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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Contractors wary of procurement proposals

President Barack Obama’s call for acquisition reform might lack the details needed to succeed

Cliff Thomas, president of ABC Management Technology Solutions Inc., of Chantilly, Va., is skeptical about contracting reform after listening closely to President Barack Obama speak in March about his federal procurement proposals.

The president’s speech offered few details about his plan to solve what he perceives as flaws in the government contracting process, and it left Thomas frustrated.

“He did no more than give a political speech,” Thomas said. “He’s the president. He doesn’t need to give political speeches.”

Thomas and others in industry wanted details about the reforms. For example, Obama said he would “open up the contracting process to small businesses.” But that was the extent of his remarks on small businesses. Thomas pointed out that helping so-called Main Street was a major theme in Obama’s presidential campaign.

From what they heard, many information technology companies contracting with the government didn’t consider Obama’s proposed procurement reforms as anything approaching a sea change. The proposals were unclear, and some were already in place.

For instance, contracting regulations already favor fixed-price contracts as the safe and preferred method instead of cost-reimbursement and especially time-and-materials contracts. Many experts doubted that new guidance would improve on that. Instead, contractors intend to continue to plug away at their business. They say they know their roles as aiding their federal customers in reaching their objectives.

Thomas and other business owners said they also recognize the reality of reform.

“Can he change the way work has been done for the last 30 years?” Thomas asked. “No one person can do it.”

Backing the president

Nevertheless, “it makes the most sense to get behind the reforms,” said Tim Conway, senior vice president and managing director at Affiliated Computer Services' Government Solutions Group. The industry must embrace change, he said.

“The real difference, I think, is that the industry is going to have to invest in solutions that are quickly implemented, configurable and built to evolve," he said. "This will enable true fixed-price contracting to occur.”

Companies such as ACS won’t see significant change, though, Conway said. Most of its federal contracts are fixed-price performance-based agreements.

Similarly, AFL Telecommunications LLC, of Monroe, N.C., won’t see much change as a fiber-optics dealer on NASA’s Solutions for Enterprise-wide Procurements governmentwide acquisition contract, said Randy Murphy, the company’s director of government business development. Its contracts are largely fixed-price already.

However, systems integrators working on a completely new program might see agencies at least considering fixed-price contracts as a possibility. But many experts say agencies likely won’t think long and hard about the possibility.

“For a one-of-a-kind project that has never existed, there are too many parts moving to do a fixed-price contract,” said Dennis Christmas, president of Enterprise Solutions Realized Inc., of Marriottsville, Md., an IT services and software company.

In his March 4 memo about reforms, Obama wants to build stronger barricades against contractors that commit fraud or simply those he believes are working too closely to core contracting decisions. He wants forceful management of contracts so agencies achieve their goals and avoid useless spending. He also expects safeguards to protect the government from noncompetitive contracts. The government needs to get away from contractors as much as it can by keeping work in-house, he said.

The contracting community, former federal officials and people inside government say it takes more than speeches from the White House for reform. It takes cultural shift, changing the way the contracting officers, program managers, chief information officers and inspectors general do their work.

For instance, the Internal Revenue Service IG reported in March that agency program managers were writing their contract proposals angled toward cost-reimbursement contracts. And the contracting officers awarded them as such. The result was cost-reimbursement contracts for general operations and maintenance for the service.

“Obama is now choosing to be more aggressive in getting executive agencies to make the right judgments and choosing the right type of contract,” said Ray Bjorklund, senior vice president and chief knowledge officer at FedSources Inc.

Obama might have hurt his chances for reforms, some business owners and former federal officials said.

Obama said the government must uphold a fundamental public trust. “The American people’s money must be spent to advance their priorities — not to line the pockets of contractors or to maintain projects that don’t work,” he said.

Malik Balil, chief architect and procurement strategist at Computer Systems Center Inc., of Springfield, Va., said the company has built a good reputation as an honest broker to the point of telling a customer agency when it doesn’t need its services.

“We live by that creed,” Balil said.

Thomas, a former Marine who was injured while in the military, echoed that attitude. “We’re not trying to rob the government,” he said. “We’re not out here trying to get rich on the back of the taxpayer.” Instead, his intent as a service-disabled veteran-owned small business with 40 employees is to make a living and give people jobs. It’s the way to keep the economy from falling further, he said.

