Experts nitpick SARA panel proposals (Extended Version)

Report elicits criticism of panel’s view of procurement practices

SARA panel report (.pdf)

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The draft report of the Acquisition Advisory Panel, released in December, is drawing mixed reviews from the federal contracting community. The report’s recommendations to improve federal contracting, boost the acquisition workforce and better define ethical boundaries in contractor/agency relationships range from the good to the misguided in the eyes of agencies, companies and advocates.

No one knows yet whether the recommendations will produce procurement changes. The panel — created by the Services Acquisition Reform Act of 2003 and often called the SARA panel — will release a final version of the report by Jan. 20. After that, however, Congress and the Office of Federal Procurement Policy will decide whether to adopt some, all or none of the recommendations.

Stan Soloway, president of the Professional Services Council, said the change in congressional leadership might not matter. Rep. Henry Waxman (D-Calif.) has taken the gavel as chairman of the House Government Reform Committee, and former chairman — and SARA author — Rep. Tom Davis (R-Va.) has become ranking member. The two members of Congress have a collegial relationship, and Davis’ new role on the committee is not likely to signal a quick death for the SARA panel’s work, Soloway said.

More worrisome, he said, is the possibility that policy-makers will cherry-pick a few appealing recommendations and miss the broad picture of federal services contracting. Trying to approach overarching issues point by point hasn’t worked, he added.

The report begins with a chapter on commercial practices, a topic that the panel returns to in later chapters. It addresses the role of small firms, the ethical rules that should govern contractor employees in blended workforces, the size of the acquisition workforce and improvements to the quality of publicly available procurement data.

Soloway said the panel did not seem to fully understand the distinction between products and services, a concern that the council developed as the SARA panel met and discussed the salient issues. The panel also blurred the line between defining commercial services and procuring them, he said.

“They’ve mixed two issues here,” Soloway said. “The definition of whether something is commercial has to do with what it is. The question of how you price it is a separate question.”

Phil Kiviat, a partner at Guerra Kiviat, said the SARA panel overlooked the need for a new governance model to provide a basis for managing services contracts. For example, he cited the recommendation to use performance-based contracts as much as possible.

“For a performance-based contract where it’s agreed that needs change over time, what you really need is a new way of managing,” Kiviat said. In such a contract, “there is now a shared risk between the government and industry, and there are incentives and possibly disincentives on both sides. When you have shared risk and shared incentives, there may be ambiguities in what the needs are as things change. What you need to do is not look at specific things. You have to think about the whole process of managing.”

Soloway said he objected to the report’s implicit assumption that time-and-materials contracts — in which contractors are paid for the materials they use and the time they work — are inherently bad. Government policy-makers have long tried to minimize the use of such contracts because they make the total cost of a project less predictable, but they have their place, he said.

Performance-based contracting
The draft report’s first chapter touches on performance-based contracting. While the second chapter examines it in detail. The panel’s underlying assumption, shared by most procurement experts, is that service contracts should be performance-based as often as possible. Although it runs counter to the instincts of many in government, the approach allows industry to provide creative solutions and ties their pay to the success of a project. The panel concluded, however, that although agencies often intend to award performance-based contracts, they find it hard to shake the older mentality of dictating to contractors specific steps and technologies.

“It’s a very different way of thinking,” said Carole Dunn, president and principal consultant at Red Team Consulting. Looking ahead to results is harder than giving upfront direction. Nonetheless, she said, the culture must shift.

The panel found that in many cases, contracts billed as performance-based have only a veneer of performance metrics on top of detailed statements of work. In other words, instead of describing their needs and letting contractors devise effective solutions, agencies are still dictating to contractors what they should do.

Interagency contracting
Interagency contracts, such as governmentwide acquisition contracts or blanket purchase agreements, allow several agencies to share in a single contract. They can make procurements easier and faster, but the panel found they still require boundaries and oversight.

According to OFPP, there are 253 interagency contracts in effect throughout the government. But the panel found the government has little data to direct the creation and reauthorization of those contracts or even analyze their performance.

“Not everybody should have one,” said Larry Allen, executive vice president of the Coalition for Government Procurement. Managing those contracts costs money. The cost often falls onto industry, which has to spread resources over numerous, often redundant, contracts, he added.

The panel believes government’s first task is to collect more data on existing contracts.

“More comprehensive data on other existing vehicles and entities should allow for more effective procedures for avoiding duplication,” the report states.

Todd Furniss, chief operating officer of acquisition advisory firm Everest Group in Dallas, said getting good information about the situation is vital. “You can’t do anything without the data,” he said. “But data can be misleading” if it is not gathered correctly or completely.

As the report notes, the Federal Procurement Data System (FPDS) has wrestled with problems with getting and providing accurate information.

Small business
The panel’s efforts to identify effective incentives and acquisition practices to aid small-business contracting were generally well-received, but several industry experts questioned some of its assessments and recommendations.

“The best intentions are there,” said Dan Young, a former IT executive and a member of several corporate boards. “I’m concerned that it’s the unintended consequences that are going to impact the small businesses.”

Young said that based on what he had seen, the proposed recommendations express concern for small businesses but do little to correct some long-standing problems related to their growth. Small businesses benefit from incentives and mandates that encourage agencies to hire them, but once they outgrow the small size, they suddenly become midsize firms that are no longer eligible for the benefits but are far too small to compete with truly large companies.

“A medium-sized business is the worst place to be in this market,” Young said. The panel’s findings and recommendations, he said, do little to address that situation. 

