Acquisition workforce: Social media could be big draw

The government acquisition community ought to take a cue from President Barack Obama’s campaign strategy and use social media technology to bolster its ranks, one lawmaker says.

The government needs to be brave enough to draw on the younger generation’s new ways of interacting to help attract them to government service and to simply improve how agencies run, said Rep. Brian Bilbray (R-Calif.), speaking at a congressional hearing last week.

Many older federal employees may not be as comfortable with that technology, but the up-and-coming employees live by it. “This is their primary way of thinking,” he said.

Obama’s campaign captured young people’s attention like no other presidential candidate has before. It created Change.gov, a hip Web site describing Obama’s agenda. But Obama also sent out text messages and had a presence on Facebook, MySpace and numerous other social networking sites. Obama posted videos on YouTube. He even tweeted.

As a candidate, Obama was “a socially enabled, socially connected, socially aware, socially conscious leader,” Barry Libert, author of “Barack, Inc.: Winning Business Lessons of the Obama Campaign,” said in a recent speech.

At the hearing, Bilbray said the older generations that didn’t grow up with this technology will always be somewhat blind to it, unlike the younger people who have never known life without that technology.

“First of all, it intimidates us to some degree, and we may not understand it. But the potential is huge,” he said.

The next generation is heading toward more Web 2.0 tools and collaboration from the crowd.

The General Services Administration already has a technology-rich culture, said David Drabkin, acting chief acquisition officer at GSA, who testified at the hearing. The agency is adopting cloud computing and Web 2.0 collaboration tools internally and using social networking sites such as Facebook to interact with the public.

“We are on the edge,” he said.

Mary Davie, assistant Federal Acquisition Service commissioner for assisted acquisition services at GSA, is already thinking about the application of social media to acquisition. In a column in this week’s print edition of Federal Computer Week, Davie suggests opening the process of defining an acquisition’s requirements to get insight from a community of experts, inside or outside of the government.

“Using the wisdom of the crowd to define requirements and the best development process, participants could propose ideas based on experience, good practices, and standards, question and weed out bad ideas, build on one another’s ideas, and float the best to the top,” she writes.

Like Bilbray, Davie sees an opportunity not only to improve procurement but to appeal to younger recruits.

“Imagine what this might do to attract and retain the Net Generation workforce we are always seeking out,” Davie wrote.

At the hearing, Shay Assad, acting deputy undersecretary of defense for acquisition and technology, said technology will bring major changes in acquisition during the next two years.

The department is developing a database that will give Defense Department contracting officials quick access to information on business deals across the department, such as how the department negotiates with certain contractors, what they buy, and how much they may.

The system will be based on information collected by the Defense Contract Management Agency, which is the hub for analysis of the value and costs of DOD’s procurements.

At present, the individual services often don’t share information and know little about what the other services are buying, even from the same contractor, Assad said. “The fact of the matter is that we are not as capable as a number of organizations in terms of being able to share that information, but we are getting there,” he said.

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GSA looks to corral former customers

Procurement agency tries to win back lost business

Good news hasn't come very often to the embattled General Services Administration in recent years. So when some positive attention does come its way, GSA officials are eager to wave the results in front of its old go-it-alone customers — if only to show them that the agency has left its bad habits in the past.

Auditors from the Defense Department and GSA have been examining GSA’s books, and agency officials are confident the outcome will reveal that GSA can toe the regulatory line, said Ed O’Hare, new assistant commissioner for integrated technology services at GSA’s Federal Acquisition Service.

“We are confident we made the changes we needed to make, and we’ll fly through,” he said in a speech delivered in May.

Meanwhile, his marketing people are gathering a list of multiagency contracts and indefinite-delivery, indefinite-quantity contracts that other agencies launched around the same time GSA was found to be assisting the Defense Department with illegal purchases. O’Hare is targeting his message of repentance to the officers in the agencies whose own IDIQs are about to expire. The contracts often last for five to 10 years.

He wants to convince those agencies that GSA is ready to take over the other IDIQs, relieving other agencies of the maintenance burdens that come with running a large contracting program.

His question is simply: “Do you really want to do this again?”

For added emphasis, O’Hare also intends to highlight GSA’s inexpensive usage fees. Agencies pay a 0.75 percent service fee to use the Alliant GWAC, and GSA is capping that fee at $150,000 a year.

