The competition question
Procurement changes recommended by Marcia Madsen’s panel seek to open the government market and increase competition
For decades, the federal government moved slowly and deliberately whenever it needed to buy something. In contrast to past acquisition procedures, today’s acquisition process is swift and lean. But critics have discovered a downside to speedy acquisitions. All that speed, they say, has undermined fair competition for government dollars — a hallmark of federal contracting.
Few critics argue for going to the past as an answer to their concerns about weakened competition. They say the old system of buying goods and services was burdensome. As recently as the early 1990s, the government frequently took three years to sign a contract for information technology services that were essential to a department’s mission. The federal government’s style of competition hindered program managers from accomplishing their jobs, said Steve Kelman, administrator of the Office of Federal Procurement Policy during the Clinton administration. He is now professor of public management at Harvard University’s Kennedy School of Government and a Federal Computer Week columnist.
Federal buying has changed since the 1990s when acquisition procedures became more streamlined. Interagency procurement contracts have proliferated. New acquisition options can put goods in program managers’ hands quickly without eliminating competition from the process of awarding federal contracts.
Nevertheless, critics have found numerous flaws in the new acquisition environment. Some lawmakers say that too much contracting occurs without proper checks and balances. They are concerned about the government awarding too many no-bid and limited-competition contracts. Critics say federal procurement spending has expanded too quickly while expansion of the procurement workforce has remained flat. One way that federal agencies have coped with increased contracting workloads, the critics say, is by shortening the acquisition planning phase and rushing to get contracts awarded as quickly as possible. As a result, competition for federal contracts has suffered.
In fiscal 2006, “for the first time on record, more than half of federal contract spending was awarded through no-bid and limited-competition contracts,” according to a 2007 report, “More Dollars, Less Sense,” issued by Rep. Henry Waxman (D-Calif.), chairman of the Oversight and Government Reform Committee.
Increases in buying
Competitiveness is only one way to measure federal contract spending. In fiscal 2006, the government spent $415 billion in contracting in the first three quarters, almost $30 billion more than total contract spending in 2005, according to Fedspending.org, a Web database that tracks federal contracts. Since fiscal 2000, federal contract spending has nearly doubled, even before fourth-quarter numbers for fiscal 2006 are added to the total.
Some lawmakers say the growth in contract spending represents an unwise use of taxpayer money because the Bush administration has weakened competition in contracting. Waxman’s report states that federal contracts awarded without full-and-open competition increased from $67.5 billion in fiscal 2000 to $206.9 billion in fiscal 2006.
Paul Denett, administrator of the Office of Management and Budget’s Office of Federal Procurement Policy, said he disagreed with Waxman’s numbers, but he agreed that federal dollars awarded noncompetitively have increased. However, the dollar value of competitively awarded contracts has also increased since 2000, Denett said. Without putting it in context, he added, “I feel a bit affronted when somebody says noncompetitive dollars have doubled.”
OFPP issued its own contracting statistics in response to Waxman’s. OFPP said the government competed 64 percent of $394 billion in contracting dollars in 2006. OFPP’s numbers show that the percent of competitively awarded federal contracts has hovered between 61 percent and 64 percen t sin ce 2000, when President Bush took office.
Think big, act small
How did the government come to this point of spending billions of dollars with what some say is limited competition? Kelman, who became OFPP administrator in 1993, said federal competition in contracting at that time bore little resemblance to competition in the commercial marketplace. For example, agencies could not consider a vendor’s past performance in deciding whether to award a contract. In the commercial world, companies win new contracts if they performed well on past contracts. Kelman said the federal government never adopted that commercial practice. The federal government always interpreted fair competition to mean make no subjective judgments and exercise no discretion, he said.
Kelman’s new job seemed like a trek up a steep mountain at the time. “I was by no means confident when I got on the job that I’d be able to accomplish even a tiny portion of it.” But federal IT employees, he said, were eager for change. Traditional acquisition methods didn’t suit their needs because technology itself began changing so rapidly that it was outdated by the time the government could award a contract.
Kelman said he worked closely with the career employees who were eager to learn about acquisition procedures that could meet their agencies’ needs. But, he added, changes would never have happened if then-Vice President Al Gore had not launched his Reinventing Government initiative and made federal procurement a target of reform.
Inefficiency in federal contracting became the target of reformers, and competition took a back seat to efficiency, said Marcia Madsen, chairwoman of the Acquisition Advisory Panel and a partner at law firm Mayer Brown. Streamlining led the government to view certain acquisition procedures as too burdensome, she said.
But the reformers might have pushed too hard for efficiency, Madsen said. Opening up contracting opportunities to many companies hindered a speedy acquisition process, she said. “Competition sometimes is not very efficient. It takes time.”
Madsen said the government is now realizing the detrimental effects of some its policies. Officials didn’t anticipate that if employees had options for spending federal dollars without competition, they would choose the path of least resistance, she said.