Maria Horton, president and chief executive officer of Emesec, a service-disabled veteran- and woman-owned security solutions provider, said small businesses and government leaders would benefit more if the panel had more closely examined the revenue figures it cites in reaching its recommendations.

Although the panel reported that $31.7 billion out of $310 billion in federal contracts went to small businesses in fiscal 2005, Horton said, “they don’t really go any further: Is that profit? Is it just revenue? Are small businesses being successful as a result of legislative initiatives?”

Jim Moody, CEO of Veterans Enterprise Technology Solutions, a service-disabled veteran-owned small business, was critical of the lack of depth in the small-business section. He said government leaders “need to step out of the box, work with the business community to implement new, innovative ideas for the acquisition process, and make it easier, cheaper and less time-consuming for small businesses to win contracts.”

The report states that the contracting community does not properly apply and follow the government contract bundling definition and requirements, and it should better train contracting officers on the requirements and benefits of contracting with small businesses. Bundling, in which agencies combine several related requirements into a single contract, can leave small firms out of the running when they might have been able to compete for individual smaller tasks.

The  acquisition workforce
The panel found that assessing the federal acquisition workforce is harder than it sounds, largely because agencies have no consistent definition or method for counting their numbers. Its first workforce recommendation is for OFPP to remedy that situation by creating a definition to apply governmentwide.

Kiviat said that was a good idea. “You have too small a workforce,” he said. “Nobody really knows much about it. Everybody suspects various things but doesn’t really know them, so the first recommendation is to have a single governmentwide definition of the acquisition workforce. That’s a very sensible recommendation.”

Kiviat was not as pleased, however, with another acquisition workforce recommendation: That OFPP convene a panel to conduct a 12-month study on whether there is a need for a governmentwide federal acquisition university, or to find other alternatives, to provide training.

“This is government at its worst,” he said. “‘Let’s have a 12-month study.’ Not a study, but a 12-month study.” What that really means, he added, is delay and inaction.

The panel, however, said such a study group would be able to evaluate whether the existing Federal Acquisition Institute and Defense Acquisition University duplicate functions — in which case a single federal organization might be better — or provide a needed distinction between the civilian and defense sides of government.

Bob Guerra, a partner at Guerra Kiviat, said workforce training should pertain to the use of acquisition to support agency missions, not just the mechanics of contracting.

“Performance-based acquisitions are more judgment than specific process,” he said. The question the government needs to answer is how it should move people out of the old mindset, fueled by the Brooks Act, of prescribing every step and into a new mentality of describing the business needs of the agency to contractors, Guerra said. “I didn’t see any of that stuff in there.”

Echoing Kiviat, Soloway said it is past time to stop talking about problems and just solve them.

“The biggest challenges continue to be human capital and human capital training and skills,” he said. “We’ve been talking about that year after year after year, and it remains the No. 1 challenge.”

Ethical rules in a blended workplace
The ethical questions that surround the proper relationship of contractors and agencies have arisen partially because the lines between governmental and commercial functions have blurred in recent years, the panel found. Although adequate ethics rules are in place to govern the behavior of agency employees, the panel recommended further study regarding whether contractor employees should be trained to comply with the same rules.

“They have identified long-standing issues,” said Cathy Garman, senior vice president of public policy at the Contract Services Association. “And some of the recommendations — better [ethics] enforcement, better training — I would say it’s almost like a common-sense chapter and common-sense recommendations.”
The draft report concludes with a chapter on procurement data, based on panel members’ experiences trying to get information in the course of formulating recommendations. The FPDS, the only system that tracks procurement spending governmentwide, has shortcomings. For one, its information is only as accurate as the information agencies provide. Historically, the accuracy of that data has been mixed. Another issue the panel encountered is that the system does not break down data into categories that permit detailed analysis of spending.

The panel’s recommendations include a number of steps to ensure that the data the FPDS receives is validated. Their report urges Congress to amend the OFPP Act so that the head of each agency is responsible for providing complete and accurate information to the FPDS. Currently, no one person at an agency is accountable, the panel said.
Defining the problemHere are some of the findings the Acquisition Advisory Panel offered in its draft final report.

  • Defining requirements is a critical factor in achieving the benefits of competition, but agencies often do it poorly.
  • Agencies remain uncertain about when to use performance-based contracts.
  • The Federal Procurement Data System-Next Generation has insufficient, and possibly misleading, information about the use and success of performance-based contracts.
  • The federal acquisition workforce faces larger and more complex acquisition problems than in the past.
Source: Acquisition Advisory Panel
SARA timelineThe Acquisition Advisory Panel, created by Rep. Tom Davis (R-Va.) through the Services Acquisition Reform Act, crafted a 448-page final draft report on federal acquisition policies. The panel issued a final draft report Dec. 22. Public comment on the report ended Jan. 5.

What comes next:

  • The panel will take a week to review the comments and incorporate them, if necessary, into the report. The panel plans to have the final report to the
  • Government Printing Office by Jan. 20.
  • By the end of January, the report will go to the House and Senate Armed Services committees, House Government Reform Committee, Senate Homeland Security and Governmental Affairs Committee, and Paul Denett, administrator of the Office of Management and Budget’s Office of Federal Procurement Policy.
  • After OMB receives the report, various interagency working groups will examine the recommendations. The analyses could take several months. The report will also be available to the public in an electronic format.
  • The future of the report’s recommendations depends on what officials want to do. Marcia Madsen, chairwoman of the advisory panel of 13 government contracting experts and attorneys, said the report is simply an advisory tool.
— Matthew Weigelt

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