“The way the government does business frustrates me as a taxpayer — forget being a contractor,” he said.

Targeting fraud

Companies intent on exploiting the government exist, though. In March, the FBI arrested Sushil Bansal, president and chief executive officer of Advanced Integrated Technologies Corp., on charges of bribery and money laundering. The FBI also arrested a former employee of Obama’s new chief information officer, Vivek Kundra, on allegations involving contract kickbacks. The employee worked with Kundra in the District of Columbia’s Office of the Chief Technology Officer.

Furthermore, companies abuse small-business certifications. In 2008, the Government Accountability Office reported that it easily found numerous instances of companies cheating the system to get Historically Underutilized Business Zone contract set-asides. GAO also reported in 2007 that contractors were receiving award fees from performance-based contracts even though the companies didn’t meet the contracts’ objectives.

But Obama painted all contractors with an incredibly broad brush, said Angela Styles, former administrator of the Office of Federal Procurement Policy. “Unfortunately, someone failed to realize that for this initiative to be successful, the administration will need the good contractors to lead the charge. By demonizing contractors that follow the law and successfully perform vital services for the United States, the administration lost a critical opportunity.”

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GSA awards three BPAs to shore up support

The General Services Administration has awarded three more purchase agreements to Integrity Management, Acquisition Solutions, and Technical and Project Engineering for acquisition support services, according to a Federal Business Opportunities notice.

The blanket purchase agreements (BPAs) awarded March 25 mirror the two other agreements GSA awarded March 12 to Integrity Management and Acquisition Solutions. The purpose is to help GSA keep ahead of a large volume of business that is expected to flow through the procurement agency because of the $787 billion economic stimulus law, and officials have said they don’t expect the flow to subside after the initial phases of the spending spree.

The agency said it already has shortages in experienced acquisition employees, and the business stemming from the law will exacerbate that weakness, especially as it will come on top of GSA's regular business. "Hence the ongoing need for acquisition management support services," GSA wrote in the notice.

The BPAs are one year long with four option years and are worth an estimated $100 million, the notice states.

The first two BPAs are for use by GSA’s National Capital Region offices, and the three BPAs announced yesterday are for all 11 regional offices, the notice states.

The BPAs have been established with Integrity Management Consulting as the primary BPA holder and Acquisition Solutions and Technical and Project Engineering as the backup BPA holders for the regional offices, according to the notice.

In another matter, GSA today announced it awarded a $400 million, five-year BPA to Lockheed Martin to manage Federal Acquisition Service’s information technology system operations and program management support.

Read the story: FCW.com News - GSA awards three BPAs to shore up support

Obama again touches on procurement reform

President Barack Obama and Defense Secretary Robert Gates will soon offer more details on how to reform the federal procurement system, which will include an emphasis on Defense Department contracting, the president said during a news conference.

Obama said March 24 that he and Gates have been searching for ways to offset the more than $1 trillion in debt he and Congress have amassed in Obama’s 65 days in office. Obama said his administration has found ways to save as much as $40 billion through some reforms, a point he made in his speech March 4 when he called contracting reforms a priority for his administration.

Obama again provided no details on reforms in the recent televised news conference, except to say the acquisition changes are “pretty apparent to a lot of critics” yet hard to accomplish.

“I think everybody in this town knows that the politics of changing procurement is tough because lobbyists are very active in this area,” he said, adding that contractors build plants and create jobs across the country. Those plants often get support from House members and senators whose constituents hold those jobs.

Despite upset constituents and members of Congress, DOD and other agencies are losing a lot of money through projects with problems. Many defense contracts' costs increase above the initial estimates by as much as 50 percent while still not working as the projects should, Obama said.

On March 4, Obama discussed a general plan to reform the acquisition process, but many contractors and government officials are skeptical of any significant changes coming from the White House. Many of them have said new procurement policies may come, but changing how agencies' acquisition employees and program managers do their work is where Obama will find real reforms.

Obama has talked about shifting government work away from contractors and bolstering the acquisition workforce to do more government work in-house. He also wants to shift toward fixed-price contracts and increase competition for contracts.

He is intent on finding savings and reallocating agencies’ resources but wants "to make sure that we’re not simply fattening defense contractors,” he said March 24.

