Worries from a Democrat about the Biden administration and federal procurement

Steve Kelman is concerned that the push for more spending with small disadvantaged businesses will detract from the goal of getting the best deal for agencies and taxpayers.

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Earlier this week Steve Schooner, who teaches government procurement law at George Washington University’s law school, sent an email to members of the Procurement Roundtable, a small group of distinguished procurement graybeards. Schooner’s concern was that the administration had not yet nominated an administrator for the Office of Federal Procurement Policy (OFPP). He wondered whether the organization should send a letter to the Biden administration urging an appointment soon.

In fact, the administration has not been particularly slow in making a nomination. When I served as OFPP administrator during the Clinton administration, I learned about the decision to nominate me, toward the end of July or the beginning of August of that administration’s first year. My nomination was announced sometime in August, and I wasn’t confirmed by the Senate until November. As Schooner notes, Dan Gordon’s nomination under Obama came around Thanksgiving. And Trump waited literally years to make his nomination.

So I am worried much less about when an OFPP administrator is named than what kind of person will be chosen and what this administration’s procurement priorities will be.

At the end of May the administration proclaimed a goal of increasing the share of federal contracting dollars that go to small disadvantaged businesses (SDBs) by 50% over this term. The language in support of this was extremely familiar to people experienced in the procurement area. “The federal government is the largest consumer of goods in the world, buying everything from software to elevator services to financial and asset management, and federal procurement is one of our most powerful tools to advance equity and build wealth in underserved communities.”

Anybody who knows about federal procurement knows that there is a perennial debate about what we are trying to accomplish with the government’s purchasing power. Most procurement experts -- and I suspect the vast majority of federal civil servants -- want the main goal of the system to be to get the best possible value, in terms of price and quality, from what the government buys, in order to meet agency missions as effectively as possible.

But there is a powerful alternate view, namely that the main goal of the procurement system should be to promote various social objectives not really related to procurement itself. These suggestions are typically proceeded by the words, “The government should use its enormous buying power to…” followed by a worthy objective such as buying American-made products, increasing contracting with minority businesses or getting workers on government contracts higher pay.

When I was in at OFPP, I used to counter, “The government should use its enormous buying power to get good deals for the taxpayer and our agencies.”

The pressure to use the procurement system for social objectives took up a great deal of my time as OFPP administrator. Not long after I arrived, the unions, an important constituency for the Democratic party, demanded that workers on an existing contract whose company lost a recompete be given a “right of first refusal” to work for the new contractor. I took on this issue internally within the administration, saying it restricted the ability of new contractors to do a good job by limiting their ability to choose employees. I persuaded Leon Panetta, then OMB director, to back me and quash the proposal. (I will never forget what he said to me during a one-on-one meeting in his office: “This is f—king communism.”)

There are two problems with making non-procurement social objectives a focus of the procurement system. One is that any time you restrict competition to companies that meet these objectives, you are likely to increase the prices the government pays and/or the quality of what is bought. The second, perhaps even more important, is that you reduce or even eliminate the focus of the system on getting a good deal, as the attention and time of the system is redirected to those other goals. Indeed, over the years the failure to focus on the goal of getting a good deal has been the bane of our procurement system and a significant reason for procurement underperformance.

It should be noted that the government is already exceeding by a substantial margin the statutory goal of steering 5% of contract dollars to SDBs. Last year, 10% of contract dollars went to these firms.

As I remember, when the goal was first established, the percentage of contract dollars going to SDB’s was well under 5%. The growth of SDB contracting has almost certainly been considerably greater than the growth of SDB’s themselves. If the government needs to go even deeper into the pool of such contractors, it is all but certain that they are going to be choosing lower-quality or higher-priced contractors, since the better ones will already have gotten lots of business. This will increase the costs of this emphasis on achieving these objectives as opposed to the best-value goals of the system.

A former senior procurement official in a Democratic administration, now in industry, told me he had recommended two candidates (both excellent) for OFPP. To date, he has gotten no follow-up at all.

We have important better-value initiatives that have begun in the procurement system which really need our attention. Examples include innovative procurement techniques such as procurement challenges/contests and tech demos (rather than voluminous written proposals), and improving the use of past performance in source selection. The time is also ripe for an important new initiative I have advocated to increase the focus on post-award contract management. And I hope an OFPP administrator can work to develop -- as OFPP career staff have admirably been pursuing – new initiatives to help the system deliver better value.

I admire President Biden and wish I could say I was more optimistic. But I am not. I fear procurement has a tough time ahead.

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