Winners and one possible loser

Small businesses owned by veterans and women could be winners under the Obama administration.

But with a new Congress, Alaska Native Corporations (ANCs) are looking for a key ally and could see some of their advantages diminish.

During Barack Obama’s presidential campaign, the Democratic candidate said he would strengthen federal small-business programs that focus on women, service-disabled veterans and minority business-owners. He wants to offer them more contracting opportunities with the government to help them grow. To help with that, Obama said he would restore SBA’s budget and strengthen its clout in the government. Karen Mills, a principal in the private equity and venture capital industry since 1983, was nominated as SBA’s administrator.

In particular, the president-elect wants to boost opportunities for women business-owners. He said he would stand up the women-owned business contracting program. Despite years of neglect, SBA officials made efforts in the last two years to launch the program, but a recent regulatory proposal crushed any progress by upsetting some members of Congress and small-business advocates. SBA’s rule would have opened the set-aside program to a select few industries. Lawmakers vehemently objected to the rule and were ready to block it statutorily in an appropriations bill. SBA hasn’t implemented the rule.

Small-business observers also expect veterans to benefit more than some other set-aside groups. Warfighters returning from Iraq and Afghanistan will get a lot of attention from the government under Obama. Guy Timberlake, chief visionary and chief executive officer at the American Small Business Coalition, said the support for veterans could lead to the creation of a program on par with companies owned by ANCs.

Timberlake and others in the small-business community said ANCs are a small segment of government contractors yet they have a large advantage over other small businesses. But ANCs are losing a key ally on Capitol Hill as Sen. Ted Stevens (R-Alaska) didn’t return to the Senate this year after being defeated in his re-election bid.

Whatever the set-aside category, many small businesses teeter on the verge of collapse when the economy falters. Thom Rubel, practice director of government programs at Government Insights, said the government must develop ways to incubate businesses to help them grow. If it can do that, the government can expect some valuable savings. But he said it takes more than simply awarding a percentage of contract dollars to help small businesses.

Timberlake said small businesses can offer government much more than in the past because they are more sophisticated today. That leads to greater capacity to handle more work on large, complex contracts, which in the past were geared for large companies.

But some small-business executives are still skeptical about Obama’s promises.

“It’s an easy thing to say, ‘We support small businesses,’ ” said Daniel Carr, chief executive officer of Distributed Solutions. Small-business owners have listened to the importance of small businesses while federal dollars have gone elsewhere.

However, Carr added, “it’s in our nature to be optimistic. The entrepreneurial hat worn by small businesses requires that we see opportunity and hope around every corner.”

So, Carr is waiting to see what comes from Obama.

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IG: Job competition saps staff

DOD auditor’s report sends clear signal on what the acquisition workforce needs

A team of Defense Department auditors, through a series of surveys at military bases, has determined several foundational acquisition workforce issues that experts say must be priorities for President-elect Barack Obama’s administration.

Officials told auditors from the DOD Inspector General’s Office that competitive sourcing — a process intended to improve efficiency by having federal employees contend with private sector firms for work — saps their employees’ attention from their jobs and leaves offices with insufficient contracting support.

Because competition pulls employees from their regular duties to rigorously gather and analyze data, managers are reluctant to take part in the process. Advocates of competitive sourcing argue that government organizations usually win the competitions and become more efficient in the process.

When the private sector wins, agencies usually lose their experienced workers, according to the IG report released Jan. 5.

More importantly, an Army Contracting Agency official told auditors that the agency faces constant turnover of contracting officers during competitions. Agency leaders worry about getting and keeping competent contracting officers — especially as purchases become more complex — but the practice intended to compel efficiency can drive away talented ones.

OMB’s influence

The IG auditors conducted the review at the request of members of Congress who want to ensure that the Office of Management and Budget has not been influencing DOD’s decisions on whether to conduct a public/private competition. The competitions are possible only for jobs that are not inherently governmental function, which only federal employees can do.

Military officers and the officials in charge of overseeing the competitions told the auditors they felt no pressure from OMB, according to the DOD IG report titled “Office of Management and Budget Influence Over DOD Public-Private Competitions.” The fiscal 2008 National Defense Authorization Act required the report.