Kelman said officials made mistakes in retooling the federal contracting bureaucracy, but he said he still believes that competition can flourish under simplified approaches to contracting. Federal managers got carried away when many restrictions on them were lifted, he said.
“Sometimes federal managers felt like they were a kid in a candy shop,” Kelman said. “They no longer had to wait for three years to get a contract, and now they weren’t even willing to wait three weeks.”
Greater efficiency in federal contracting produced other unintended consequences. Officials began to whittle away at the acquisition workforce as new acquisition procedures freed resources. But government officials failed to adjust their hiring practices as the volume of federal contracting grew, according to a report from the Acquisition Advisory Panel, which recommends changes in federal acquisition rules. Agencies kept their workforce numbers relatively level as contract spending steadily increased and then ballooned after the 2001 terrorist attacks.
The panel said agencies are now suffering from the effect of acquisition workforce cuts in the 1990s. According to the panel’s report, the Defense Department’s workforce was reduced by nearly 50 percent. Although DOD has added contracting officers since then, their overall increases have not kept pace with increased contract spending, critics say.
Kevin Carroll, recently retired program executive officer at the Army&rsquo ; Enterprise Info mation Systems, said DOD’s contracting officers are overworked. The pressure to get contracts awarded has increased, he said, especially since U.S. forces have been stationed in Iraq and Afghanistan.
Acquisition workforce shortages are greatest among procurement professionals with five to 15 years’ experience, despite recent government efforts to hire additional acquisition employees. This shortage could soon become acute. About half of the acquisition workforce is eligible to retire in the next four years, according to the advisory panel report.
Kelman said government reforms of the 1990s freed resources. If agencies had used them properly, he said, officials could have corrected problems, including staffing, and been prepared for the surge in the growth of acquisitions.
Task and delivery orders
Federal agencies have found ways to juggle their heavy contracting workloads and understaffed contracting shops. One way has been to issue task or delivery orders against interagency contracts. The Federal Acquisition Streamlining Act and the Federal Acquisition Reform Act, both enacted in the 1990s, encouraged the use of the General Services Administration schedule contracts and other interagency contracts, which spare agencies the time and effort of seeking competitive bid proposals. Since then, those contracts have flourished.
In a recent memo addressing concerns about competitiveness, OFPP said agencies have increased their use of task or delivery orders against interagency contracts. Agency contract expenditures through those types of orders grew from about 14 percent of total dollars obligated in 1990 to about 52 percent in 2005.
Companies compete to win and be listed on those contracts. In theory, companies must compete again to win orders to perform specific tasks or deliver certain products. In reality, agencies do not consistently award task and delivery orders on a competitive basis. Often agencies contact only one company when they are ready to award a task or delivery order.
Carroll said DOD’s contracting officers often use task or delivery orders to achieve a quick turnaround time and reduce opportunities for companies to protest, which can delay a contract award for as much as three months. “People just can’t wait that long,” he said.
Waxman’s report states that interagency contracts have reduced competition in federal contracting. “These limited-competition contracts represent a growing exception to full-and-open competition,” according to the Waxman report. Of the amount of federal contracting dollars not awarded through full and open competitions, 30 percent was awarded through interagency contracts. Waxman’s report states that, in 2006, federal contracts worth about $10 billion were awarded in competitions in which only one bidder participated.
Some federal contracting officials see nothing noncompetitive in single-bidder competitions. “It’s just the free market,” said Victor Powers, former program director of the National Institutes of Health IT Acquisition and Assessment Center. Even if only one contractor submits a bid, that’s still competition, he said. “The government can’t force a vendor to participate because it’s a business decision.” OMB regulates governmentwide acquisition contracts, but some acquisition leaders have concerns about the growing number of interagency contracts and task orders. “I do worry that they’re creating all these task order contracts everywhere around government,” said Jim Williams, commissioner of GSA’s Federal Acquisition Services.
Congress and some administration officials are eager to halt the spread of interagency and single-agency contracts. Denett said OFPP plans to issue guidelines on agencies’ roles and responsibilities related to interagency contracts. It will also provide a model agree t for agencies to follow tha ill address competition.
Although agencies can find ways to avoid competition in contracting, they can easily offer competitive contracting opportunities if they simply plan ahead, said Joseph Neurauter, chief procurement officer at the Housing and Urban Development Department. “If you plan, you can do anything, but you have to do the work upfront,” he said.
Neurauter said he recommends pulling together appropriate parties, such as contracting officers and program managers, to chart a course, especially for large acquisitions.
By planning and strategizing with a team, he said, “you can get through anything very quickly to include a full and open competition.”
An update on the SARA panel's recommendations on competition (pdf)
Matthew Weigelt is a former FCW senior writer who covered acquisition and procurement.