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GSA awards BPAs for support services

The General Services Administration awarded blanket purchase agreements (BPAs) on March 12 to Integrity Management Consulting and Acquisition Solutions for acquisition support services, according to a Federal Business Opportunities notice.

The BPAs will help GSA shore up support to handle floods of Recovery Act money that agencies are likely to funnel through the government’s primary procurement agency.

The BPAs are for one base year and four options years and are worth $100 million based on the expected revenue from all of the regions' similar contracts, which GSA expects to award soon, the notice states.

GSA will use the agreements to support specific projects related to the $787 billion American Recovery and Reinvestment Act. The BPAs will also save money by finding discounts through agencywide mass purchases, the notice states.

All GSA offices, including the Federal Acquisition Service and Public Building Service, can use a primary and a backup BPA specifically established for their region of the country. GSA said it anticipates awarding in the near future the primary and backup BPAs for the remaining 10 GSA regions.

Integrity Management Consulting holds the primary BPA and Acquisition Solutions has the backup BPA for GSA’s National Capital Region and Central Office.

As agencies spend their economic stimulus money, GSA is preparing for a long-term influx of support services. It said it expects agencies’ need for its acquisition services encompasses more than the initial spending spree.

President Barack Obama’s economic stimulus package became law Feb. 17.

The BPAs are through GSA’s Mission Oriented Business Integration Services Schedule contract. GSA can use the BPAs with Recovery Act funds or other purse sources, the notice states.

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17 words that will change acquisition

Buried deep within the $787 billion economic stimulus law is a small provision, barely noticeable on a quick skim, that could well change the federal government’s procurement practices for years to come.

The provision is just 56 words long, and the core of it is only 17: “To the maximum extent possible, contracts funded under this act shall be awarded as fixed-price contracts.”

President Barack Obama frequently promises change, but the procurement approach of setting a price first and then proceeding with work is old school. Other approaches to federal contracts, such as cost-reimbursement and no-bid awards, have emerged in recent years to give procurement officials more flexibility while accepting more risk.

Obama’s Office of Management and Budget now calls fixed-price contracts “safe investments” for the massive amounts of taxpayer funds going out the door in the stimulus package. Last year, Democratic lawmakers clamped down on cost-plus contracts in the fiscal 2009 National Defense Authorization Act, which became law Oct. 14, 2008. And now, the American Recovery and Reinvestment Act that Obama signed Feb. 17 includes the provision that limits contracts as much as possible to those with fixed prices.

However, many procurement experts are critical, worried that the administration is limiting the use of other contract approaches that have a legitimate place in a contracting officer’s toolbox.

It’s an old debate. While proponents say fixed-price contracts commit companies to performing work for a set amount and allow agencies to budget appropriately, some experts say other contract types offer a flexibility that is necessary in certain situations. And, they add, fixed-price contracts can eventually cost the government more because contractors are likely to base their bids on the upper end of their expected costs. Other contract types, such as cost-plus, allow agencies to pay less if the final cost to the contractor is closer to the lower end of the range.

Many see fixed-price contracts as “the panacea for waste, fraud and abuse,” said Ellen Brown, former legislative director for the Republican staff of the House Oversight and Government Reform Committee. “Those of us who understand government procurement…know it’s not true.”

Avoid risk

In their fiscal 2010 budget proposal, titled “A New Era of Responsibility,” Obama administration officials wrote that cost-type contracts -- any of several kinds that start with the actual cost as a base and adjust the final price to include such things as a profit margin or an incentive for superior work -- are particularly vulnerable to exploitation. Such contracts offer no incentive for companies to control costs, they wrote, adding that those contracts increased 75 percent under President George W. Bush.

Furthermore, many lawmakers have said they believe contractors often take advantage of the government, especially when agencies enter into agreements in which prices aren’t set from the beginning.

The Obama administration said the stimulus package seeks to halt such abuses. Office of Management and Budget officials said agencies should ensure reasonable contractor risk and economic performance when selecting the contract type for a project that will use stimulus money.

“Fixed-price contracts provide maximum incentive for the contractor to control costs and perform effectively and impose a minimum burden upon the contracting parties,” OMB Director Peter Orszag wrote in a memo issued Feb. 18. “These contracts expose the government to the least risk.”