“I defy anyone to do a GWAC less expensively than that,” O’Hare said.

GSA’s ‘come to Jesus’ moment

Although GSA says it has moved past the scandal that rocked it five years ago, the memories — and history — linger. On Jan. 8, 2004, the GSA inspector general reported a pervasive problem of improper task orders and contract awards by the agency’s client support centers (CSCs), which served DOD. The IG found that some GSA employees were using the Information Technology Fund for purchases of goods and services that were well outside the fund’s scope. As a result, DOD officials banned use of GSA for major purchases.

The list of GSA’s sins grew long, according to the IG: improper sole-source awards, allowing work outside the scope of contracts, and inappropriately using time-and-materials task orders. Although the IT fund is authorized only for acquiring IT equipment, software and related services, investigators found that CSCs were dipping into it to pay for a wide variety of inappropriate things, such as marine barriers, pathogen detection devices, and construction of classrooms and office buildings.

The GSA IG attributed the problems to a culture that emphasized revenue growth instead of adhering to proper procurement procedures.

“I think every organization has to have a ‘come to Jesus’ moment,” said David Drabkin, GSA’s chief acquisition officer. That IG report was GSA’s moment.

Although the problems applied only to one small piece of GSA’s operation, the public perception was that the agency was more broadly compromised. “One part of your business does badly, and it hurts everybody,” Drabkin said.

DOD customers were frustrated with GSA and showed it in 2004 and 2005. Sales in the multiple-award schedules program slowed, but the program kept GSA from losing money year over year, Drabkin said.

But O’Hare and Drabkin said the agency has reorganized and revamped its operations. GSA is a new place compared to several years ago. And with the problems solved, GSA is ready to work. This latest round of audits, as required by the fiscal 2007 National Defense Authorization Act, should close the file on GSA as a poor broker of procurement dollars, O’Hare said.

Good news

Kevin Carroll, former program executive officer for the Army’s enterprise information systems who was in charge of the Information Technology Enabled Services-2S contract, said the new audit results can only help GSA rebuild its image and agencies’ trust in it.

“They’re showing responsibility,” said Carroll, president of the Kevin Carroll Group. But, he said, GSA also must continue to re-establish and develop its business relationship with DOD. Just showing good audit results won’t be enough.

Greg Rothwell, former chief procurement officer at the Homeland Security Department and president of Everymay Consulting Group, said there’s a deeper issue that might be too tough for GSA to surmount with a good audit: Agencies have become accustomed to doing their own contracting, and they aren’t likely to dump their contracts just to return to GSA.

Martha Johnson, President Barack Obama's nominee to be GSA administrator, said the agency has suffered its decline largely because of new freedom for agencies. Legislative changes in the 1990s, such as the Clinger-Cohen Act, removed many of the rules that required agencies to use GSA. It’s now one option among many.

“If you own it, you can control it,” said Rothwell, who helped to launch DHS’ Enterprise Acquisition Gateway for Leading Edge Solutions (EAGLE) contract and the Internal Revenue Service’s first two iterations of the Total Information Processing Support Services (TIPSS) contracts. “If you can’t control it, it can’t be as responsive to the agency’s mission.”

Faster, better, cheaper

The reality of control and GSA’s rough times forced it to cater to its customers and listen to them, experts say. For instance, GSA is letting agencies use contracts other than its own when GSA assists a customer agency.

GSA is scrambling to get started on launching ways for agencies to get on board with the Obama administration’s emphasis on cloud computing. Chief Information Officer Vivek Kundra and Chief Technology Officer Aneesh Chopra are advancing the administration’s policy, while GSA’s role could be to make it easy for agencies to use cloud computing services.

“We see the administration’s requirements, we respond by initiating some kind of contract action and make it fast and easy for government agencies to use,” O’Hare said.

He even wants to make cloud computing services available to agencies using a credit card, especially when they’re in a pinch for time.

“You don’t have to go to the CIO, you don’t have to go plan it, you don’t have to go buy servers or digital maps or do a [certification and accreditation]," he said. O'Hare envisions an agency employee logging on to a Web site, answering a few questions, and “boom, check out, you got it.”

