Stimulus funds bring acquisition showdown

Two organizations are preparing for new business and intense scrutiny

Pop quiz: Take a limited number of federal acquisition employees, add $787 billion in stimulus spending, then square the root with a requirement to spend the money as fast as you can. What have you got?

Anyone familiar with the federal contracting process can tell you that's a no-brainer: It’s algebra for procurement meltdown.

So if there were ever a time when the already beleaguered contracting community needed a white knight, the moment is now. The fact has not escaped the attention of officials in the General Services Administration’s Office of Assisted Acquisition Services (AAS), nor of those at the National Business Center’s Acquisition Services Directorate, known as AQD. The two centers are designed to be full-service acquisition support operations, ready to serve any other federal agency willing to pay them for their services.

Indeed, both AAS and AQD are speeding to the stimulus rescue, each hoping to be the first on the scene in a highly competitive — and image-repairing — procurement services process. It’s already shaping up as the acquisition showdown of the century.

Officials at both organizations say their experts are ready to step in and put stimulus-related spending on the fast track. They both can manage customer agencies’ entire procurement process from planning, soliciting and evaluating bids to awarding and administering contracts.

Those organizations exist for just this reason: to augment an agency's existing acquisition staff when the workload gets too big or a project needs special attention. And because they fund their respective operations through service fees, they have a vested interest in generating new business from the stimulus jackpot.

But there’s also more to it than that. In recent years, the procurement practices of both AAS and AQD have come under fire, particularly from the Defense Department, which spurred a decline in business and customer confidence. The stimulus package provides an opportunity to recover both.

But that opportunity also comes with risk. The business could come fast and furiously, and both centers will be under intense scrutiny from Congress, inspectors general and the Government Accountability Office, all of whom will be ready to jump on any missteps or irregularities.

“This is a tremendous opportunity,” said Phil Kiviat, partner at Guerra Kiviat and a former acquisition official at GSA. “It’s an opportunity for success but also for failure if they don’t meet the demands.”

The Sales Pitch

Recognizing the stakes, AAS and AQD officials are visiting current clients and developing marketing campaigns to reach new ones, and they consider every agency to be a potential customer.

AAS is holding all-day events to brief agencies on acquisition services. AQD representatives are speaking at events, buying booth space at trade shows, such as FOSE — which is owned by the parent company of Federal Computer Week — and buying advertisements in magazines, including FCW. Neither organization would disclose how much money they spend on marketing.

Mary Davie, GSA’s assistant Federal Acquisition Service commissioner for assisted acquisition services, and John Nyce, AQD’s associate director, each spoke at an industry event March 16 about the stimulus money and what they offer.

“I’ve always got to give my commercial,” Davie told the crowd. “We’ve got project managers, contract specialists and contracting officers that can actually help agencies.”

Nyce made a similar pitch for AQD. “You’ll get the best service for your money,” he said.

Davie and Nyce are confident their respective organizations have recovered from past mistakes, though to some extent, they are still paying the price.

GSA’s problem was primarily one of positioning, experts say. Agencies were not interested in GSA’s cradle-to-grave contracting services so they began running their own contracts. GSA's acquisition services business plummeted from $7.7 billion in 2004 to $3.6 billion in 2008.

But GSA also ran into problems with DOD. The department's inspector general criticized DOD and GSA for not enforcing contracting policies.

The low point was in fiscal 2006, when Davie’s office was $156 million in the red. In 2007, GSA reduced overhead by reassigning approximately 250 staff members and restructuring its service offerings. In fiscal 2008, the office was back in the black by $5 million, although its revenue was half of what it had been four years earlier.

AQD, which was once known as GovWorks, has suffered similar travails. In 2007, DOD banned the use of GovWorks for any business worth more than $100,000, until the center improved its process for tracking and documenting transactions. Until that point, DOD had accounted for nearly two-thirds of GovWorks' business.

However, DOD’s move had a silver lining: it forced GovWorks to re-evaluate itself, Nyce said in 2007. To improve its processes, AQD turned to the International Organization for Standardization, earning ISO 9001 certification in 2008. The center, like AAS, also scaled back its services, realizing it could not be all things to everyone. After topping $2.7 billion in annual contract obligations in 2005, AQD’s business was worth only $1.35 billion in 2008, and projections for 2009 are between $1.6 billion and $1.9 billion. The agency said it recovered all of its costs during those years.

DOD lifted its ban on big-ticket contracts with AQD in 2008.

Nyce said he doesn’t duck the issue if a customer questions him about his track record. “I deal with fact if they bring it up,” he said.

This time though, he said, “we will accept no work we are not capable of doing, and we will work to do it right.” AQD will take as much work as possible but won’t overextend itself, which Nyce said invites big problems.

Money on the table

The demand will be intense, in terms of the amount of money and the time allotted to spend it.

The Energy Department, for example, received $32.7 billion in new budget authority from the stimulus package, half of which is for investing in energy efficiency and renewable energy sources. The Agriculture Department is getting $28 billion.

GSA’s Public Building Service received $5.5 billion in money from the recovery act, mainly for repairing and renovating federal buildings. GSA is considering 200 projects covering all 50 states. The Interior Department received $3 billion and is scanning its five-year project plan to find ways to spend its money.

According to the recovery act, those departments and other agencies must obligate the funds by mid-June. But the two centers and their customers cannot afford to get sloppy.

“This is a surge in federal spending,” said Ray Bjorklund, senior vice president and chief knowledge officer at FedSources. “If you don’t follow the rules, you will have the big spotlight on you.”

The Obama administration wants a specific accounting of where the stimulus money flows, with that information made readily available to the public on the Recovery.gov Web site. The agencies also have to keep regularly appropriated money separate from the recovery act money. Commingling is not an option.

“There’s a lot of work," Davie said. "There’s a lot that we need to be aware of.”

Nyce added that “we are scrambling to put processes and procedures in place,” just as much as the agencies are scrambling to designate the money for specific projects.

The work will soon begin. But the outstanding question is who will get it. If agencies decide to turn to outside help on any given project, they must choose between AAS and AQD. In their recent joint speaking appearance, Davie and Nyce sold their respective centers' work while playing down the idea that they are in fact competitors.

But Deidre Lee, director of Compusearch Software Systems' defense and intelligence unit, who attended the industry event, said they do compete against each other despite what they say for public consumption. “Agencies have to decide who they go with,” she said.

Their track records will likely play out in clients’ decisions about which service provider to go with, Lee said, adding that speed and efficiency will be deciding factors.

In the end, said former GSA official Kiviat, agencies won’t be wondering whether one center will charge a lower fee versus the other. The question will be who can get the work done.

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