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By DAVID PHINNEY
At the Energy Department, the contractor-managed Los Alamos
nuclear lab suffered a string of security breaches,
prompting the department last month to announce a sweeping
lab-management overhaul and plans to subject the Los Alamos
contract to competition when it comes up for renewal.
At NASA, in the wake of the space shuttle disaster,
investigators examined whether the shuttle program was
overly reliant on contractors with too little oversight.
At the Federal Retirement Thrift Investment Board, a $30
million effort to give Thrift Savings Plan participants more
control of their accounts via the Internet took three years
longer than expected and doubled in cost. Since the new
system began operation last month, it has been virtually
useless to many users because of continuing glitches.
Across government, poor contract management poses a “high
risk” to agencies for wasteful spending or worse, says the
General Accounting Office in recent reports.
Likewise, inspectors general have cautioned agency managers
of the costs of poor contract management in terms of fraud,
embezzlement and unnecessary procurement costs that
potentially measure in the billions of dollars.
“Generally, the federal government has been lax in its
contractor oversight,” the inspectors general said in an
annual progress report to the president, released in May.
So why have procurement programs emerged as such a trouble
spot for federal agencies?
One reason can be found in two seemingly incompatible
trends: A shrinking acquisition work force and the
government’s explosive appetite for the private sector’s
high-tech workers, products and services.
Between 1997 and 2001, according to GAO, procurement
staffing across government shrank 5 percent while contracts
exceeding $25,000 jumped 26 percent.
What’s more, the government increasingly plunks down
greater sums of money on contracts for services, as opposed
to products. Of the $235 billion the federal
government spent on contracts in 2001, $135 billion - or 57
percent - went to pay for services. That makes services the
largest single spending category in federal contracting.
Indicators are that the trend won’t go away soon.
This convergence of events adds up to daunting challenges.
Fast-changing technologies and services, new trends in
financing and contracting, an ever-growing procurement
emphasis on services over products, and a strong drive
toward competitive sourcing are all testing the boundaries
of the government’s procurement work force.
“This not a cookbook business anymore,” said Jacques
Gansler, undersecretary of Defense for acquisition,
technology and logistics from 1997 to 2001. “There is an
increasing shift in procurement toward becoming business
managers. It’s a movement away from being a doer to being
a manager of doers.”
Amid all of this is another concern: The government’s
procurement work force - like the rest of the federal work
force - is fast approaching retirement age. This offers
agencies opportunity to hire new talent with modern skills,
but it also threatens to sap many departments of their
institutional knowledge.
Federal managers have been taking steps in recent years to
increase training and education, improve recruiting and
hiring to bring on employees with modern business management
skills, and build more support systems for staffs.
Congress, too, is stepping up to the plate with ideas of its
own.
“We simply do not have the right people with the right
tools and the right skills to manage the acquisition of the
services and technology that the government so desperately
needs,” said House Government Reform Committee Chairman
Tom Davis, R-Va. In April,
Davis
wheeled out a sweeping reform proposal aimed at
bolstering resources and training for acquisition
professionals.
The House approved his measure May 22 as part of the $400
billion Defense authorization legislation still pending.
Davis’ package, called the Services Acquisition Reform
Act, would install a chief acquisition officer at each
Cabinet-level department to create a clear line of authority
over procurement activities so they become fully integrated
with each agency’s mission and long-term planning. The
legislation also calls for increased funding for career
education and expanding temporary exchange programs of
federal and private employees so they can enhance their
understanding of government and business.
Moreover, the legislation echoes the Bush administration’s
aggressive push for a variety of performance-based
contracting, an innovation in government that many hope will
reap big rewards for both the taxpayer and the contractor.
Copies, Not Machines
That may be easier said than done, said retired Brig. Gen.
Frank Anderson, president of the
Defense
Acquisition
University
, which offers training to 50,000 or more workers in
the acquisition field each year.
“We have to train people differently,” he said.
“Performance requires you to engage earlier and be in a
preventative mode rather than a reactive one. To truly be
successful, you have to reach out and touch people and write
their requirements in ways that say what you want instead of
how the contractor will do it.”
Anderson
recalls the university’s own distraction with
photocopy machines.
The university first needed to write contracts with vendors
to lease or buy the machines and then write more contracts
for service and maintenance.
Once the photocopiers became outdated - say, every three
years - they then needed replacing. That resulted in a new
round of contract writing to reflect changes in maintenance
needs.
Why did university officials have to go through that endless
cycle? To get photocopies.
“That’s what we wanted - photocopies.”
Anderson
said. “We didn’t want copy machines. We wanted the
lowest cost per copy and to keep up to date with state of
the art.”
So the university wrote a new contract, agreed to pay for
copies and let the supplier own and service the machines. In
return, every year, the school gets half a million copies
and saves $40,000,
Anderson
said.
If the contractor discovers a more efficient way to deliver
the service with a more efficient machine, then the
contractor makes more money.
“Everybody wins,” he said, “but you need early
engagement and an integrated relationship so you know how
best to support the mission and not just write a
contract.”
Thorough engagement with the user’s objective signals a
sea change for people who had earlier viewed their roles as
writing specifications, stamping contracts and filing them
away.
That old way of doing things no longer fits, according to
Steve Kelman, administrator of the Office of Federal
Procurement Policy in the Office of Management and Budget
under President Clinton. Contracting people must think in
three phases: setting performance goals, writing the
contract and then managing it.
“The traditional procurement system was so obsessed with
source selection that there were virtually no resources or
psychic energy left for contract management,” said Kelman,
now professor of public management at
Harvard
University
’s John F. Kennedy School of Government. “But
things are just beginning to change.”
One step the
Clinton
administration took that helped ease the burden on
shrinking procurement staffs was to introduce purchase cards
to thousands of federal employees. This made it easier for
federal purchasers to buy goods and services under $2,500
without having to go through bureaucratic channels. Before
the cards were issued, procurement professionals were
spending 40 percent of their time processing small
purchases, Kelman said.
“The administrative cost on average added about $150 per
item,” he said. “The government credit card helped free
up our resources.”
Big Ambitions, Strapped Resources
But as the nature of contracting was changing, federal
procurement staffs were shrinking drastically. After the
Cold War, the Defense Department alone witnessed a 75
percent reduction in its contracting staffs - mostly those
in junior positions. Other agencies made cuts to a smaller
degree, something that leaves the government in need for a
backup generation to replace senior contract professionals
expected to retire in the coming years.
The potential for an exodus of institutional knowledge and
experience is a big concern among top federal procurement
officers, according to a recent candid survey sponsored by
the Professional Services Council, an
Arlington
,
Va.
, contractor organization, in conjunction with Grant
Thornton LLP of Chicago.
But the expected retirement wave over the coming half-decade
also brings an opportunity for agencies to revitalize their
procurement staffs with younger employees who have greater
knowledge of private-sector business practices, market
trends and technology trends, many experts say.
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