The Highly Visible Invisible OFPP Administrator

Obama is reforming contracting with no administrator, and he doesn't seem to mind

Just four weeks after being sworn in as president, Barack Obama signed into law the massive stimulus legislation, complete with $787 billion to spend and significant changes to the government’s contracting regulations.

Two weeks later, Obama declared contracting reform to be a top priority for his administration and issued a memo on some of the changes he had in mind. Since then, he has frequently stated what he sees as a dire need for reforms and oversight of contractors.

Obama signed another bill in May that changed the rules for the Defense Department's procurement of major weapons systems.

Through all of this, he seems to be missing a key player: the administrator of the Office of Federal Procurement Policy.

Obama has chosen a national chief information officer — Vivek Kundra — and picked Aneesh Chopra to be chief technology officer. They quickly became prominent figures, and Kundra has pushed technology as an important part of acquisition reform.

But the president has no procurement policy chief.

The Office of Management and Budget has issued guidance on how agencies are supposed to spend the stimulus money, approved numerous new regulations and nearly completed a definition of inherently governmental functions.

But no chief.

In theory, the OFPP administrator is a key player in anything to do with government acquisition and is downright essential during times of major reform. Nevertheless, the changes are apparently moving along without an administrator. Some experts have started to wonder if the role is as important as others had assumed.

However, the push to find a nominee is building now that OMB’s deputy director for management, Jeff Zients, has been confirmed, said Kundra, who is involved in the search for an OFPP leader.

Even so, the administrator’s desk remains empty, while outside, the acquisition and contracting world is spinning faster than ever.

“There’s something to be said for somebody who knows how to grab on to things that are already in motion,” said Allan Burman, president of Jefferson Solutions, a division of Jefferson Consulting Group.

As the world turns

The government is witnessing some of the biggest changes in contracting in more than a decade. Obama took an about-face from President George W. Bush in a memo issued March 4 that comments on the troubled area of contracting and indicates how important he considers reforming the system.

Experts say the OFPP leader will be in a powerful position. He or she will have the president’s ear and a big agenda to tackle — bigger than in many past administrations.

“This is going to be a highly visible job with senior-level interest in what’s going on,” said Burman, who was acting administrator of OFPP starting in 1988 and confirmed in that role in 1990.

Obama wants tighter oversight of noncompetitive contracts and those without fixed prices. He wants an acquisition workforce that is capable of overseeing contractors. He has also told agencies to use outsourcing only when it’s absolutely necessary so the government can wean itself off its dependence on the private sector.

The American Recovery and Reinvestment Act, which Obama signed into law in February, is disbursing billions of dollars to save the economy, and the law dictates how agencies can spend that money and what contractors must report on when they get the cash. Experts say those rules have set a new standard for acquisition transparency and reporting and thus will spread to all government contracting in the near future. They say a leader needs to guide those changes appropriately.

A few blocks from the empty OFPP administrator’s office, Congress is passing reform legislation. Members are changing small-business set-aside rules and thinking about ways to revamp DOD’s acquisition system so the department can buy information technology faster. Many acquisition experts believe Congress makes rules without really understanding the issues. And that’s another reason it’s important to have an OFPP administrator.

All this activity is happening while the government remains on a fast track to spend $600 billion a year.

Then there’s the acquisition workforce. It’s overworked and demoralized. Employees are waiting for a strong leader to offer them some relief. For several years, they have felt battered by intense scrutiny by Congress, inspectors general and the Government Accountability Office. They want a leader high in the Obama administration’s ranks to protect them.

Catching up

When finally confirmed by the Senate, the administrator will need to sprint to catch up with what’s been happening in the acquisition field, said Angela Styles, OFPP administrator from 2001 to 2003 and now a partner at Crowell and Moring’s Government Contracts Group.

The White House has been working for months to draw up memos and craft a strategy. Most important for OFPP, Obama has brought the traditionally back-office duties of negotiating and signing contracts to the forefront of his agenda.

“We’ll have to break bad habits that have built up over many years,” he said. “But we can’t keep spending good money after bad.”

The first test of the new OFPP administrator’s authority will be how far he or she can stray from the goals Obama outlined in his March 4 memo, according to one expert.

