The Enron effect
- By Steve Kelman
- Mar 03, 2002
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
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
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 [email protected].