O’Hare’s Office of Integrated Technology Services has awarded all of its major contracts, such as Alliant and Networx, and they’re ready for business. "I’ve got to get out there and talk to people and try to convince them we’ve already got it,” he said.

And he wants to make GSA work “faster, better and cheaper” than other agencies can offer. “My job is to make it work,” he said.

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Think twice before insourcing government work

A report says the Obama administation should be careful before taking jobs from contractors and giving them to agencies

The Obama administration and Congress should proceed cautiously as they attempt to take work away from contractors and hand it to agencies' employees, according to a report released today.

“A rush to insource thousands of positions, while trying to take on ever more government programs, can end in disaster,” wrote Raj Sharma, president of the Federal Acquisition Innovation and Reform Institute, in a report titled "The Move to 'Insourcing'…Proceed with Caution."

Agencies should concentrate first on removing contractors from jobs already defined as inherently governmental and duties central to agencies’ missions, the report states. At the same time, officials need to consider insourcing other jobs in longer-term phases, he wrote, adding that the government can handle the shifting load much easier in stages rather than all at once.

“Rushing to undo what has been in the making for years — perhaps decades — will be counterproductive,” Sharma wrote.

Moreover, taking work from contractors must be done deliberately and based on facts, not innuendo and rhetoric, he wrote.

President Barack Obama often depicts contractors as taking advantage of the government.

However, contractors are a major component of how the government operates, Sharma said, and they often perform work that requires specialized expertise, Sharma added.

“The current rhetoric that demonizes all contractors, instead of those few that are guilty of fraud and abuse, will only deter the best suppliers that we so badly need from competing for government business,” he wrote.

He added that an essential component of success for Obama’s plans for health care reform, energy independence and social innovation will be the technical expertise, innovation and scale that industry can bring.

Meanwhile, experts say experienced federal employees are attractive to private-sector companies, which often offer more to those employees than the government does. Also, a large number of government employees are nearing retirement, and agencies’ acquisition jobs are remaining vacant because few people are seeking those jobs.

Obama’s calls to join public service can only do so much to help find people to do the work, Sharma wrote. The government needs to reconsider its recruiting efforts, pay and professional development policies to make them competitive with the private sector before agencies dramatically insource jobs.

“While it may be feasible to hire thousands of people during the current economic downturn, it will be difficult to retain this talent unless systemic human-capital issues are addressed,” he wrote.

Sharma said officials should answer the following questions before bringing work in-house:

Which positions should be insourced?
How and when should they be insourced?
What will attract the people needed to do the jobs once they are brought in-house?
How will the government retain the employees who are doing the insourced jobs?

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Supplemental bills would restrict award fees

Congress is working to restrict award fees for contractors’ work.

The House passed its fiscal 2009 Supplemental Appropriations Act (H.R. 2346) on May 14 with a provision that would not allow the Defense Department to spend its money on award fees to defense contractors unless DOD judged their work using set criteria.

The bill would boost the importance of the guidance on award fees in the fiscal 2007 National Defense Authorization Act. That law required the defense secretary to write rules on how DOD should appropriately link award fees to acquisition outcomes. The law bolstered checks on what is good contractor performance worthy of the extra money.

In particular, the authorization law required, among other things, guidance on how to judge performance, determine if a contractor should get even a percentage of the award for satisfactory work, and analyze whether award fees actually work to improve contractors' work.

Also on May 14, the Senate Appropriations Committee also approved its version of the supplemental bill (S. 1054) that has a similar provision that would restrict award fees.

The provisions align with a March 4, 2009, memo from President Barack Obama designed to stop the use of cost-reimbursement contracts, including ones that would pay for contractors’ cost plus an award fee for reaching certain performance measures.

“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 at a press conference in March. Obama predicted his reforms would save the government $40 billion each year.

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The hidden force in acquisition

Some of the most influential people in the federal acquisition community are also the least well known.

They make critical decisions at every step of the acquisition process, yet the Federal Acquisition Regulation does not mention them. Any reform initiative that does not take them into account is bound to fail, yet the Office of Federal Procurement Policy rarely takes note of them in memos.

But that is beginning to change. Slowly but surely, federal agencies are coming to realize that contracting officer’s technical representatives (COTRs) play an essential — if underappreciated — role in government contracting.