Steve Kelman, administrator of the Office of Federal Procurement Policy from 1993 to 1997 and now a Harvard University professor and Federal Computer Week columnist, said the memo reads more like something written by lawmakers than a document crafted by experts in contracting.

He said the OFPP administrator must wrestle with nitty-gritty acquisition issues, such as how to navigate performance-based contracting and improve the use of contractors’ past-performance information in making awards. The administrator also has to continue melding contracting officers, their technical representatives and program managers into a team as they manage millions of contracts.

Kundra, who is pushing for a speedier, simpler acquisition process, said the OFPP administrator must understand the challenges of government procurement while also believing that the government needs to find faster ways to buy ever-evolving IT.

The administrator should “recognize we can’t treat technology procurements in the same way we do buying buildings,” Kundra said.

Furthermore, a report from industry and government experts urges the administrator to compel agencies to approach acquisitions holistically when they write contract requirements. The administrator will need to improve communication between agencies and industry, the said, and he or she will need to convince employees that technological innovations can improve the acquisition process.

Unfortunately, the delay in naming an OFPP administrator means “people are always going to know you weren’t the one who wrote the agenda,” Styles said. Therefore, the administrator will need to find a way to embrace and personalize the administration's priorities.

Styles said she received her priority — competitive sourcing — from Bush administration officials, but she was involved in drafting the procurement policy from the start because she was nominated in March 2001 and confirmed three months later. Her role was to implement the ideas of her bosses. The same will be true for the next administrator, she added.

When a key position remains vacant while other officials lack deep knowledge of an issue, it can result in a misguided — if not directionless — agenda, said Bob Woods, commissioner of the General Services Administration’s Federal Technology Service from 1994 to 1997 and now president of Topside Consulting. That’s the sort of situation the new OFPP administrator will face.

"You don't want to be the last wolf to the feast," he said. "There’s been a lot of chewing going on since you've not been there."

Missing person

The longer the position remains unfilled, the more some experts question its importance. Congress and the administration seem to be setting policies just fine without an OFPP administrator, they say.

“Here we are in August, and we don’t have a nominee yet,” said Robert Burton, former OFPP deputy administrator and now a partner at Venable law firm. “It’s obviously not a priority yet.”

Burton pointed out that Lesley Field is doing a fine job as acting OFPP administrator, and he questioned the urgency of choosing a permanent administrator. “It’s not like the initiatives don’t go forward,” Burton said. “It’s not like the career people don’t talk with other offices.”

OFPP would work just as well with a career employee in charge, who would likely stay longer than the typical two-year tenure of most OFPP administrators, Burton said [tk: ok?]. Plus, he or she would have the added benefit of understanding the issues involved after having risen through the office’s ranks.

“Acquisition is nothing but a lot of rules and regulations,” and it demands a strong legal background, not a political connection, Burton said. Deputy administrators work on many aspects of reforms, and they’re often dealing with agency leaders on regulations. Burton also ran OFPP during many of his years there as administrators came and went.

Kelman said there are benefits to appointing a retired career acquisition official to be OFPP administrator because that person wouldn't need a crash-course in what’s happening and why.

In the meantime, highly visible officials are talking about innovative acquisition reforms. For example, Kundra is calling for saving money through an IT storefront, cloud computing and software-as-a-service initiatives. He wants to use technology to speed the slow and deliberate acquisition process. And the tech-savvy Obama administration is putting a lot of weight behind Kundra.

“The administration is making that post very visible,” Burton said. Kundra’s prominence might suggest the decline of the OFPP administrator’s role as a leader in acquisition reform, Burton added.

However, Deidre Lee, OFPP administrator from 1998 to 2000 and now executive vice president of federal affairs and operations at the Professional Services Council, said Kundra could be a strong ally of the OFPP administrator.

“Two or three people at that high of a position with like minds can do a lot,” she said.

Although neither of them has much statutory authority or budget control, “one of the most important things anyone can have is a bully pulpit,” Kelman said. The two leaders could inspire people and soothe an anxious acquisition workforce, he added.

Only a few people are capable of doing that. Lee said that when acquisition employees make a mistake, the administration’s “leadership has got to step up there and say, 'Yep, we tried it, made a mistake, noted [it] and moved on. Let’s try again.'”

Everything is in place to move the workforce forward with the innovations that technology allows, experts say, but people are waiting for leaders to show them the way.

