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By Steve Kelman

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Is the performance of the procurement system improving?

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I have been working over the past few days on a keynote speech I will give on June 12 at the University of Nottingham in the United Kingdom, in connection with the twentieth anniversary of their procurement law and policy program’s conferences on Public Procurement: Global Revolution. For this twentieth anniversary, I have been asked to reflect on the big picture of changes in the system over the past two decades.

As I worked on my remarks, I was initially filled with optimistic thoughts. Since the burst of procurement reform in the 1990s (full disclosure: I was a leader of this effort while in government), there has, in my view, been a major improvement in the culture of the U.S. federal procurement system in a more performance-oriented direction.

Traditionally, the balance between attention to the goals the system should pursue (obtaining best value products and services for agencies and taxpayers) and the constraints under which the system operates (avoiding bad things such as corruption, unfair treatment of those bidding for government business and contractors cheating the government) was skewed towards assuring compliance with constraints more than pursuing goals. While of course we want officials to display integrity and impartiality, if all that the system does is achieve respect for the constraints on it, it is unlikely to be seen as successful. That would be like a journalist who never lied and never revealed a source but also never got a good story.

The 1990s recalibrated that balance in favor of more attention to goals. A key regulatory change was the new “statement of guiding principles” in Part 1 of the Federal Acquisition Regulation: “The vision for the Federal Acquisition System is to deliver on a timely basis the best value product or service to the customer, while maintaining the public’s trust and fulfilling public policy objectives.” This put the system’s goals at the center, pushing the constraints under which the system operated into a subordinate clause.

If you look at the years since, there has been a significant change in the language we use in procurement debates, toward thinking about how we can get the system to deliver better results. In this new world, there has been less lawyerly debate about the content of regulations and more attention to management -- practical ideas and innovations for how to do the job better. Think of the spread of procurement contests being run by GSA’s and of agile software development to replace the old “waterfall” approach. A third example is the spread of reverse auctions in procurement, a new way of buying that lowers prices the government pays.

When I was working on these changes in the 1990s, I, along with many others, was worried about a “pendulum swing,” where the system would move away from the new emphasis on results back to the old emphasis on compliance with constraints. A key event here was the system’s reaction when stories first came out about abuses of government credit cards for personal purchases. There were indeed some transgressions, but the big-picture story was that the cards saved a lot of money and made the system function much faster and more smoothly for agencies. In the old world, credit cards would have been shut down at the first whiff of scandal. It was a sign of change that this didn’t happen. Over these past decades, there have indeed been some pendulum swings between attention to goals and to controls, but the basic direction of movement started in the 90s still remains.

Yet as I was getting ready to finish up my remarks for this conference, I suddenly asked myself: Is there any evidence that, with all this new culture, the actual performance of the procurement system has improved? Is government getting better stuff at better prices in a more timely manner?

As I thought about it, my optimism dissipated if not evaporated. To be sure, the short answer to my own question is, “We don’t really know,” given the lack of apples-to-apples performance comparisons across different services and products the government buys. But I would like to think that if the answer to this question were a clear “yes,” we would be seeing signs and signals of such improvement that I confess I personally have a hard time noticing. So maybe the better culture hasn’t produced better results.

Some would argue the reason for this is that we haven’t been bold enough in breaking with the old system -- an argument made by my friend Stan Soloway in a recent column. There is probably something to that, but as I have thought about this question, my attention has turned elsewhere. At the same time as we made advances since the 90s, we also cut back the resources we provided for contract management, under the mistaken notion that these resources were in the business of constraints and control, rather than helping reach the system’s goals.

Between 1990 and 2001 there was a 25 percent increase in contract spending but a 13 percent decrease in the contracting workforce; between 2001 and 2009 there was a 104 percent increase in spending but only a 23 percent increase in the workforce. During these same years the Defense Contract Management Agency workforce declined by about half. At the same time, between 1985 and 2014 the percentage of contract dollars going to service contracts, which are harder to manage, increased from 23 percent to 63 percent. So I worry, in terms of overall performance, that what we gave with one hand we took away with the other.

I have been blogging for nearly two years on the government’s need to put more resources and focus into post-award contract management. That limited performance improvement despite a better procurement culture may be missing in action should underscore the importance of what I have been writing about.

