Study: Federal Procurement Troubled

"The Troubling Trends of Federal Procurement." That title for the procurement policy survey published by the trade association Professional Services Council (PSC) and accounting firm Grant Thornton says it all. Thanks to conflicting strategic procurement initiatives, an insufficient workforce and skepticism from government agencies about collaboration with the private sector, federal procurement faces challenging times.

For the third time since 2002, PSC and Grant Thornton surveyed federal officials about their views on procurement policies and practices. Respondents included 37 representatives from myriad civilian and defense agencies.

"What [they're] telling us is this is as tough an environment as they've ever seen," says Stan Soloway, president of PSC. "But there's a strong consensus that it's more smoke than fire," with many challenges stemming from confusion in the market and insufficient resources, rather than a broken system.

According to the Federal Procurement Data System, government purchased more than $374 million in goods and services in 2005, which equals about 45 percent of the annual discretionary budget. That's compared to $200 billion five years earlier. Such a market swell has left the acquisition community scrambling to adjust, often without necessary resources or support from those on Capitol Hill. The number of acquisition professionals in 2005 was 125,779, a 10 percent decrease from 1996, despite a 108 percent increase in dollars spent on purchases and 2 million more transactions completed.

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"No one recognizes that [procurement] is the gut of government right now," Soloway says.

Significant growth has spurred some major change in the processes of procurement, with performance-based contracting enabling agencies to only pay for services that meet expected levels of quality, and strategic sourcing allowing government to leverage its buying power for commodity goods. Also, the Lines of Business managed by the Office of Management and Budget (OMB) drive a direction for purchases by seeking to streamline processes, and competitive sourcing attempts to make the process of procurement more market-based through public-private competitions for government services.

Such initiatives are good in theory, but sometimes poor in execution. Often, they conflict with one another in concept, with strategic sourcing encouraging bulk buys, for example, but Lines of Business emphasizing streamlined solutions; little guidance leaves agencies at a loss for moving efforts forward. While 82 percent of survey respondents said performance-based acquisition is better than traditional contracting "when done right," the additional time, skills and resources required for developing and monitoring such procurements often causes agencies to opt out.

Similarly, when asked to grade competitive sourcing as a management tool for their organizations, respondents gave it 3.0 on a scale of 1 to 5, saying it's less suitable for mission-critical processes. One of the respondents, which PSC kept anonymous, said the process is best for those things found in the Yellow Pages.

"[Federal officials say,] 'We recognize the benefits of competitive sourcing, but it's just too damn hard to do,'" Soloway says, noting that there has yet to be one competitive sourcing initiative that was not subject to congressional review.

Similar frustration exists with the federal small-business program, which 77 percent of respondents said requires revision. Unclear to agencies are policies determining which target group receives priority (small disadvantaged businesses vs. service-disabled veteran-owned businesses, for example), how credit for small business contracts is tallied, and methods for incorporating small businesses into large-scale initiatives, like strategic sourcing. They also noted problems associated with misallocation of dollars.

"[This program] is too complicated, too layered and, in some ways, too political," Soloway says. "It's time to step back and relook at these [policies], because the world is a much different place."

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While 80 percent of respondents said that "real partnership" is possible between the public and private sector, skeptics point to conflicting motives and a lack of understanding of requirements. They wonder: If industry motivation so often returns to stockholders and government's motivation returns to the taxpayers, how can it be a true partnership?

To ensure those on both sides of the table are on the same page, methods of communication must improve through such efforts as roundtables, seminars and other formal discussions, respondents said. Contractors must also take the time to better understand the requirements of their government customers and avoid low-balling bids in an attempt to win awards -- admittedly a challenge in an environment that so often rides on price.

"[Government's] reluctance to collaborate is not due to a lack of trust," says Joann Kansier, a director at Grant Thornton and former director of competitive sourcing at the Federal Aviation Administration. "There's a fear of ramifications ... It's really an issue of survival."

Contributing to challenges in the acquisition process is newfound attention from Congress. As one respondent noted, "Congress needs to stop trying to legislate solutions for problems caused by a few bad apples in the procurement barrel."

"It used to be Congress didn't mess with the acquisition process, but acquisition is now clearly a part of the party plans," despite the fact that few on the Hill really understand procurement policy, Soloway says. "You leave a hearing on the Hill, and you get the impression this is the Wild West. Nothing could be further from the truth. [There] just needs to be more support in the system to allow [it to work] better."