“I think the lion’s share is ready, but it’s going to take a lot of courage,” said John Nyce, associate director of the Acquisition Services Directorate at the Interior Department’s National Business Center. He added that they’re looking for someone to stand up for them.

Lee said the workforce is in huddle mode. Employees have learned that they can avoid attention by not moving forward. “That’s why leadership is so critical,” she said.

And employees understand that a political appointee has more access to key decision-makers. “The better the relationships, the better job you do,” Styles said, mentioning Kelman and David Safavian, who was OFPP administrator from 2004 to 2005 until he resigned during a scandal.

Some experts believe the administrator should remain a political appointee, even if a career person is just as capable. That approach ensures respect from other appointees throughout the government and shows that the administrator shares the president’s goals and agenda.

Furthermore, the president’s support for the administrator will make employees listen to what he or she has to say and pay attention to the direction they’re headed.

“A lot of the workforce longs for good leadership,” Kelman said. “And it’s up to that person to show he’s willing to go out of his way to work for them.”

Read the story: FCW.com News - Acquisition reforms rush forward while top OFPP seat remains empty

Senate passes bill with HUBZone change

Bill deals with small-business equality issue


The Senate has passed its fiscal 2010 National Defense Authorization Act (S. 1390) with a provision that would remove the “shall” in the law that some government attorneys say gives small businesses in historically underutilized business zones (HUBZones) first preference when a contracting officer considers setting aside a contract for small businesses.

The mandatory “shall” would become a “may,” which would give the officers more discretion in awarding the contracts.

Since May, the Government Accountability Office, the Small Business Administration and the Office of Management and Budget have been debating whether HUBZone businesses should get priority over service-disabled veteran-owned small businesses and firms in SBA's 8(a) program. Read the story. The Senate passed the legislation July 23.

Rep. Roscoe Bartlett (R-Md.), co-chairman of the HUBZone Caucus, today said he supports the statutory change.

“Small-business owners from these three categories endure different types of disadvantages, but they all create invaluable opportunities and magnified benefits in our communities. They deserve equal priority consideration for federal government small-business contracts,” he said.

The Senate passed the legislation July 23.

Also regarding acquisition reforms, the bill would require a Defense Department contracting officer to justify why a contract worth more than $20 million should be awarded on a sole-source basis. For example, the officer would have to show that the anticipated costs are fair and reasonable. The bill would also tighten restrictions on public/private competitions for government work. The competitions pit the two sectors against each other to see who can do the work best for the lowest price.

The House passed its version of the bill in June. A conference committee of senators and House members will work out the differences before sending the legislation to the president.

Read the story: FCW.com News - Senate passes bill with HUBZone change

Senate deal will level small-business contract preferences

HUBZone companies would not get priority over 8(a) companies and service-disabled veteran business owners

Senate leaders have agreed to include a provision in the next defense authorization bill to do away with the current debate over which categories of small businesses should be given priority in federal contracting.

The amendment, introduced by Sen. Mary Landrieu (D-La.), would remove the special preference given to small businesses in historically underutilized business zones (HUBZones), putting those firms on a par with companies owned by service-disabled veterans and those in the Small Business Administration’s 8(a) program.

“All small businesses should be given an equal opportunity to succeed,” said Landrieu, chairwoman of the Small Business and Entrepreneurship Committee.

The Senate is currently considering the fiscal 2010 National Defense Authorization Act ( S. 1390 ). The House passed its version in June.

Landrieu said her amendment is in response to a May ruling by the Government Accountability Office that HUBZone companies had to be considered before other categories of business when conducting a set-aside procurement. She said the ruling has caused contractors to pull back business from 8(a) and service-disabled veterans programs.

In its decision, GAO said the Army made a mistake when it didn’t consider whether at least two HUBZone businesses would bid on an information technology contract. Mission Critical Solutions, a HUBZone company, protested the award after the Army awarded a one-year, $3.45 million sole-source contract to Copper River Information Technology, a company owned by Alaska Natives.

SBA and administration officials also object to GAO’s decision. They say it conflicts with SBA's long-standing regulations and its view that 8(a) companies and those owned by service-disabled veterans and HUBZone companies are all equals. On July 10, OMB told agencies to disregard GAO’s decision.