Even the Government Accountability Office is trying to get a handle on the community.

“We have no really clear picture of how many of those there are, what their training and skills are, and so forth,” said John Needham, director of acquisition and sourcing management at GAO, during an April 28 congressional hearing on the Defense Department’s acquisition workforce. “That’s one area we saw as a need.”

COTRs serve as a vital link between their better-known colleagues — program managers and contracting officers — and help translate operational requirements into executable and manageable contracts.

“They’re the principal people who bring these worlds together,” said Robert Burton, former deputy administrator at OFPP and now a partner at Venable law firm.

COTRs also keep tabs on how well contractors are meeting their requirements. Agencies have learned the hard way that they cannot hand that task to new employees or pile it on an already overworked acquisition staff.

So as contracting spending rises and the complexity of contracts increases, COTRs have become the linchpin of government contracting.

Performance pressure points

Agencies are finally beginning to appreciate COTRs because agencies are spending much more money on services compared to a decade ago. For example, DOD spent $202 billion through services contracts in 2008, compared to $92 billion 2001.

“There are a lot more moving parts to keep hold of and a lot more contracts to manage today,” said Mary Davie, assistant commissioner of the Office of Assisted Acquisition Services at the General Services Administration’s Federal Acquisition Service.

Davie took a job as a COTR in 1989, when she was 23 years old. It was a good way to get some on-the-job training, she said. She made sure that products came in on time and in good condition. “They were sort of turning to me for getting what was needed and keeping the project on schedule,” she said.

In recent years, agencies have been under pressure from the White House and Congress to determine whether they are getting their tax dollars’ worth from contracts, said Elizabeth Miller, vice president of Government Horizons, a nonprofit acquisition training organization.

Therefore, they are trying to develop more sophisticated ways to measure contractor performance. Those metrics and disciplines such as earned value management can get complicated when it comes to technical services contracts.

COTRs are responsible for building such metrics into contracts and sounding the alarm when contractors go astray. Communication must happen early and often, Miller said. “It’s not about waiting for the monthly progress report to find out, ‘Oh, we have a problem.’”

Davie said COTRs also explain to contractors what the program managers need and what the contracting language requires of them.

In addition, COTRs must keep in close touch with contracting officers about progress and suggest modifications if things are off kilter, experts say.

“The COTRs go back and forth,” Burton said.

COTRs come of age

With President Barack Obama’s push to put more contracting information online for public consumption, several experts said COTRs’ duties will become more visible, which will force them to manage projects even more carefully.

With billions of stimulus dollars to spend, the increased burden on COTRs worries many inspectors general. They know agencies will have their hands full managing that money, which comes with new demands from the administration to track where the money is going and what it yields.

Numerous IGs have issued reports recently detailing their concerns about their acquisition workforces. The American Recovery and Reinvestment Act’s requirements seem to demand larger acquisition workforces than agencies have. Existing employees are already struggling to manage increasing sums of money and transactions, even without the stimulus funds.

Procurement officials expect that actions associated with the stimulus funding will be complex, requiring more rigor and oversight. That will, in turn, increase the demands on COTRs and other contract specialists, according to a recent report from the Energy Department’s IG.

In today’s environment, COTRs can’t be young people fresh out of college, as they often were in the past, officials say. They must be savvy and experienced experts in their fields who understand both the procurement and program management sides of acquisition.

In recent years, “there was a shifting expectation for a higher level of competence in understanding and collaborating on the ‘how’ versus the ‘what,’” said Chuck Harris, a former Air Force contracting officer and now president and chief executive officer of Inflection Point Solutions, a training and consulting company.

It hasn’t always been that way. DOD, the world’s biggest buyer, has not always filled the slots for contracting officer’s representatives -- DOD's equivalent to the COTR -- with the best people. It is not uncommon for CORs overseas in war zones to have no training. And generally, all COR training is geared for times when operations are slow, so it is barely adequate when situations get tense, the Senate Armed Services Committee wrote in a report last year.

Assigning a soldier to the role of a COR would seem like a good way to boost someone’s career by providing a launching point into the contracting field. But too often, the soldier who takes on that role doesn’t have any relevant experience, the committee wrote. Then the situation gets worse.

“The COR assignment is often used to send a young soldier to the other side of the base when a commander does not want to have to deal with the person,” the committee wrote.