The auditors concluded that early in 2008, the Office of the Secretary of Defense (OSD) had put pressure on the Army to conduct the competitions, but the pressure waned by the end of the year. Meanwhile, officials at the Army Materiel Command and Army Installation Management Command said the chain of command pushed them more than OSD or OMB did, according to the report. The two major commands announced their competitions because of pressure to reach a goal that the Army already set.

Wayne Arny, deputy undersecretary of Defense for installations and environment, told the auditors that DOD independently determines its competitive sourcing program.

During the normal program and budget review process, the service branches create plans for public/private competitions.

The defense agencies are expected to carry out those plans, he said.



Arny added that competitive sourcing is an important management tool, and he encourages agencies to continue to use it as much as possible.

“Competitive sourcing consistently results in greater government efficiency and cost-savings to the taxpayer,” he wrote in a March 2008 memo. DOD saved more than $7 billion from competitions completed between fiscal 2000 and 2007, Arny said. The number could top $10 billion after the competitions started in 2008 are finished, he wrote.

A controversial initiative

Competitive sourcing is the second initiative on the Bush administration’s President’s Management Agenda. Administration officials believe the competitions decrease costs and trim a department’s operations.

Setting up the competitions can determine if it’s better to keep the work with federal employees or outsource it to contractors, officials say.

In the last Executive Branch Management Scorecard issued by OMB, released last week, only the Smithsonian Institution improved. Twenty-two of the 24 graded agencies received the top score or an average grade. The Energy Department and National Science Foundation again earned the lowest rating.

The sourcing initiative has never had widespread support: Congress steadily imposes limits on it. Army and Air Force officials said the congressional restrictions on competitive sourcing change every year, making it difficult to keep up with the laws and regulations while in the process of hosting the competition, according to the IG’s report.

Numerous laws have restricted the use of competitive sourcing, effectively stopping the practice. The fiscal 2008 National Defense Authorization Act restricted OMB and the defense secretary from influencing DOD regarding competitive sourcing, and it also required the IG review.

The competitive sourcing initiative is now called commercial services management and includes business process re-engineering along with the competitions.

Some experts have questioned whether the initiative would survive during the Obama administration, but the president-elect is looking for areas where he can cut costs and save money.

“Change and reform can’t just be election-year slogans,” Obama said. “They must become fundamental principles of government.”

Challenges for Obama

Competitive sourcing is only one issue that awaits Obama’s pick for the administrator of the Office of Federal Procurement Policy, experts say.

“The need for an acquisition workforce that can navigate the government’s contracting process, translate it for government buyers and private-sector contractors, and ensure the taxpayers get what they pay for has never been greater,” said Diane Denholm, a principal at Grant Thornton.

She recommended that the new administrator work with agencies to find ways to fill gaps with available resources. The administrator also should work with chief acquisition officers to learn what skills employees need, then maintain those skills with regular training.

A survey conducted by the Professional Services Council and Grant Thornton, which was released in December, showed the acquisition workforce’s continued concerns about recruiting, training and retaining the right people.

Stan Soloway, the council’s president, said the survey provided no surprises or raised new issues but showed lingering concerns that need a resolution.

The council and Grant Thornton said the Obama administration should view its procurement policy initiatives through the lens of strategic human capital planning.

“The future workforce needs to have the capability to provide innovative risk-based approaches to assist the agencies [as they] acquire products and services in a way that maximizes performance and minimizes costs,” said Denholm, who was involved in analyzing the survey’s results.

The need for a larger, better trained workforce is obvious, said Trey Hodgkins, vice president of federal government programs for the Information Technology Association of America.

“It’s a broader set of skills that we need to attract and retain,” he said. However, the broken hiring system is a major hindrance to bringing people in.

The system is another challenge awaiting the OFPP administrator, who will have to work with other agency officials to solve that problem.

A simple request

Many people in government acquisition consider success to be hiring the right people and training them well. Denholm said the survey respondents described success in terms of day-to-day operations rather than the rare award of a major contract.

According to many respondents, the workforce might be unprepared for the changing environment.

Acquisition is becoming more complex, and the volume of procurements has put new demands on contracting officers. Several interviewees stressed the need for better training in areas of business, analytical and management skills, the survey states.

“The current acquisition workforce doesn’t have sophisticated business judgment,” an oversight official said in the survey. “They are good at following the rules, but when the rules lead you to an illogical conclusion, you need judgment. Acquisition is more of an art than a science."

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