DOD eyes buying, personnel reforms (Part 2)

The Defense Department has begun work on the next generation of procurement reform and is drafting a comprehensive set of new regulations and proposed legislation. The effort would equal the scope of previous major overhauls such as the Federal Acquisition Streamlining Act, and many in industry have dubbed the project FASA III.

Although the department is in the process of determining what aspects of the acquisition process it will address, DOD and industry sources said it is likely to address perceived shortcomings of controversial laws such as the False Claims Act and the Service Contract Act. It is also likely to modify the federal government's rules governing intellectual capital and its cost accounting requirements, sources said.

David Drabkin, assistant deputy undersecretary of Defense for acquisition process and policies, said DOD officials are working with industry representatives and other parties to determine the scope of the reform package, which he said should be completed this fall. He refused to speculate on which issues will be addressed but said the effort will build on reforms instituted by the Clinger-Cohen Act and previous DOD initiatives.

"Essentially, one of the critical things that needs to happen is greater access to our nation's industrial base," Drabkin said. "There still is a segment of the industrial base that is unavailable to us because of government-unique requirements. There are companies that will not sell to us because it's too difficult, it adds costs they never fully recover, or there is a danger they might lose intellectual capital."

As part of the endeavor, called the Civil Military Integration effort, DOD officials are inviting industry representatives and others to participate in focus groups to identify issues that remain unaddressed in the wake of previous procurement reforms. The effort will produce three "packages" of reforms recommending changes to existing laws, regulations and business practices.

Drabkin said he wants to send the legislative proposals to Congress for inclusion in the Year 2000 Defense Authorization Act.

Bert Concklin, president of the Professional Services Council, said he believes DOD will try to eliminate obstacles that have kept some companies from selling to the government. "Some companies refuse to bastardize their accounting system [to comply with federal requirements]," Concklin said. "The government wants to examine your cost accounting data and have the right to audit your financial structure. That is excessive regulation."

Sources said some of the legislative hurdles DOD probably will tackle may be difficult to overcome. For example, government and industry sources said the False Claims Act— which allows the government to seek damages for inaccurate billing— has caused consternation among contractors and has produced little benefit for the government when used in regard to contract disputes. But the act also is used to prosecute false Medicare claims, so DOD reformers will have to navigate through some contentious political issues to alter the law, a government source said.

Another sticking point may be attempts to amend the Service Contract Act, which the Labor Department has zealously protected against efforts to change it, the source said.

He added that potential attempts to amend regulations regarding ownership of technical data— which have kept some companies away from research and development contracts with the government— also will be controversial.

Larry Allen, executive director of the Coalition for Government Procurement, said he expects DOD reforms to include a provision that would prohibit post-award audits of contractors' pricing data. Previous attempts to ban these audits were blocked by the government's inspectors general.

Reforms that do not require legislative changes may be easier to pass, sources said. Concklin said he hopes to work with DOD officials to change the department's training and professional development culture to acclimate procurement personnel to a new era of contracting in which they will be asked to "take risks and use common sense."


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