Madsen: The SARA panel’s mission focus

The group’s charter was to help government buy services like the private sector

Steve Kelman’s Jan. 22 column, “A missed opportunity,” in Federal Computer Week revealed a surprising lack of familiarity with the charter and report of the Acquisition Advisory Panel. Some of his comments are directed at issues the panel was not tasked to consider. Others are out of sync with commercial practices.

The panel was given a targeted focus by Congress. It was supposed to focus on commercial practices, performance-based contracting and interagency contracts. Those are important topics given the growth in procurement since 2000 and the increasing concerns about the appropriate use of interagency contracts and government commercial contracting. The panel’s recommendations, if adopted, would bring the government in step with commercial practices by boosting competition, tightening internal controls and increasing expertise for services contracting.

Kelman said the panel did not address the benefits of making the government more commercial-like in its procurement practices. Not so. Because of the panel’s statutory focus on the appropriate use of commercial practices and because performance-based acquisition is a commercial practice, the panel members conducted extensive public hearings on commercial best practices in contracting for services. The panel heard from major commercial buyers of services such as General Electric, Disney, General Motors, Proctor & Gamble and other companies that spend significant sums to acquire services.

Those companies identified well-defined requirements and competition as essential for successful service contracting. The companies define their service requirements by asking users and senior managers what they need. Having well-understood requirements makes vigorous competition possible. Clear requirements make it feasible to use performance-based contracts and fixed-price contracts. Not surprisingly, competition, performance-based acquisition and fixed-price contracts drive down costs, reduce administrative burdens and deliver better results.

On the government side, pressures to meet critical mission needs and obligate annually appropriated funds often conflict with agencies’ acquisition plans. Failure to adequately define service requirements increases the government’s costs.

Government practice does not meet the commercial standard for competition. In 2004 and 2005, services accounted for 60 percent of the government’s procurement spending. In 2004, one-third of the government’s procurement dollars were awarded noncompetitively. Even when competed, the percentage of dollars awarded when only one offer was received has more than doubled.

Reliable data regarding competition for orders under interagency contracts was not available then in 2004, but a substantial amount of dollars flowed through those contracts. Those contract orders represented $142 billion, or 40 percent of procurement spending in fiscal 2004. In that year, the government awarded $67 billion in large, single-transaction orders valued at more than $5 million each. Reports from the Government Accountability Office and inspectors general dating back to 1998 indicate that 40 percent to 50 percent of such orders are never competed.

The panel’s key recommendations identify ways to improve competition in procuring services. Contrary to Kelman’s assertion, the first recommendation in the panel’s report calls for improving the process of defining requirements by requiring users and the agency’s contracting officer to sign off on them.

The panel proposed making the Defense Department’s Section 803 rule for buying services apply to all agencies, which would establish greater transparency for large orders and create a new and competitive General Services Administration schedule for IT services. Other recommendations would give the government access to the same market research tools and reasonable pricing information that the private sector uses.

The panel specifically analyzed interagency contracts and acknowledged their potential value. Panel members examined the reasons for having interagency contracts, and it looked at how they are created, how decisions are made to continue them, whether they are effective in maximizing the government’s purchasing power and whether there are too many of them. Far from hyperventilating, as Kelman described the panel’s behavior, the members outlined a thoughtful approach for improving the government’s internal controls on those contracts and for establishing a basic business case for agencies to create or continue offering such contracts.

The panel reviewed the government’s use of performance-based contracting. Without good contract requirements, agencies find it difficult to structure appropriate contract performance incentives. Several of the panel’s recommendations involve contract administration and employee training. Panel members called for improving post-award contract performance monitoring and management through acquisition-specific performance improvement plans. They provided guidance on creating and administering performance incentives. As Kelman wrote in his column, post-award management practices are ripe for reform, and the panel addressed them in detail.

The panel recognized a significant gap between the demands placed on the federal acquisition workforce and the employees and skills available in the workforce to meet those demands. The government reduced its acquisition workforce by 50 percent in the mid-1990s, apparently without considering the critical skills that would be necessary for a more commercial-like government.

The panel found that the current workforce lacks the resources to operate in today’s complex acquisition environment. But panel members didn’t have sufficient data to assess the size, composition and competencies of the acquisition workforce, or the role played by contractors. The panel commissioned a major study of the acquisition workforce that will be part of its final report.

We did not propose that agencies rush out and hire hundreds of new contracting employees. Instead, we recommended that the government immediately define and measure the acquisition workforce and its skills in light of the government’s needs. The panel recommended a process flexible enough to enable agencies to adjust quickly to changes in employee numbers and skill levels.

The panel addressed complex issues, some of which are the product of years of inattention. The panel’s recommendations, if adopted, will make a difference in the government’s ability to use commercial best practices when they appropriate, to manage the acquisition process more effectively, and to do so with a highly skilled workforce.

Madsen is an attorney with Mayer Brown Rowe and Maw in Washington, D.C., and chairwoman of the Acquisition Advisory Panel, commonly known as the SARA panel.
Kelman: Missed opportunitiesThe SARA panel’s first missed opportunity was a failure to forthrightly discuss the benefits of making contracting more commerciallike. Government efforts to adopt commercial practices are now under attack, even though federal procurement of information technology hardware and other commercial items works better than ever. Government gets quick access to the latest technology at excellent prices. And vendors are more customer-oriented, partly because of the use of past performance in source selection and streamlined procurement vehicles, such as interagency contracts. Such vehicles, which make it easy to get on a contract, also make it easy to fire a bad vendor because hiring a replacement is simple.

The panel’s second missed opportunity was a failure to focus on the system’s most important shortcomings. It chose instead to hyperventilate on everybody’s favorite whipping boy: interagency contracts.

Contracting has three stages. The first is planning, which is researching the market, defining requirements and developing a contracting strategy. The second is source selection. The third is postaward management.

All too often, government does a poor job at the first and third stages. The panel discussed problems with requirements definitions, but it aimed its heavy guns at problems related to competition in selecting sources....By getting the government to focus excessively on source selection, the panel ignored preaward planning and post-award management, which need more attention.

—Steve Kelman, “A missed opportunity,” Federal Computer Week, Jan. 22

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