“If agencies were to follow the GAO decisions, the federal government’s efforts to procure goods and services from 8(a) small businesses and from [service-disabled, veteran-owned small businesses] through the other statutory programs may be negatively impacted,” Office of Management and Budget Director Peter Orszag wrote on July 10.

Read the story: WashingtonTechnology.com News - Senate deal will level small-business contract preferences

Congress, administration move into protected territory

The governmnent is having an ongoing debate about certain small businesses with big advantages

Congress and the Obama administration have stepped into a well-guarded territory of small-business contracting: special advantages.

The Senate Homeland Security and Governmental Affairs Committee’s ad hoc Contracting Oversight Subcommittee has questioned whether the explosive growth in Alaska Native Corporations’ (ANCs) contracting dollars in the last eight years through unique set-aside rules has given ANCs too much of an advantage. The subcommittee held a hearing July 16 that has become part of an ongoing debate about some categories of small businesses that live by special rules.

“The current situation is out of balance, and it may be time to swing the pendulum back the other way,” said Mark Lumber, senior vice president for federal program for Cirrus Technology, a historically underutilized business zone (HUBZone) small business in Huntsville, Ala.

Sen. Claire McCaskill (D-Mo.), the subcommittee chairwoman, asked several representatives for ANCs if they would agree with changes to make ANCs abide by the same rules as Indian tribes and other socially and economically disadvantaged companies.

If there is no difference between them, she said, “Then I hope that you would accept a change in the law that would make sure that you are on completely equal footing."

The ANC representatives at the hearing remained neutral. “We are not in a position today, through our organizations, to negotiate on behalf of our people. We need to go through an extensive tribal consultant process,” said Susan Lukin, executive director of Native American Contractors Association.

Officials believe ANCs are getting a disproportionate amount of money compared to other small businesses, according to reports. Because of ANCs’ rules, the amount of contracting dollars going to ANCs have grown by 1,386 percent since fiscal 2000 and have tripled from $1.1 billion in 2004 to $3.9 billion in 2008, according to the Small Business Administration’s inspector general. In SBA’s 8(a) small business program in 2008, ANCs were awarded 26 percent of the total dollars flowing into the program, although they are only 2 percent of the total number of companies in the program, according the IG’s July 10 report.

Similarly, McCaskill’s subcommittee analyzed information from 19 ANCs and found similar results. ANCs received $6.6 billion in 8(a) multi-million-dollar sole-source contracts between 2000 and 2008, according to its report.

The increases are a result of agencies’ small-business contracting goals and, more importantly, a quick way to award a contract, officials say. Rules that are unique to only ANCs allow agencies to award them sole-source contracts of any size without competition, and no fear of bid protests.

Sen. Susan Collins (R-Maine), the subcommittee’s ranking member, said Congress needs to carefully consider whether the 8(a) program rules offer too many benefits to ANCs at the expense of the others.

In the private sector, many business owners are upset by the set-aside partiality ANCs receive. Lumber said few people would object to ANCs having some type of procurement preference, but not that allows for this much advantage.

At the same time, HUBZone businesses get a deal that upsets many other business owners and the Obama administration. It’s a difference of a word: "Shall" versus "may."

Office of Management and Budget Director Peter Orszag on July 10 told agencies to disregard the Government Accountability Office’s (GAO) May 4 bid protest ruling that said HUBZone small businesses get first crack at a contract set-aside. GAO rejected SBA's request to reconsider its rulings.

Because of language in a 1997 authorization law, GAO sustained two bid protests in favor of HUBZone businesses. As a result, GAO ruled that those companies get priority over all 8(a) small businesses and companies owned by service-disabled veterans.

“You’ve got to live by the ‘shall,’ ” said Robert Burton, former deputy administrator of the Office of Federal Procurement Policy and now a partner at the Venable law firm.

While GAO believes the “shall” in the law is a mandate, SBA officials said the 8(a) companies, service-disabled veterans, and HUBZone companies should all be equal to each other.

John Moliere, an advocate service-disabled veteran contractors and president of Standard Communications, said, "I envision the lawyers at GAO smugly pleased with their decision."

Meanwhile, the HUBZone Contractors National Council isn't talking about the disagreement between GAO and OMB.