When an agency proposes using a riskier type of contract, it must first make certain it has evaluated all alternatives, Orszag wrote. If the agency doesn’t choose the fixed-price approach, officials must appoint an appropriate number of qualified acquisition employees to oversee the contract.

In his address to Congress Feb. 24, Obama said Cabinet secretaries — just like the mayors and governors who will receive stimulus money — are accountable to him and to the American people for the money they spend.

“Here in Washington, we’ve all seen how quickly good intentions can turn into broken promises and wasteful spending,” Obama said. The administration plans to track stimulus spending at a Web site called Recovery.gov.

Casting a dark shadow

Recovery.gov features another measure that more subtly nudges agencies to choose fixed-price contracts: Other kinds of contracts and sole-source awards must be posted in a special section of Recovery.gov.

“A summary of any contract awarded with such funds that is not fixed-price and not awarded using competitive procedures shall be posted in a special section of the Web site,” the legislation states.

Stan Soloway, president and chief executive officer of the Professional Services Council, an industry trade group, said that approach puts contracting officers under pressure to keep their work out of the spotlight. Posting the information in a separate section could cast a dark shadow over the contract by implying there’s something unsuitable about it, even when it might be the best kind of contract for that procurement, Soloway said.

Contracting officers prefer to do their work in quiet obscurity, but they can face significant repercussions for making bad acquisition choices. “They already feel like they’re on the front lines,” Soloway said.

One contracting officer, who spoke on condition of anonymity because he is not authorized to discuss legislation, criticized the micromanaging nature of the provision. “When are they going to stop telling me how to do my job?” he asked.

The officer said he and his fellow professionals understand the procurement process better than members of Congress do. Although lawmakers act like they know the process as well as the people in the field do, he said, they fail to recognize that contracting officers need many options for finding the best fit for agencies seeking a contractor’s services.

Learn from the past

In an era in which development proceeds rapidly in areas such as back-office information technology systems and military combat systems, contracting lessons from a decade ago can offer insight.

Computer software development expanded rapidly in the 1990s. However, it was still new, and agencies struggled to write clear definitions when buying new software that would work with old systems. At the time, the government used fixed-price contracts to buy software, Brown said. With the companies taking on the risk, the government paid a lot more for the software.

“Fixed-price contracts are completely appropriate when we know what we’re going to buy,” said Paul Kaminski, chairman of a National Research Council study on systems engineering for the Defense Department and undersecretary of Defense for acquisition and technology from 1994 to 1997. If there’s uncertainty, “I think we end up on the wrong end of the bargain negotiating a fixed-price contract.”

Experts agree that returning to the era of fixed-price contracts won’t protect the government from ballooning costs and could even lead to overpriced contracts.

Sen. Joe Lieberman (I-Conn.), chairman of the Homeland Security and Governmental Affairs Committee, said fixed-price contracts aren’t a simple solution to saving money, but they do work in certain circumstances.

“No acquisition of any kind, however diligent, can overcome a fatally flawed statement of work,” said Elliott Branch, executive director of contracts at the Naval Sea Systems Command.

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Obama wants contracting overhaul

The way government agencies acquire the goods and services needed to carry out their responsibilities will take an abrupt 180-degree turn if President Barack Obama gets his way.

Obama made it clear last week that he wants to abandon the Bush administration’s drive to push more federal work into the private sector and, at the same time, toughen on contracts that he considers prone to exploitation by companies and wasteful to agencies.

“It’s time for this waste and inefficiency to end. It’s time for a government that only invests in what works,” Obama said in a news conference March 4. The same day, Obama signed a presidential memo putting the overhaul into motion.

The president’s push to have agencies interact differently with contractors is a sea change from the Bush era. Departments have become overly reliant on contractors, Obama's memo states. As a result, government spending through contracts has more than doubled since 2001, reaching more than $500 billion in 2008.

Obama would put more obstacles in front of contractors who might want to cheat the government with substandard work. And he plans to “in-source” federal work, a process of identifying outsourced work and bringing it back into agencies.

Furthermore, he’s moving away from cost-reimbursement and no-bid contracts by demanding that agencies use fixed-price contracts as much as possible.

