The perfect storm?

At this year's Executive Leadership Conference last month, the air was filled with the spirit of government/industry collaboration. Compared to a decade ago, when I attended my first such conference — which had the plaintive theme, "Can We Talk?" — the commitment of industry to helping the government and its understanding of the importance of partnership now characterizes the relationship.

But, in the world outside, winds are blowing that threaten to bring us back to the bad old days characterizing government/industry relations in 1993. The squalls have names such as public/private competition, Boeing Co. tanker deal and Halliburton. Only the first involves IT specifically, but that doesn't mean they don't threaten us. Together, they could represent a procurement perfect storm.

There's a lot to be said for a moderate version of the Bush administration's public/private competition plan. But it has been a political nightmare, bringing out public employee unions in full force — not only against this effort but also in fevered opposition to every improvement in government management.

Even more problematic for the administration, union leaders are gaining the support of virtually all Democrats for this reactionary agenda. Specifically in procurement, union members realize the worse the procurement system functions, or even appears to function, the better for their campaign against job competitions. This has given both unions and Democrats an interest in portraying contractors as scoundrels holding government in thrall.

These issues have dramatically changed the larger political environment for government/industry collaboration. Agencies could come under significant pressure to increase the number of audits for fraud. The collaborative efforts we see as contributing to the government's ability to meet its goals might come to be interpreted as collusion and sellout of the government's interests.

Steps must be taken to reduce the chances of this unfortunate development.

Most importantly, we should be increasing performance incentives in contracts — including share-in-savings, so-called fixed-price or time-and-materials incentive fee contracts that reward cost control, an increased role for cost control in award fee determinations, and performance-based contracting. That will ensure that contractors do well only by performing well. The role of cost control in past performance evaluations should be increased.

We need to redirect government resources toward contract and program management. And it probably wouldn't hurt for industry to get out the message that government contracts, contrary to the common view, are generally less profitable than commercial business, not more so.

We face serious danger. It demands a serious response.

Kelman is a professor of public management at Harvard University's Kennedy School and former administrator of the Office of Federal Procurement Policy. He can be reached at steve_kelman@harvard.edu.

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