The Army wants to correct the situation. Officials are spreading the word about CORs’ role in contracting and are teaching Army commanders, staff members and people outside contracting the value of CORs.

“The COR’s role is key to ensuring that the government is getting what it is paying for with appropriate oversight,” Edward Harrington, deputy assistant secretary of the Army for procurement, told a House subcommittee in March.

In April, Jeffery Parsons, executive director of the year-old Army Contracting Command, said an entire division is dedicated to fixing its COR program. And the Army published the “Deployed COR Handbook” to supplement CORs’ training when they’re out in the field.

Sizing up the COTRs

But even as COTRs grow in importance and receive more recognition, officials are still struggling to form a clear picture of the community.

One official called it a mysterious group because agencies and analysts know so little about them. They’re often hidden behind full-time jobs in areas such as information technology or engineering.

In its 2008 report on the acquisition workforce, the Federal Acquisition Institute said it couldn’t identify COTRs because agencies’ records and official guidance about them are so ambiguous. It deferred analysis of COTR demographics until the role is better defined and agencies keep better records.

Officials recognize that the COTR’s role is also growing in importance because the future of government contracting will likely mirror the recovery act rules.

“The program managers rely on them, and the contracting officers rely on them,” Burton said. “They’re really the bridge.”

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Officials: Recovery act rules are the future

The strict acquisition regulations attached the stimulus money is a foretaste of what agencies and contractors can expect for the future, several government officials said in speeches April 23.

The American Recovery and Reinvestment Act, has many transparency requirements, a strong emphasis on firm-fixed-price contracts and competition for those contracts, and demands for tracking the money to show what it yields. Procurement officials say these levels of transparency and oversight have never been demanded in such ways, and it’s only the beginning of what’s to come. A precedent has now been set, many experts have said.

“The stimulus is the wave of the future,” Soraya Correa, director of procurement operations at the Homeland Security Department, said at an event hosted by the American Small Business Coalition.

General Services Administration officials who also spoke said the law's requirements force agencies to keep a closer tabs on what they spend and how they spend it because the information will be public on Recovery.gov and agencies' own recovery Web sites.

“With revenue comes responsibility,” said Amanda Fredriksen, GSA’s deputy assistant commissioner for general supplies and services.

To boost transparency, the law requires agencies to publicize their bid proposals. Even if an agency buys a product or service from a GSA Schedule contract, the agency has to post a notice on the Federal Business Opportunities Web site for the sake of announcing it, which wasn’t required in the past.

The requirements will also reach into contractors’ books, officials said. Agencies will ask contractors for their spending and subcontracting information. And to remain in GSA’s Schedules program, companies must agree to adhere to the new requirements. GSA officials said companies can expect to hear from the agency soon.

“That means your data is out there,” Correa said to a group of small-business owners, adding that they need to make sure their books are in order and presentable because the information could be posted on the Internet.

David Drabkin, GSA’s acting chief acquisition officer, said the transparency theme has been moving ahead for at least two years. In December 2007, the Office of Management and Budget launched USASpending.gov as part of a law that then-Sen. Barack Obama helped introduce legislation known as the Federal Funding Accountability and Transparency Act. While in Congress, he introduced a follow-up, which would have provided more information on the government’s contracting system, but it never became law.

In his same spirit of openness, the stimulus law, which pushes for contracts with nonadjustable prices, requires agencies to share their reasons for why a contract couldn’t be awarded with a set price. In the past, those justifications have stayed within the agency.

“People are going to be able to read the excuse you’re giving, and people are going to hold your feet to the fire,” Correa said. That likely will lead to more discussions between agencies and industry through more draft requests for proposals, in-depth market research and outreach to a broader range of companies, she said.

Drabkin said the stimulus spending reflects President Obama’s March 4 memo on his proposals for procurement reforms, such as greater competition for work, a preference for firm-fixed-price contracts, more transparency from agencies, and a stronger workforce to handle the immense amount of contracting work flooding into agencies.

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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.”

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

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.

Read the story: FCW.com News - 17 words that will change acquisition

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

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

Experts: Value beats price to avoid fake IT

As government regulators consider tougher ways to block counterfeit information technology products from entering the federal marketplace, they’re restarting an old debate about whether to award contracts based on the lowest bid or the best value.

