requirements and expected outcomes prior to making a large investment. Pilots are designed to be small but focused efforts to test the potential effectiveness of a solution. They also afford the agency an opportunity to gather lessons learned and later apply them to the large-scale implementation. In most pilot projects, the project owners and the project teams come to the realization that some of the requirements established at the outset need to be modified in order to produce an IT solution that will actually meet their needs…

A pilot is a great way to test capabilities on a smaller scale to ensure a properly defined scope, and to have better grasp on outcomes and metrics to achieve success. These capabilities can then be expanded for further expand requirements and continue success through lessons learned and continuous learning. However, it is imperative that pilots be treated as projects, which means they have clear objectives and end-points. Too many pilots or prototypes simply continue in perpetuity, which not only defeats the purpose but creates the “big-bang” and does not allow for any learning. Further, not all projects should be made into pilots. Just like requirements should not be forced into a certain contract type, not all projects are pilot candidates. Value must be carefully weighed against the chances of success, the ability to develop through agile means and lessons learned, and total value and risk.

Kathleen Turco, associate administrator of government-wide policy at the General Services Administration, discusses one of the most difficult issues facing government management; change management.

…We must begin with the end in mind: What do you want to change? The change management effort should focus on the employee requirements and not just the technology if we are to successfully transition our work processes, procedures and behaviors to adapt to new technology...

...The most significant obstacle is that our nature is to avoid change rather than embrace change. Senior managers must be aligned across the organization to ensure that all are in lockstep on change management and employee training. Otherwise, the transition is doomed from the beginning…

As Ms. Turco mentioned, training is a key component to change and requires that the organization fully understand and make resources available. Regretfully, training is one of the first things that get cut during fiscal belt-tightening, which is unfortunate as having empowered, knowledgeable, and trained employees can have major impacts on success through new technology or process implementation.

These issues are of even greater importance now that one of the chief architects of IT acquisition reform, Vivek Kundra, has resigned. Only through continuing the momentum that Kudra helped spearhead, along with a continued focus on government/industry collaboration, can improvements be achieved. The adversarial nature of the relationship needs to be rethought, as only through working together can taxpayers get better results.

How to Improve Government/Industry Communications in Acquisition?

I was on Federal News Radio and In Depth with Francis Rose to discuss the Better Government IT initiative and the work the group is doing to improve the acquistion process and create best practices for government/industry communications. Some thoughts for consideration:

• What are some ways we can improve the process?
• What are some areas you see that are difficult, either from industry's side, or from government's?
• What feedback can we give to both buyers and sellers to improve communications during the acquisition process?
• What are some areas the Better Government IT initiative should focus on?
• What communications best practices would you propose?
• What communications practices should be adopted during contract management?
• What Web 2.0 tools can be implemented in this process?
• What program management tools would help increase communications?

Please join the discussion!