Posted by Steve Kelman on May 30, 2017 at 12:10 PM

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Reader comments

Wed, Jun 21, 2017 EricE

Decentralized procurement (for supplies in particular) is the real problem here - not because it's an acquisitions problem but due to the inability to optimize requirements fulfillment fully. The most glaring example - look at how the private sector talks about category management and then how government talks about category management. The bulk of the focus of the private sector is on planning before you even get anywhere near issuing a contract followed by how fullfillment meets the organization's mission more effective, where government pretty much starts and ends at the acquisition process. Huge opportunities for optimization are lost, as are any discussions about how to enhance delivery of agency mission - it's all about SKU price discounts and little else.

Wed, Jun 21, 2017 EricE

"...a precondition for successful contracting is robust contract management." While I wholeheartedly agree with that, there is also a significant lost opportunity for agencies to organize themselves before they even start the acquisition process. Especially with commodities (be they IT hardware/software, office supplies or whatever) I never see anyone following the Priorities for use of mandatory Government sources in FAR Part 8 - they skip over the first two requirements to look internally "on the shelf" to reuse unused resources, and then look at other agencies "shelves" to reuse unused resources *before* running off to buy new stuff. There are many reasons from no shelf (inventory) to look at, no way to look across multiple agencies at once or even the simple ability to aggregate requirements within an agency to decide how to fulfill them before running to the vendors. None of those are directly acquisition issues, but they directly impact the efficiency of our acquisitions. We ended up with things like schedules and GWACs because in the 50's and 60's automation was non existent - but this is 2016! We should be able to set up storefronts in agencies to efficiently collect decentralized requirements *and* funding in an automated fashion, and then aggregate them for agency or multi-agency fulfillment! For fiscal accountability reasons alone (and cyber security for IT!) agencies should have accurate, timely and up to date inventories. They don't have to be 100% accurate, but even 80% would reap significant savings in reuse. The best way to save money is not spend it in the first place. When the default answer for new requirements is almost always "buy" there is significant waste occurring. These are problems well understood in the commercial sector where companies are incentivized to figure out efficient ways to keep tabs on overhead since it directly eats into profit. It's only painful in government today since our processes haven't changed since the 80's! If we cleaned up the processes around the purchasing of supplies, that would free up vast CO resources to focus on things like services contracts while also saving significant amounts of money. Suddenly we no longer have such a shortage of CO's nor quite the budget crises we face today. Properly integrated with the right automation, I have set up processes that beat decentralized purchasing with purchase cards in both time to delivery and cost. Typically these processes will also provide more functionality than originally requested as well. I'm not talking about consolidated buying of yesteryear where program people often never got what they really wanted, it took two to four times as long as it should have and the savings were almost never there vs. them doing it on their own. I'm talking about fundamental change via automation to streamline and eliminate the past issues of trying to manually do consolidated purchasing.

Tue, Jun 20, 2017 Mensch

Steve and Stan,
You're both right (just like the ole Doublemint ad). But we can't forget that the inefficiencies and underwhelming effects of the old/current system supports many hundreds of thousands of juicy white collar jobs. That has something to do with the lack of change. Since there is no point man in the White House for proc reform (no, not Jared or Mick), we can expect change to get slow rolled. Mattis does not have the patience or the staff to fire up the ole reform engine in the Pentagon. We should look at VA as a possible model, not because the Cerner/integration approach will actually work, but only because it has the tacit blessing of the Leadership and can be touted and blessed at the front end without any political consequences

Mon, Jun 5, 2017 Steve kelman

Stan, I hope we can agree that the issues each of us have raised both have validity, and maybe disagree of weight. We have significantly disinvested in contract management, and we have been saying for years that a precondition for successful contracting is robust contract management.

Tue, May 30, 2017 Stan Soloway

Steve: I think the issue of not having enough people to do the work has some truth to it, but is overstated. The question is whether those in contracting roles are taking full advantage of the technologies and flexibilities they have--the culmination of which would actually be a reduced workload. But even more than that, I fear we have diluted some of the most critical reforms of the 90s, added layers of compliance on a system that as you once told me, needed to empower and support the 99.5% of the people who are trying to do the right thing rather than make everyone pay for the .5% who may have other motives. And by any objective measure, our workforce training and development never caught up with the profound changes contained in the 90s reforms and even today continue to lag well behind the marketplace in which we are asking acquisition professionals to operate. Finally, I agree that we are seeing more innovation in acquisition today than we have in a long time--contests and challenges; DIUx, etc. But they are all in the end efforts to circumvent the traditional acquisition system and process. That people driving those innovations feel the need (which I fully understand) to find new and better ways around the traditional process in and of itself is a message. Is the system "performing better?" I agree that we don't really know---but I fear the answer is "not much." And in today's world, that means we run the risk of falling further behind faster than ever before.

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