The unexpected scope and sweep of Obama’s directive took Washington’s procurement community by surprise and prompted a wave of criticism from outside contractors and acquisition officials inside the government. Obama’s campaign rhetoric against procurement abuse might play well with the mainstream press and the general public, they say, but he’s missing some of the most crucial problems that plague federal procurement.

Critics say Obama’s proposals would do little to stem an explosion in the use of of task and delivery orders rather than full contracts. And it does not seem to offer any relief to an already stressed acquisition workforce.

“In an area as technical as procurement, it is not a good idea simply to translate campaign rhetoric into the nuts-and-bolts of government management,” said Steve Kelman, administrator of the Office of Federal Procurement Policy from 1993 to 1997 and now a Harvard University professor, on his FCW.com blog, "The Lectern."

A major point of contention is the administration’s negative view of no-bid and cost reimbursement contracts. Although Obama’s memo cites the increase in those contract types, he misses the larger picture, Kelman said, which is all contracting has increased significantly in that span of time. According to an OFPP memo from 2008, the proportion of contracts that are fully competed has remained steady at more than 60 percent from 2003 to 2007.

“It is a higher priority to seek to increase [the] use of performance and cost incentives in cost-reimbursement [or time-and-materials] work than to attack cost-reimbursement contracting per se across the board,” Kelman wrote.

Obama said the Office of Management and Budget will issue governmentwide guidance by Sept. 30 on the appropriate use and oversight of sole-source and other types of noncompetitive contracts. He said the amount of money funneled through those types of contracts jumped from $71 billion in 2000 to $135 billion in 2008, which is a 47 percent increase. He instead wants to see more full-and-open competition for contracts.

Furthermore, OMB will develop more detailed guidance by July 1 to help agencies review their existing contracts to find the wasteful ones that are unlikely to meet their needs, the memo states.

“We will end unnecessary no-bid contracts and cost-plus contracts that run up the bill that is paid by the American people,” Obama said. He predicted his reforms would save the government $40 billion each year.

While those reforms might save money, experts said more dramatic savings could come from a well-educated and better-trained acquisition workforce. Obama needs to make training the workforce the paramount priority, not simply curtailing certain types of contracts, they say.

“That’s got to be the central theme,” said Robert Burton, former deputy Office of Federal Procurement Policy administrator from 2001 to 2008 and now partner at Venable law firm.

Many acquisition employees don’t fully understand the 1,949 pages of the Federal Acquisition Regulation and their agencies’ own regulatory supplements, Burton said. Training them to improve their understanding of and adherence to the laws could solve many contracting programs, he said.

Meanwhile, task and delivery orders are increasing with little guidance, Burton said. Today, more than 50 percent of the federal contracting expenditures go through huge task and delivery orders. Core problems exist with these orders, such as poorly defined requirements that are often out of scope of the contract, and limited competition for work. It’s an area that needs more guidance, he said.

Similarly, a panel of former Defense Department acquisition officials told senators last week that knowledgeable and experienced acquisition employees are the solution to improving programs and controlling costs.

Fixed-price contracts have a role in federal contracting, but contracting officers need a wider range of options, several government acquisition executives said. Officials should not discourage the acquisition community from using other appropriate contracts that might suit specific needs.

Still, experts say departments’ contracting officers must support the White House’s changes if agencies expect better contracting decisions and savings. Michael Sullivan, director of acquisition and sourcing management at the Government Accountability Office, said memos and legislation might not achieve the goals unless departments transform the overall acquisition culture.

Ray Bjorklund, a military officer and Defense Department acquisition official from 1971 to 1998 and now senior vice president and chief knowledge officer at FedSources, said Obama is aggressively pushing agencies to choose the right type of contracts.

Angela Styles, OFPP administrator from 2001 to 2003 and now partner at Crowell and Moring’s Government Contracts Group, said Obama might have hampered his efforts by over-generalizing the motives of contractors. The president will need good contractors to drive the initiative forward, cooperation that he might be less likely to get if they feel offended that he appeared to characterize all contractors as mercenary and untrustworthy.

“If you make one false turn as a contractor, you will be brought to your knees by the full power of the U.S. government," Styles said. "It is not a great place to be. The vast majority of government contractors understand that what they do is for the taxpayer and to make the federal government work better.”