At a meeting Dec. 11 regarding newly proposed rules on counterfeit IT, Laura Auletta, a procurement policy analyst at the Office of Federal Procurement Policy, said she was surprised to hear that contracting officers believe they should award a contract to the lowest bidder to save money instead of finding the best value.

Contracting officers and acquisition officials often interpret the Federal Acquisition Regulation to mean that the lowest bid should get the award, said James Bockman, a former NASA official who worked closely with the agency’s procurement employees.

“They see that as saving the government money,” said Bockman, who is now a special projects engineer at Aerospace Corp.

The FAR gives civilian agencies broad discretion in making decisions based on price or other best-value parameters, such as the company’s experience and management capabilities. But government and industry experts say acquisition workers are concerned about making a mistake and paying for it with a career-ending embarrassment. With today’s emphasis on curbing waste and abuse, they say contracting officers often choose the vendor with the lowest price.

However, federal officials agree that the government should strive for quality and ensure that agencies don’t buy products that are tainted with malware or poorly made.

The prevalence of counterfeit IT and electronic parts has exploded in the past five years after roughly 20 years of level numbers, officials say.

“The whole supply chain is infected with counterfeit parts,” said Brian Hughitt, manager of quality assurance at NASA’s Safety and Assurance Requirements Division.

The sudden increase has led regulators to add tougher checks to the FAR. Counterfeit IT products lead to financial losses for government agencies and companies, and they pose a threat to national security, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council wrote in a Nov. 18 Federal Register notice.

The new rules’ draft language would require agencies to buy all IT products from original equipment manufacturers, software developers, or authorized distributors or resellers. In addition, agencies would have to require companies to offer proof in contract proposals that their products are authentic.

Edward Chambers, a procurement analyst at the General Services Administration who is leading the regulatory proposal, tried to allay initial concerns from industry and government officials by saying the language is preliminary.

At the meeting, government officials disagreed about who’s to blame if an agency buys fake IT or electronic parts. Hughitt said a federal employee should take no blame if an agency buys a phony product because the contractor should know what it’s selling to the government.

However, the government does not use rigorous scrutiny when evaluating products, said Brad Botwin, director of industrial studies at the Commerce Department.

“The sloppiest processes are on this side of the house,” he said, referring to the government, particularly the Defense Logistics Agency. The liability for counterfeit parts rests on contractors and the government.

As the debate continues, officials say they need to find a way to increase scrutiny without putting companies out of business. But the checks are necessary because counterfeit products will continue to be a problem, Botwin said.

Read the story: FCW.com News - Experts: Value beats price to avoid fake IT

Watchdogs make industry leery

Federal contractors must report evidence of crimes to inspectors general under new requirements

Contracting officers and government contractors will soon have someone new in their relationship: a watchdog.

Starting Dec. 12, contractors will be required to tell government officials if they find evidence of criminal activities related to a federal contract or if the government overpays them. The new rules allow federal officials to suspend or even debar a company from government work if the company knowingly fails to inform officials.

Experts say contractors are most concerned about the requirement that they inform two parties: the appropriate contracting officer and the agency’s inspector general.

Most contractors’ mistakes, including accidental overpayments, are minor administrative errors that contracting officers can easily fix, government and industry experts say. But because IGs have different responsibilities from contracting officers, the mandate makes contractors anxious about sharing even minor infractions with IGs.

“The rule goes too far,” said David Drabkin, deputy chief acquisition officer at the General Services Administration, adding that it won’t help relationships among contractors, agencies and IGs.

However, regulators say they wrote the rules with contractors in mind. They offer flexibility and allow companies to find credible evidence of a crime before reporting it. For agencies, reporting requirements will encourage relationships between IGs and contracting officers as they work together to root out fraud, regulators say.

The rules will have “contractors turning square corners and everybody walking with that halo over their head,” said Ernest Woodson, a procurement analyst at GSA who was instrumental in writing the regulations.

The sea change
The revision to the Federal Acquisition Regulation stands as a reversal from long-standing policies of voluntary disclosure.

“There is no doubt that mandatory disclosure is a sea change and major departure,” the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council wrote in a Federal Register notice outlining the rule.

