BUY LINES: Abdication not a sound management strategy

Stan Soloway

I wrote in this column recently of the concerns that many in the private sector have about proposals being considered by the congressionally mandated Acquisition Advisory Panel. Industry has made its concerns clear and has engaged in a robust, open dialogue with the panel about them.

To the panel's credit, it recently devoted an entire day to that dialogue. The discussion continues.

Unfortunately, even as the panel continues its work, others clearly have made up ? if not closed ? their minds. A prominent example is the General Services Administration's inspector general'S office.

GSA's Assistant IG Gene Waszily recently made the sweeping assertion that "contractors are lining their pockets" with excessive profits. His reasoning: Contractors routinely bid for work with the government and, after winning an award, find cheaper subcontractors, thereby dramatically and inappropriately enhancing their profits.

With these and other recent statements, the IG has unfairly tarnished an entire industry and what are most often perfectly appropriate business practices. Balancing the roles and costs of prime and subcontractor performance is a constant in all business relationships.

Nonetheless, the IG has thrown down the gauntlet for a heightened debate over issues that many thought had been settled long ago ? effectively declaring war on the government's participation in the real world of business and commerce.

In the real world of commerce, the marketplace rewards companies that meet or improve their cost, schedule and performance, while increasing profitability. In the real world, there is a clear link between risks assumed and rewards earned.

The IG's statements suggest that these fundamental business tenets are unacceptable in the federal government market.

Ignoring performance quality, the risk-reward equation and the roles of competition and customer judgment, the IG effectively has declared that anything beyond a basic minimum profit is unacceptable.

It would be one thing if the IG were referring solely to cost-type contracts or to egregious cases of what is known as bait and switch.

But he is not. He is referring to all contracts, including competitive fixed-price or fixed labor-rate contracts.

GSA IG Waszily is not alone.

Several companies recently have reported extraordinary pre-award audit demands requiring massive amounts of data to justify their cost buildups for competitive fixed-price contracts.

Others are reporting equally extraordinary post-award incurred cost audits on competitively awarded, fixed-price contracts, even though the law presumes, pending contracting officer approval, that the pricing in such contracts is fair and reasonable.

On one level, what we are witnessing is the re-emergence of longstanding antipathies toward the very idea of the government participating in the real marketplace.

To some, profit margins remain more important than whether a contractor has met its contractual commitments and delivered promised quality to the customer.

This debate also conveys a similarly unfair message that the government workforce simply cannot be trusted to do the right thing.

At its core, this is a form of management abdication, a willingness to abandon management's real responsibilities in favor of removing or strictly limiting workforce empowerment and flexibility.

Rather than giving the workforce the tools needed to better execute its increasingly complex work, this strategy assumes it is incapable.

Rather than demanding investment in and support for the workforce, this strategy perpetuates the government's historical intolerance for inevitable risks and errors.

Abdication is a strategy that will solve nothing, and further, is doomed to failure.

It would be most refreshing if we could simply focus on those issues that really matter.

Stan Soloway is president of the Professional Services Council. His e-mail is soloway@pscouncil.org.

About the Author

Stan Soloway is president and chief executive officer of the Professional Services Council.

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