If Congress or the administration tries to make any changes to these sensitive areas, Burton said it won’t be an easy legislative fix. There are members of Congress who will fight to keep things as they are. Both of Alaska’s senators, who weren't members of McCaskill's subcommittee, took advantage of the special privilege to question witnesses at the ANC hearing. They both also thrust their strong support behind the Alaska Natives.

Over all, Moliere said, “This is not the end of this skirmish. It will erupt in a full-fledged battle.”

Read the story: FCW.com News - Congress, administration move into protected territory

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.”

Read the story: Washingtontechnology.com News - Contractors wary of procurement proposals

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.

Read the story: FCW.com News - Obama again touches on procurement reform

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.

Read the story: FCW.com News - Obama wants contracting overhaul

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

Ruling buttresses small businesses

Yet favorable 'Rule of Two' decision could come at a high cost

Ed Driscoll, president and chief executive officer of Delex Systems Inc., was forced into an awkward position last spring. His customer of 40 years, the Navy, was disregarding small-business acquisition rules. Delex risked losing a lot of potential business if the problem continued.

On a $75 million contract, the Navy decided against setting aside orders for small businesses as acquisition rules require when at least two small companies can handle the work and can offer reasonable prices.

Driscoll, a former Navy officer, had invested millions of dollars just to earn a spot to compete for the orders on the Navy’s Training Systems Contract II. Given the size of his investment and the contract, he had to consider a protest. At the same time, he did not want to wreck a relationship he had spent years building.

Ultimately, he had no choice. “This was an opportunities issue and an investment issue,” he said.

After hearing Delex’s case, the Government Accountability Office decided Oct. 8 that agencies must set aside some task orders if at least two small businesses could do the work, which is known as the “rule of two.” The Federal Acquisition Regulation requires a contracting officer to reserve any order of more than $100,000 if at least two responsible small businesses could enter bids. The regulation was the foundation for GAO’s ruling.

Driscoll won the protest, and the result might give small businesses such as Delex a new edge in government contracting. By ruling that agencies must set aside work for small businesses if they find two such companies that are capable of meeting the agencies’ needs, the GAO buttressed rules that agencies have often disregarded.

However, the decision could stress relationships between companies and agencies. Agency officials expect more time-consuming protests for not setting aside work. And they’re frustrated by the prospect.

“Delex hints at some of the angst people haven’t had since” acquisition reforms in the 1990s, said Ray Bjorklund, senior vice president and chief knowledge officer at FedSources Inc., a market research firm.

When they solicited the task order under the training contract, Navy officials decided not to set it aside for small businesses. Instead, they opened the competition to large and small companies on the multiple-award contract.

“GAO tipped the playing field in favor of small-business contract-holders,” said Alan Chvotkin, executive vice president and counsel at the Professional Services Council, an industry group. GAO has significantly changed how agencies and contractors plan their acquisition strategies, especially when it comes to multiple-award contracts that have a mixture of small and large companies, he added.

As a result of the decision, program managers and contracting officers will likely give more weight to small-business set-asides in their initial acquisition strategies, Bjorklund said. When agency officials need to buy something quickly, the greater possibility of a protest by a small company on a task or delivery order would make them keep set-asides in mind.

“Small businesses should capitalize on this opportunity,” said Andy McCann, vice president and geographic sales leader at EDS Corp.’s U.S. Government and Public Sector business.

ASSESSING THE DECISION
At this point, though, many companies and industry observers are still trying to understand what effect the ruling will have. An executive at a major systems integrator who asked to remain anonymous said large companies aren’t enthusiastic about the ruling, but the outcome depends on how a contracting officer interprets GAO’s decision. Integrators are waiting to see how to set up bidding strategies and partner with small businesses, especially on mixed indefinitedelivery, indefinite-quantity contracts.

The ruling could cause small businesses to consider new ways of working with integrators to ensure that they offer the best services and win future government contracts, McCann said.

“This ruling creates an incentive for small businesses to strive to be selected on IDIQ contract vehicles or to team with a large integrator on an IDIQ contract,” McCann said. It might also encourage companies to put more emphasis on their mentor/protégé programs.

Nevertheless, other experts say GAO’s decision doesn’t give advantages to small companies.

“On the surface, this may seem to be a benefit to small businesses, but the price may be too high,” said Guy Timberlake, chief visionary and chief executive officer at the American Small Business Coalition.