But the councils said contractors have largely ignored voluntary disclosure policies for the past decade, as the Justice Department and the National Procurement Fraud Task Force have also charged. In May 2007, the department and task force proposed the FAR changes to Robert Burton, then deputy administrator of the Office of Federal Procurement Policy and now a partner at the Venable law firm.

“We believe that if the FAR were more explicit in requiring such notification, it would serve to emphasize the critical importance of integrity in contracting,” they wrote. The new mandates stemmed from that letter.

Burton said the rules will encourage contractors to institute vigorous processes for reporting internal criminal allegations and quickly reviewing the merits of those claims.

“The rule will add weight to the arguments inside a corporation that good business practices in the long run favor compliance and disclosure,” the councils wrote.

Lesley Field, acting OFPP administrator, said mandatory reporting is a sound business ethic and should already be part of companies’ standards.

Contractors might be more comfortable leaving the IG out of the process, but regulators say disclosing a crime to the contracting officer isn’t enough because he or she is in no position to evaluate criminal actions.

“Contracting officers truly wouldn’t know what to do,” Woodson said. “We don’t want the contracting officer interfering with an investigation that the IG or the Department of Justice may have to get involved with.”

Essentially, regulators want those crimes referred immediately to people with badges.

In a speech in November, James Graham, a trial lawyer in the Justice's Criminal Division, said the proposal should improve procurement oversight when mistakes or criminal activities happen. Graham later told reporters that notifying the IG would make the contracting officer and IG work more closely together.

Graham, who also helped craft the regulations, said that although most contractors are honest, fraud is always possible, and the tendency toward corruption is constant.

“It’s the human condition,” he said.

Altering relationships
In public comments on the rule, many people disagreed with the mandate. One wrote that in 1986 a proposal from the Defense Department to make fraud disclosures mandatory foundered. In 1989, then-Defense Secretary Dick Cheney withdrew a proposed mandatory reporting rule on the grounds that “to be meaningful, corporate codes of conduct must be adopted by contractors voluntarily, not mandated in procurement regulations.”

Similarly, Elliott Branch, executive director of contracts at the Naval Sea Systems Command, said there must be a cultural shift in contractors’ thinking or the rules could be meaningless.

Many observers also say the new rules would likely keep the parties at a distance so they can avoid the appearance of wrongdoing.

“It could have a chilling effect on relationships between the contracting officer and the contractor,” Burton said.

Contracting officers and IGs view contractors through different lenses, said Michael Mason, a partner at the Hogan and Hartson law firm. For instance, contracting officers see companies as business partners that are trying to accomplish a contractual job for the agency. But IGs are the government’s watchdogs. They’re trained to sniff out fraud, waste and abuse and expose it. Experts say that focus will strain government/industry relations.

In public comments to the Federal Register, some industry representatives said reporting activities to the IG would take the ability to settle and resolve issues away from the contracting officer and agency. It undercuts the contracting officer’s right to handle a contract, they argued.

Furthermore, IGs have limited resources and staff, and disclosures will slow the procurement process, some commenters said.

Flexibilities
Regulators say they realized that the rules would place more burdens on contractors. Therefore, they granted contractors flexibilities within the rules in an attempt to strike a balance.

“We want disclosure,” said a Bush administration official who requested anonymity. “On the other hand, we want to show some semblance of fairness where there’s uncertainty.”

When learning of an alleged crime, contractors can investigate the credibility of the allegation before telling the government, the official said, adding that “rumors are not enough to trigger the disclosure requirement.”

Until the contractor has determined the allegation’s credibility, federal officials can’t charge the contractor with knowingly failing to inform government officials. Regulators also declined to set specific timelines, saying they would be arbitrary and cause more problems than they would solve.

Despite regulators’ efforts to ease the burden on contractors, the industry remains unenthusiastic, said Richard Bednar, senior counsel at the Washington office of law firm Crowell and Moring and coordinator of the Defense Industry Initiative on Business Ethics and Conduct. In the end, contractors might focus on the rule’s loopholes and report fewer incidents.

But Bednar said the councils clarified many of the uncertainties when they published the final version of the proposed rule. Contractors can respond to the rules by “pulling up their socks and being responsible contractors,” he said.

"I do think it’s digestible,” he added.

Read the story: FCW.com News - Watchdogs make industry leery

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