DOD cuts back on orders with GovWorks

Impact could severely reduce revenue at Interior's IT assisted services center

The Defense Department’s decision to stop using GovWorks for transactions of more than $100,000 could have a crippling effect on business at the Interior Department’s assisted-acquisition services center. DOD last week suspended indefinitely its use of GovWorks for large procurements after an inspector general reported continued problems in following procurement rules. 

The suspension is the latest move by DOD after a series of audits found widespread procurement rule violations among several agencies that provide government- wide assisted-acquisition services.

The effect on GovWorks could be more severe than the impact on the General Services Administration, beginning in fiscal 2004. The services cut back their use of GSA’s assisted services after audits found illegal procurement activities. Other agencies followed DOD’s lead and shied away from using GSA, and the agency still is trying to rebound. Its revenue is $46 million below what it needs to cover costs, GSA officials have said.

John Nyce, director of the Acquisition Services Directorate at Interior’s National Business Center, said DOD’s NBC $100,000 spending limit is “quite restrictive.” DOD provides  a major portion of GovWorks’ business, although Nyce couldn’t cite spending figures. In fiscal 2005, GovWorks had revenues exceeding $1.5 billion. (See chart at left.)

The problem stems from ambiguities and different interpretations of fiscal practices and  acquisition rules, said Doug Bourgeois, NBC’s director.

However, Shay Assad, DOD’s director of defense procurement and acquisition policy, said in a May 31 memo that he is disappointed with GovWorks for not improving its funding and contracting practices, as recommended by DOD’s inspector general.

“We direct that no interagency agreement in excess of $100,000 be accepted by GovWorks Federal Acquisition Center …from DOD unless a determination has been made in writing by the Under Secretary of Defense Acquisition, Logistics and Technology that it is necessary in the interest of the department to procure the particular property or services,” Assad wrote in a memo obtained by Federal Computer Week.

As DOD has requested, Interior must comply with DOD regulations with respect to all interagency agreements, Assad’s letter states.

However, Nyce and Bourgeois said NBC has solved the problems, and they have asked the Interior’s inspector general to perform another review.

In addition, GovWorks has made systems changes to enforce policies, and they have sent staff through extensive training, officials said.

“If an individual agency has policies that are more restrictive than what the law requires, it requires an additional level of control and training that we’ve had to adjust to,” Bourgeois said.

As for DOD’s decision, government procurement experts say it could send shockwaves throughout DOD’s branches, GovWorks and industry.

The prohibition could affect departments’ contracts with option years left, said Stan Soloway, a former deputy undersecretary at DOD and now president of the Professional Services Council.

The question ultimately becomes to what extent DOD authorities will grant the waiver authority so departments can use GovWorks, he said.
Losing a big business partnerAs the Defense Department halts indefinitely its use of the Interior Department’s National Business Center subsidiary, GovWorks, for orders worth more than $100,000, officials say the the assisted-acquisition services center will struggle to avoid major losses in its business volume and revenue.

GovWorks garners a large volume of business from DOD and has seen double-digit increases in the past few years.

Fiscal 2005
Defense $1.01 billion   
68.6 percent of its revenue
10.3 percent increase compared with fiscal 2004

Civilian $464.4 million
31.5 percent of its revenue
33.4 percent decrease compared with fiscal 2004

— Matthew Weigelt

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