By Steve Kelman

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What procurement execs say about Obama’s contracting agenda

I spoke today to a group of senior procurement executives at small agencies (ranging from the Pension Benefit Guarantee Corporation to the U.S. Holocaust Commission to the Millennium Challenge Corporation) about the administration's contracting agenda. The reaction of the audience, partly in questions and comments, and partly in nods, frowns or other facial expressions, was interesting.

The message to the administration that the procurement executives emphasized most strongly was that many improvements in the contracting process are impossible without the cooperation of program folks -- contracting people can't do these things by themselves.

Yes, significant parts of many recurring services requirements could be converted from cost-based to fixed-price contracting, but program people need to help determine which parts can be done fixed-price and to make the requirements clear. Yes, contracting folks can negotiate strategic sourcing contracts, but program people need to buy off of them. (One participant gave an example of a very senior government official who refused to back her up when a GSA schedule vendor declined a request for a discount on some products being bought.) There is still a feeling that frequently contracting people are consulted only at the end of the process, rather than being brought in as teammates early on.

A second worry was that savings on commodities through better contracting may not generate net savings to the government -- they might simply lead to agencies spending the same amount of money but buying more stuff. I heard a similar worry from a group of VA interns to whom I spoke later in the day. One person was concerned that cost-savings would mean more money left over at the end of the fiscal year, which would mean more crazy end-of-year spending.

The administration appears to be dealing with this by mandating reductions in procurement accounts in agency budgets -- so if agencies can't save money, they will have to buy less. (I don't know what the administration plans to do about phantom "savings" coming from insourcing, which doesn't count the cost of insourced employees into agency salaries and expenses accounts.) This is a version of an old Office of Management and Budget approach to take out projected savings from an agency's account before the savings have been realized, but I think that with the huge deficit, the approach this time has some legitimacy.

Finally, the body language about the administration's "transparency" agenda in contracting was really negative. There were nods when I stated that lack of transparency hardly makes the list of the top 50 problems facing government procurement, not to speak of the top five. We already have probably the most transparent procurement system in the world. There were more nods when I expressed worry about diversion of scarce contracting resources into redacting contracts for trade secrets so they could be placed on the Web.

Lessons here for the administration? First, just as the agency contracting folks can't solve problems without help from program managers, neither can Dan Gordon at the Office of Federal Procurement Policy. He needs the help of Jeff Zients, his boss, who has access to deputy secretaries (who can direct people to use strategic sourcing contracts) and to program managers. I think Zients realizes this, but he should get moving bringing a council of working-level program managers and contracting managers together.

Second, the end-of-year spending problem remains an embarrassment caused by our dysfunctional budgeting rules that require agencies to return all unspent funds to the treasury. The U.S. is one of the few advanced countries that does not allow agencies to "bank" a proportion of savings for future years. Although a statutory change is not enough to solve this problem (because budgeteers can still reduce a next year's budget by an amount equal to any amount saved in the previous year), the administration, as part of deficit-cutting efforts, should bite the bullet and seek congressional approval of experiments with allowing agencies to hold on to a percentage of their savings -- say a third -- as an incentive to generate genuine savings.

Posted by Steve Kelman on Dec 17, 2009 at 12:08 PM


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