Bringing the work home

Obama said he wants to limit the outsourcing of federal work, whereas the Bush administration sought to increase it. The question, as always, turns on the definition of inherently governmental work, which is work that only federal employees can properly do.

The fiscal 2009 Omnibus Appropriations Act already passed by the House would require a clarification of those functions. The Senate had not passed the bill as of March 6, but Obama has made limiting outsourcing a priority to pursue regardless of the bill's fate. The legislation would make it easier for agencies to pull work back into the agencies and away from contractors.

And so it appears that Obama, with the vocal support of Democrats in Congress in addition to Republicans such as Sen. John McCain of Arizona, is fundamentally changing the relationship between the public and private sectors. And it would also appear that the tide is in his favor. Several members of Congress made statements of support for Obama, and many of his proposed reforms are already incorporated in the current Defense Authorization Act, which President Bush signed last year.

“We must put an end to no-bid contracts and dishonorable procurement practices that are often the root cause of waste, fraud and abuse of taxpayer dollars,” said Rep. Edolphus Towns, (D-N.Y.), chairman of the House Oversight and Government Reform Committee.

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Obama: Big changes coming in federal contracting

President Barack Obama said he wants an overhaul of government contracting and signed a presidential memorandum to launch the effort today.

“It’s time for this waste and inefficiency to end,” he said at a news conference. “It’s time for a government that only invests in what works.” (Read a transcript of his comments.)

Obama said the Office of Management and Budget will issue governmentwide guidance by Sept. 30 on the appropriate use and oversight of sole-source and other types of noncompetitive contracts. But he added that he wants to see more full and open competition for contracts.

By July 1, OMB will develop more detailed guidance to help agencies review their existing contracts to identify wasteful ones that are unlikely to meet their needs, the memo states.

Obama said he wants agencies to better oversee all types of contracts and carefully consider the agencies’ needs before signing any deal. The changes would minimize the risks for government and boost the value of contracts, he said.

“We will end unnecessary no-bid contracts and cost-plus contracts that run up the bill that is paid by the American people,” he said. The reforms would save the government $40 billion each year, he added.

Obama also wants to clarify when it’s appropriate to outsource federal work and help agencies find the appropriate size and experience for the federal employees who develop and oversee acquisitions.

Obama focused largely on defense contracting but said the reforms will span all agencies. He cited a 2008 Government Accountability Office study of 95 Defense Department weapon programs that found cost overruns of $295 billion and average delays of 21 months.

“I can assure you that this will be a priority for my administration," Obama said. "It’s time to end the extra costs and long delays that are all too common in our defense contracting.”

Obama said he wants agencies to enter into contracts that will bring value, adding that agencies have wasted money through poor planning while giving contractors ample opportunities to take advantage of the government.

“It is essential that the federal government have the capacity to carry out robust and thorough management and oversight of its contracts,” the memo states.

Read the story: FCW.com News - Obama: Big changes coming in federal contracting

Woman-owned IT firms seek inclusion

As the Small Business Administration considers which industries can receive set-asides, women business owners hope they won't be overlooked

Katie Sleep is training for the Ironman Triathlon in part to handle the stress of her job as chief executive officer of List Innovative Solutions Inc., a small technology company in Herndon, Va.

“The training has saved my life,” Sleep said. “If you carry that stress every day, you’ve got to get rid of it somehow.”

As part of a seven-day workout routine, Sleep runs on the Washington and Old Dominion Trail at 6:30 a.m. on Mondays and Wednesdays. She swims Tuesdays and Thursdays at 5:45 a.m., and she exercises again in the evenings and on weekends.

“Working out has given me the energy to save this company,” Sleep said.

Women who own small information technology firms, like Sleep, are under a lot of pressure to protect their companies during the current recession. Meanwhile, they are losing out on government business that could help them because there is no program that sets aside contracts for woman-owned small companies.

According to the Small Business Administration, women are underrepresented in some fields, but there are too many woman-owned businesses in the technology industry to warrant set-aside contracts.

In general, the IT field doesn’t have more woman-owned businesses competing for work than other industries, at least not on a per-dollar-spent basis, said Kevin Plexico, senior vice president of operations at Input, a market research firm. The IT industry tends to fall in the middle relative to other major industries. Some segments, such as professional services, tend to have a larger number of woman-owned businesses, but the average contract size tends to be smaller and therefore they attract small firms, he added.

