The Enron effect

I was buttonholed recently at a reception by an information technology industry insider who wanted to share a concern. The debate about outsourcing is becoming more and more shrill and partisan, he said, and the efforts of federal unions to stop further outsourcing has gotten more dogged.

Into this gasoline can has now been thrown the lit match of the Enron scandal. The IT industry needs to be on high alert to avoid even the hint of impropriety in its dealings with government, he said, because in the post-Enron environment, outsourcing opponents could use such scandals to try to ram through burdensome restrictions.

What was he thinking of, I asked him? Did he mean billing scandals, like the reindeer suits hidden in some indirect cost pool, over which Rep. John Dingell (D-Mich.) held hearings in 1992? Did he mean corruption scandals like "Ill Wind" in the 1980s, where some industry people were bribing some government officials? All of the above, he answered.

Were there rumors "on the street" that scandals were out there, I asked? No, he replied. He just felt that the Enron experience illustrates the need for industry to be especially vigilant. It is time to put more resources into company defense integrity initiative efforts, time for heightened attention by chief executive officers to ethics and internal controls.

I think my friend is right. I would also add something he didn't mention. My impression is that there is a growing level of consciousness among third parties that study outsourcing about insufficiencies in the government's efforts at contract management — what is often called "contract monitoring." I hear lots of worry that weaknesses in government contract management efforts could create problems for the government.

It can be remedied, of course, either by reducing contracting or by getting serious about contract management as a core competency for government. The need isn't necessarily for more financial auditors, but for people whose responsibility it is to see to it that contractors deliver quality performance.

The abilities required here are executive leadership skills in setting strategy, performance measurement and management, and team building. IT contract management should be a prestigious, well-paid profession, as befits what should be a central government skill. The time is right for a strong push to make dramatic improvements in the status of and resources devoted to contract management, broadly conceived. The IT industry should join in this call.

In the post-Sept. 11 environment, the last thing the government needs is to be deprived of the skills and capabilities of the IT industry to meet the challenges of terrorism. This is the time both for heightened internal monitoring efforts and for a push, from outside the government as well as inside, to create world-class contracting management capabilities in the federal government.

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

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