OFPP offers new guidelines to improve interagency contracting
Long before Paul Denett became administrator of the Office of Federal Procurement Policy in 2006, interagency contracts had multiplied out of control, at least in the eyes of some procurement experts. Denett now says he wants “a little less of the Wild West” in interagency contracting.
OFPP identified one category of interagency contracting — multiagency contracts — as particularly needing stricter controls. Denett targeted MACs in a new policy guidance that OFPP
issued June 6, but some procurement experts say it may be too little, too late.
The new guidance calls for more stringent reviews of MACs, which are task- or delivery-order contracts for goods or services awarded by one agency and used by multiple agencies.
“Agencies can skirt OFPP rules and oversight by launching a MAC,” said Neal Fox, former assistant commissioner of commercial acquisition at GSA and now a consultant.
MACs are similar to governmentwide acquisition contracts, or GWACs. Both are interagency contracts. However, GWACs are specifically for information technology products and services, and agencies interested in awarding a GWAC must first get OFPP’s permission. They don’t need that approval to award MACs.
As a result, oversight of MACs has been poor, and that shouldn’t be tolerated, Fox said.
“If a MAC is quacking like a GWAC, then it needs to get in the water with the other ducks,” he said.
However, Fox said, MACs aren’t harming competition and, in fact, are forcing the General Services Administration to offer better service to remain competitive as a procurement agency.
In the new policy guidance, Denett pledged that OFPP will work with other acquisition executives to design a business-case review process for MACs similar to the review currently required of GWACs.
For years, the government has allowed the number of interagency contracts and the amount of money flowing through them to grow with little oversight. Interagency contracts caught the attention of the Government Accountability Office, which put them on its biannual High Risk List in 2005 and again in 2007. The list contains programs and operations whose weaknesses make them vulnerable to mismanagment.
GAO said interagency contracts pose a high risk because of unclear lines of responsibility between both parties and limited expertise on both sides of the contract. With insufficient acquisition expertise available, interagency contracts are often poorly managed, GAO auditors said.
David Drabkin, acting chief acquisition officer at GSA, said agencies, including GSA, spend a lot of time awarding contracts but little time managing them afterward. “No matter how good you are, if you don’t have someone managing your contract actively, inevitably you’re going to wind up with a problem.”
Contract management is inadequate because the federal acquisition workforce is shorthanded, acquisition experts say. Finding experienced, well-trained contracting officers is becoming more difficult. And once they are found, other agencies or companies often lure them away.
“We always seem to be losing people to promotions within the federal government,” said Kellie Stoker, chief of the law enforcement and security branch at GSA’s Federal Acquisition Service. “We always seem to have vacancies.”
The size of the federal acquisition workforce has remained relatively stable. In fiscal 2007, there were 28,434 contracting officers, only a 6 percent increase from the 26,751 counted in fiscal 2000.
However, overall federal spending has doubled since 2000, largely in response to the 2001 terrorist attacks, acquisition experts say. In 2007, the government spent $430 billion on products and services, up from the $209 billion spent in 2000, federal data shows. Departments and agencies now spend more than eve on services, which has made acquisition more complex, said James Phillips, executive vice president of Centre Consulting. As a result, acquisition employees are stretched and overworked.
Denett’s guidance on interagency contracting includes several tools to assist agencies and their overworked acquisition employees. Those tools include:
- A model interagency agreement that establishes the terms and conditions governing contractual relationships between agencies in a interagency contract.
- A detailed checklist to ensure that contractual roles and responsibilities are well defined.
- A list of internal controls, such as things to consider before signing an agreement, to ensure that the acquisition reflects a sound business decision.
“Agencies who manage interagency acquisitions and the agencies [that] rely on them share a fiduciary responsibility to use sound contracting and fiscal practices,” Denett said.
Denett’s memo urged federal agencies to begin using the model interagency agreement and other tools. It also set an Oct. 1 deadline for agencies to document that their use of interagency contracts is supported by best-interest determinations.
In a best-interest determination, contracting officials gauge whether they are paying more to use another agency’s contract than to perform the contracting work themselves. Thomas Essig, chief procurement officer at the Homeland Security Department, said he hasn’t seen data that would justify paying a fee to use GSA’s Multiple Award Schedule contract. For small orders, the fee is worth it, Essig said. But for billion-dollar projects, the fee is not in DHS’ best interest, he said.
OFPP’s new guidance on interagency contracts recommends that agencies first consider the servicing agency’s experience and expertise and how it has complied with policies before signing a contract.
After Nov. 3, agencies that enter new interagency agreements must include 31 elements described in the guidance. For example, the agreement must establish general terms and conditions, such as legal authority of the agency providing the service, the scope of the agreement, and each party’s right to terminate the agreement.
However, some critics said the new guidance lacks teeth. Larry Allen, president of the Coalition for Government Procurement, said OFPP’s MAC initiative could begin to check the spread of MACs, but agencies will just find another avenue to award contracts with minimal scrutiny.
Other acquisition experts say OFPP’s latest policy guidance on interagency contracting is simply common sense. Denett has taken a significant step in controlling interagency contracts by
issuing the guidance, Allen said. “This is a step, and it’s probably not a bad step.”
Meanwhile, the Bush administration is running out of time, Allen said. OFPP might be forced to leave any additional changes in interagency contract requirements to the next OFPP administrator, he said.