Making business sense

• By Steve Kelman
• Apr 03, 2000

Deidre Lee, who will be leaving her post as administrator of the Office of Federal Procurement Policy in June to become director of Defense procurement, has long believed that contracting professionals need to rethink the role they play in the interaction between government and vendors.

Contracting folks have traditionally seen themselves as people who know more about regulations than anybody else. For good reason, this is not a "skill" that has always been particularly highly valued by information technology or program folks. Lee has argued strongly that procurement people need to start seeing themselves as the government's business advisers.

What contracting officials should know better than anybody else, according to Lee, is how to establish, structure and administer a business relationship with contractors that secures a good deal — which means excellent performance at reasonable prices — while treating vendors fairly.

What does being the government's business advisor mean in practice? A recent conversation with Ed Elgart, who heads contracting at the Army's Communications and Electronics Command at Fort Monmouth, N.J., provides a good illustration. Cecom buys, among other things, night-vision equipment for soldiers.

Since around 1990, Cecom has been using best-value contracting to buy the equipment. The ongoing competition, and the best-value approach, means that equipment the Army gets today lasts longer, works better and uses less power. Each night-vision tube fits whatever equipment soldiers use, whether they're infantry or aviators, which produces big logistics savings.

These days, that's pretty much garden-variety good government contracting. But I was more impressed by another idea Elgart shared with me. Night-vision equipment is sold commercially, but the Army does not allow the latest generation of equipment to be sold commercially to keep it out of the hands of U.S. enemies.

The Army's old night-vision equipment was typically sold on the market for pennies on the dollar. But Cecom now requires contractors to include in their bid how much they would spend to buy back the old equipment. On a piece of equipment that sells new for $2,000, the Army now gets a $1,000 credit for the trade-ins.

Elgart's story illustrates what Lee means by contracting people serving as business advisers. It comes down to using your noodle. Every procurement person in government should think about what they buy and work hard to come up with one new idea like Cecom's equipment trade-in that makes business sense for their program. That will add up to lots of further improvements in government contracting.

— Kelman was the administrator of the Office of Federal Procurement Policy from 1993 to 1997. He is now Weatherhead Professor of Public Management at Harvard's Kennedy School of Government. He can be reached at steve_kelman@harvard.edu.