2008 Watch List: OFPP to rein in interagency contracts

New policies likely will target duplicative contracts that offer little additional value

Acquisitions evolve

Beyond new rules for interagency contracting, agencies can expect other procurement rules to evolve.

Assisted acquisition services

Many agencies did not use the General Services Administration’s assisted acquisition services in fiscal 2007 and instead took their business elsewhere. However, procurement experts say they foresee a rebound in the use of those services as acquisition workloads increase and agencies struggle to keep up.

— Matthew Weigelt

Time-and-materials contracts

The fiscal 2008 National Defense Authorization Act limits the Defense Department’s use of time-and-materials contracts when it buys commercial services. That measure could shape how the rest of the government treats those contracts this year.

Lawmakers generally oppose time-and-materials contracts. However, the authorization bill identified some limited circumstances in which DOD could use them, such as for emergency repair services or for contracted services that help the department integrate commercial products.

— Matthew Weigelt

SARA panel recommendations

Paul Denett, administrator of the Office of Federal Procurement Policy, moved quickly in 2007 to implement some recommendations of the Acquisition Advisory Panel, mandated under the Services Acquisition Reform Act. Agencies will see the results this year.

In June 2007, Denett issued a memo that asks agency chief procurement officers and senior procurement executives to make federal contracting more competitive, especially task and delivery orders. He also issued regulations on ethics and focused attention on the acquisition workforce.

OFPP and Congress expect to implement other SARA panel recommendations this year.

For example, Congress will continue to push bills that address the increased use of firm fixed-price contracts, increased competition for multiple-award contracts and more funding for acquisition workforce training.

— Matthew Weigelt

Acquisition workforce
OFPP and other acquisition leaders collected data and created workforce certification standards last year. Those efforts will pay off this year, procurement experts say.

Meanwhile, the Federal Acquisition Institute and the Defense Acquisition University continue developing targeted training courses to meet agency workforce needs, and OFPP is promoting intern programs to bring more acquisition workers into the government.

FAI also will focus on hiring and retaining mid-level acquisition workers to help fill employee ranks.

— Jason Miller

The widespread award and use of multiple-award contracts in the past three years have caused some agency confusion and borderline illegal practices. Although some problems have been cleared up recently, the Bush administration is deciding on the best way to oversee the hundreds of contracts agencies are using.

An Office of Federal Procurement Policy memo calling for changes in interagency contracting has been circulating among federal acquisition chiefs, inspectors general and chief financial officers for months, while the Chief Acquisition Officers Council is working with OFPP Administrator Paul Denett to set up a governance process for such contracts.

The draft document, which is nearly 40 pages long, establishes agencies’ roles and responsibilities in interagency agreements.

Bush administration officials say they hope to use the policy changes to slow but not halt the proliferation of such contracts. The memo will address the way that agencies manage and use the contracts, and it will target duplicative contracts that offer little additional value.

“We need a governance structure,” said Robert Burton, deputy administrator of OFPP, who added that managing interagency contracts effectively “is not going to be easy.”

In 2007, administration officials identified 41 multiagency contracts and more than 200 agencywide contracts. Senior procurement officials say that’s too many contracts, and many of them are redundant.

The policy will not dictate the language of those agreements word for word, Burton said in June. However, he added, “We’re going to cover the elements that should be in any interagency agreement.”

Some government contracting experts familiar with the forthcoming policy memo say it won’t bring dramatic changes this year, but they think OFPP might require agencies to justify a need before creating additional interagency contracts.

“Everyone’s going to be from Missouri for the first year” of any contracting changes, said Bob Dickson, a former State Department acquisition official who is now an executive consultant at Topside Consulting.

Like people who hail from the Show Me State, agencies will want to know how the policy changes will affect them.

In speeches in the past year, Burton and Denett stated a desire to improve interagency contract management and have the Government Accountability Office remove interagency contracting from the next High Risk Series report, which it will issue in 2009.

The High Risk Series identifies federal programs and operations that, in some cases, are high risks because they are susceptible to waste and mismanagement.

The series also focuses on programs that require broad-based transformation to address major challenges.

GAO initially identified agencies’ management of interagency contracts in 2005 as a program area requiring senior procurement leaders’ attention. Two years later, GAO again put interagency contract management on its biennial list.

Interagency contracts are useful, auditors say. They streamline the procurement process and generate savings by capitalizing on the government’s buying power.

“However, monitoring and oversight of these contracts have not kept up with their growth,” GAO analysts wrote in the 2007 High Risk Series report.

For example, no one has complete and reliable data on how much agencies spend governmentwide through interagency contracts or even the amount of fees that agencies pay to use those contracts.

GAO and agency IGs have found that agencies involved in such contracting have not always followed requirements for competitive bidding, evaluated alternatives or conducted adequate oversight of the contracts.

Furthermore, auditors say agencies often issue task orders that are beyond the scope of the contracts and frequently fail to s et up internal controls that would ensure proper payments or clearly define oversight responsibilities.

In the past year, Denett and Burton said they intended to rein in the growth of interagency contracts and improve their oversight. However, some contracting experts question whether OFPP’s policy will make much of a difference this year.

John Nyce, associate director of the Acquisition Services Directorate at the Interior Department’s National Business Center, said the policy changes will work in agencies’ favor.

“This new guidance does not discourage the use of interagency acquisition resources,” Nyce said, adding that “interagency contracting tools…will continue to thrive in the wake of the new guidance.”

Nevertheless, agencies will have to consider each new contract carefully and try to avoid overlapping with existing contracts, said Gary Winkler, program executive officer for the Army’s Enterprise Information Systems, which hosts several interagency contracts.

“Agencies will need to have a firm understanding of what contracts exist across the federal government and how a proposed contract will add value to the suite,” Winkler said. Assessments and more scrutiny will bring benefits, “provided that missions don’t suffer and oversight does not equate to increases in resources.”

Some policy changes might require more work for agencies that want to create new contracts. The anticipated memo doesn’t specifically address new contracts, but OFPP officials said they plan to deal with that issue separately, perhaps by requiring agencies to submit business cases for approval before creating any new interagency contracts.

Under current policy, agencies don’t need OFPP’s approval for interagency contracts as they do for governmentwide acquisition contracts. OFPP has allowed only a few GWACs and, consequently, has greater oversight of those contracts.

Joanne Woytek, program manager for NASA’s Solutions for Enterprisewide Procurement GWAC, said the proposed policy won’t affect OFPP-approved contracts, such as SEWP.

“We’re already under the thumb — in a good way,” she said.       

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