SBA’s Dynamic Small Business Search directory lists 69,000 woman-owned firms. Of those, about 2,800 received prime contracts in fiscal 2008 for IT-related products and services. About 7,700 woman-owned small businesses span several types of technology-related sectors — from data processing to computer system design and computer sales — and they earned nearly $45.8 million in federal contracting in 2008, according to FedMine, a data research firm.

Persistence will pay

But women who own technology companies are not counting themselves out of getting a set-aside program.

“One thing about women is they don’t give up,” Sleep said.

In October 2008, SBA proposed expanding the set-aside program from four obscure industries, which include kitchen-cabinet making, to 31. However, IT was not included on the proposed new list. A women's advocacy organization said SBA is missing the bigger picture.

“The 30-plus [list] currently being considered still does not accurately portray what we believe to be the real situation — namely, that women in most industry sectors are underrepresented” among federal contractors, the Women’s Business Enterprise National Council wrote in November 2008 in response to SBA’s proposed rule.

Women who own small businesses battle for contracts against large incumbent companies that have strong ties to the government. They don’t have as many resources to compete for the work, especially when agencies bundle smaller projects into one large contract. Women also often stand on the outside of an exclusive club of insider companies, several women business owners said.

“Quite frankly, there are no benefits to being a woman-owned small business,” said Alison Brown, president and CEO of Navsys Corp., a Global Positioning System software engineering company in Colorado Springs, Colo. For example, women face serious barriers when they try to break into the defense contracting market, she said. Set-asides would help small businesses, but “I don’t mean to say it’s easy if you have a level playing field,” she added.

Obama raises hope

Many women are hopeful that the new president will bring change. During his campaign, then-Sen. Barack Obama said he wanted to boost contracting opportunities for women and would push to establish a contracting program for woman-owned businesses. In the past few years, Congress has sought to help women by creating such a program, but officials have yet to fully launch it.

Despite years of ignoring the issue and concerns about constitutionality, officials have tried in the past two years to create a framework of regulations for the program, but a recent regulatory proposal crushed any progress by upsetting some members of Congress and small-business advocates. Some lawmakers objected to SBA’s proposed rule that would have opened the set-aside program to only a select few industries. Senators were ready to block the regulation with a single provision in an appropriations bill.

A rule finalized Oct. 1, 2008, authorized contracting officers to restrict competition to eligible woman-owned small businesses for contracts worth less than $3 million in industries in which women were underrepresented. However, any agency seeking the set-aside must show SBA that the arrangement would meet constitutional requirements.

SBA wants better data

Under that rule, SBA must determine in which industries women are underrepresented. Officials are seeking input on what source of information would offer the clearest picture of women in business.

SBA officials are accepting comments until March 13 on whether the agency should use the Central Contractor Registration or the Census Bureau’s Survey of Business Owners. The survey includes information about demographics, type of business and gross receipts. Several experts say CCR and the survey are the only reliable sources with disparity ratio information.

But many business owners don’t approve of using CCR to determine the number of woman-owned small businesses that are ready to handle government contracts. They note that many companies don’t enter their names in the registry until they require payment for contracted work. And many of them are subcontractors that are not paid directly by the government.

“From personal knowledge, the CCR as indicative of truly woman-owned companies is some kind of stupid joke,” wrote an anonymous woman business owner in a comment to SBA about its proposal. The writer said CCR’s data is suspect because companies enter the information themselves. “Bad data is worse than no data,” she said.

However, SBA officials say the Census survey might overestimate the number of companies that are ready for set-aside contracts.

“The glass ceiling is still there,” Sleep said. “The question is how are you going to be creative and get around it.”

Alba Alemán, president of Citizant Inc., a company based in Chantilly, Va., that specializes in enterprise architecture, said women aren’t respected as federal contractors. Nevertheless, she has noticed more women in business these days, increasing the importance of having a set-aside program for IT companies.

“Set-asides support an emerging market,” she said.

Women business owners say they intend to continue fighting for set-asides, even if they only succeed in helping the next generation of entrepreneurs. As Sleep put it, “You always want to make it better for the people who are coming behind you.”

Read the story: Washingtontechnology.com - Woman-owned IT firms seek inclusion