Procurement was a contentious issue in 2006

2006 was a year of policy debates. Are federal procurement policies fair to small businesses? Are the government’s information security policies misguided? How far should the government go in outsourcing the work of federal employees? Those issues were debated but not resolved in 2006.A congressionally chartered advisory panel on federal procurement shook the information technology community with its recommendations for making federal contracting more competitive. Companies responded quickly to oppose many of the proposals. Critics said the proposals would push back a decade of innovation that has made federal procurement more efficient and effective.The panel, known as the SARA panel, is authorized under the Services Acquisition Reform Act of 2003 to propose changes to federal acquisition regulations.“The focus of the panel’s recommendations is a strengthened competitive process that is more transparent about the government’s requirements,” said Marcia Madsen, a partner at law firm Mayer Brown Rowe and Maw and the panel’s leader. The panel’s recommendations included expanding a Defense Department rule on soliciting competitive bids and imposing additional restrictions on time-and-materials contracts, which tend to be more expensive for the government than fixed-price contracts. In a separate but related action, a procurement innovation known as share-in-savings suffered a setback this year when lawmakers failed to renew its authorization under the E-Government Act of 2002. Under share-in-savings contracts, the government pays companies an amount relative to how much their work helps the government reduce future spending. Those contracts differ from traditional ones in which the government guarantees companies a fixed profit margin and reimbursement for the companies’ cost of doing work.By letting the authorization lapse, the government showed its growing aversion to risk, said Larry Allen, executive vice president of the Coalition for Government Procurement, a group representing companies that sell commercial products and services on multiple-award schedule contracts. But some people who favor procurement innovation said they have not given up hope for share-in-savings. Rep. Tom Davis (R-Va.), a supporter, introduced new legislation to reinstate the concept. “I remain convinced that [share-in-savings contracting] can be a valuable tool in helping modernize our government in this era of tight budgets,” Davis said.Share-in-savings took a hit, but strategic sourcing gained some ground in 2006. With its federal strategic sourcing initiative, the Office of Management and Budget wants to consolidate the separate procurement activities of various agencies so the government can demand greater volume discounts and premium service from suppliers.Under that initiative, the General Services Administration began planning a governmentwide wireless procurement that could replace agencies’ piecemeal wireless buys and perhaps save money and aggravation. A recent study found agencies were struggling to manage inaccurate wireless inventories, incorrect billing and a proliferation of service plans.Besides trying to sell its strategic sourcing policy, OMB was busy introducing another procurement initiative in 2006, the president’s initiative against contract bundling. With that initiative, the Bush administration declared its allegiance to small businesses that feel they are losing federal contracting opportunities as more agencies bundle their IT requirements to gain the strategic sourcing advantages.OMB’s pledge to keep a score card on agencies’ progress in unbundling contracts highlighted contradictions in the administration’s procurement policies, which industry leaders were quick to point out. “It should be pretty easy to keep track of bundled contracts,” Allen said. “All OMB will have to do is gauge the success of its strategic sourcing initiative.”E-government joined procurement on the list of big policy issues in 2006. Federal agencies received lower marks on their e-government score cards in 2006, and OMB partly blamed congressional leaders who refused to approve sufficient funding for e-government and other cross-agency programs.“We are going to continue to reach out to Congress on e-gov and work with them to ensure that e-gov projects are able to provide the greater levels of services demanded by our citizens,” said Clay Johnson, OMB’s deputy director for management.E-government scores for the second quarter of fiscal 2006 fell to their lowest levels since March 2004.E-filing, however, stood out as an example of successful e-government. The Internal Revenue Service reported in early April that 67 percent of tax returns had been filed electronically, a 2 percent increase compared with statistics from the same time a year ago. But participation in the IRS’ Free File program, an electronic tax-filing service offered free to middle- and low-income taxpayers, fell sharply in 2006. After the program revised its rules to exclude 39 million taxpayers, only 4 million participated in Free File in 2006. The IRS said it must persuade the 93 million taxpayers who are now eligible for Free File to use the program. “Our biggest challenge to overcome is awareness,” said Bert DuMars, director of the IRS’ Electronic Tax Administration.Besides having growing concerns about e-government, IT leaders also worried about information security. After five years during which agencies have been graded on their compliance with governmentwide IT security policies, some former federal officials began to publicly question the value of annual IT security grades. “High grades could mean a lot of compliance but not necessarily a lot of security,” said Bruce Brody, former information security official at the Department of Veterans Affairs and the Energy Department, who is now a vice president at CACI International. Brody said a better approach would be for OMB, which oversees compliance with the Federal Information Security Management Act (FISMA) of 2002, to recognize technically based audits in which agencies continuously scan and patch their systems and networks and maintain audit logs.“That process could replace an inordinate amount of paper that is generated right now on certification and accreditation,” Brody said.In March, the federal government earned another D+ on its FISMA score card, the same score it received in 2005.Davis scolded federal agencies for their poor FISMA scores, which were lowest among federal agencies whose mission puts them, he said, “on the front lines in the war on terrorism.”  Failing FISMA scores didn’t rouse as much passion as IT outsourcing, however. Bush administration officials continued trying to convince lawmakers that with more job competition, federal agencies could spend less on work that is not inherently governmental. But with control of the Congress shifting to Democrats, some people said that policy, known as competitive sourcing, is likely to undergo greater scrutiny.  Renee Courtland, a former Office of Federal Procurement Policy official and now a senior associate at lobbying and marketing company Dutko Government Markets, said the policy will face greater opposition. “Competitive sourcing was never popular on the Hill, even under a Republican Congress.”