Timberlake said he is concerned that the decision might strain the already tense relationship between agencies and small businesses.

Officials and experts agree that the ruling could increase the distrust between industry and government. Agencies might suspect contractors of planning protests and including those projected costs in their bids.

Karen Kopf, operations director at the General Services Administration’s Federal Systems Integration and Management Center, said she feared becoming bogged down in protests, especially now that companies can protest task and delivery orders and be heard by GAO.

Lee Harvey, the Army’s deputy program executive officer for enterprise information systems, said that a decade ago, fewer companies protested award decisions because they wanted good relationships with the government. But today’s larger orders encourage people to protest, he said, because companies have more at stake.

“Frustration sums up our feelings,” Harvey said about GAO’s decision and its likely effects.

KEEPING TABS ON ORDERS
The crux of the issue was the Navy’s contention that Delex’s protest was against a delivery order and not a contract, making it exempt from the rule of two. But changes by Congress opened the orders to protests. In January, lawmakers decided that task and delivery orders were growing so large and complex that they equaled traditional contracts. They decided orders needed more regulation because agencies have been using task-order contracts for more than 50 percent of their procurements, compared with 14 percent in 1990, experts said. In the 1990s, the government viewed task orders as distinct from contracts and put those orders outside GAO’s jurisdiction.

GAO will keep its new authority to review task-order protests for three years. Legislators plan to evaluate the effects before then and make any necessary changes.

In the meantime, the new authority is changing the acquisition field, and GAO’s ruling could further alter how agencies view orders and contracts.

“More of these multiple-award opportunities might be issued as full-and- open [competitions] with no setaside components, creating a more prohibitive competition environment for the average small business,” Timberlake said.

Agencies will reassess the advantages of multiple-award contracts because of GAO’s ruling, Bjorklund said. They might ask themselves why they should go through the hassle of awarding an IDIQ and then go through another competition for task orders.

However, some experts say GAO’s decision won’t affect multiple-award contracts that separate small and large businesses.

The ruling will have little effect on NASA’s Solutions for Enterprisewide Procurement, a governmentwide acquisition contract, said Joanne Woytek, NASA’s SEWP program manager.

SEWP is organized into four groups of multiple-award contracts. Two are exclusively for small businesses with one of the two set-asides for small companies owned by service-disabled veterans. The other two groups are primarily for large businesses, though a few small companies are in the group.

Woytek said the ruling might affect a few orders in those groups that lack set-asides, but the small businesses in those groups are generally winning orders when they submit a reasonable bid.

“We have always encouraged contracting officers to provide a small-business preference, and now it will be more targeted if two of the small companies in the open groups can and want to provide a reasonable quote,” she said.

Whether the ruling opens an advantage for small businesses, it has left the contracting community in limbo. Ultimately, though, the rules are nothing new, and GAO has simply reinforced them, Driscoll said.

Read the story: Washington Technology - Ruling buttresses small businesses

A push for more competition

Departments will likely soon feel more pressure from policy-makers to buy more products and services through competitive bids, rather than sole-source contracts.

The federal government has competed approximately 64 percent of its procurements (based on dollar value) each year since fiscal 2005, although total procurement spending has increased from $371.8 billion in fiscal 2005, according to the Office of Federal Procurement Policy.

Members of Congress and the Bush administration’s chief procurement official said they believe agencies can do more, and they are looking for new ways to push agencies along.

Read the story: FCW.com News - A push for more competition

Denett: Agencies can compete more contracts

The government held competitions for 64 percent of its contracting dollars in fiscal 2007 — a stable percentage of the past three years — but the chief procurement officer said agencies can grow beyond that number.

Read the story: FCW.com News - Denett: Agencies can compete more contracts

EPA wants controls on sole-source contracts

Environmental Protection Agency officials are adding a “second set of eyes” to ensure noncompetitive contracts have all the necessary signatures before they are awarded, according to a recent letter.

By July 31, EPA will put new internal controls over sole-source procurements valued at more than $550,000, which require several officials' signatures before award. The agency will revise its acquisition handbook to require contracting staff members one level above the contracting officer to review and approve justifications for sole-source procurements.

Read the story: FCW.com News - EPA wants controls on sole-source contracts