Contractors wary of procurement proposals

President Barack Obama’s call for acquisition reform might lack the details needed to succeed

Cliff Thomas, president of ABC Management Technology Solutions Inc., of Chantilly, Va., is skeptical about contracting reform after listening closely to President Barack Obama speak in March about his federal procurement proposals.

Obama's procurement reform goals

In a memo dated March 4, President Barack Obama told his administration’s acquisition officials to focus on four specific areas.

  • Find when sole-source and noncompetitive contracts are appropriate but encourage more full-and-open competition for contracts.
  • Improve oversight of contracts to get the best value for the government.
  • Assist agencies in evaluating what their acquisition employees can handle.
  • Clarify when outsourcing government work is appropriate.

The president’s speech offered few details about his plan to solve what he perceives as flaws in the government contracting process, and it left Thomas frustrated.

“He did no more than give a political speech,” Thomas said. “He’s the president. He doesn’t need to give political speeches.”

Thomas and others in industry wanted details about the reforms. For example, Obama said he would “open up the contracting process to small businesses.” But that was the extent of his remarks on small businesses. Thomas pointed out that helping so-called Main Street was a major theme in Obama’s presidential campaign.

From what they heard, many information technology companies contracting with the government didn’t consider Obama’s proposed procurement reforms as anything approaching a sea change. The proposals were unclear, and some were already in place.

For instance, contracting regulations already favor fixed-price contracts as the safe and preferred method instead of cost-reimbursement and especially time-and-materials contracts. Many experts doubted that new guidance would improve on that. Instead, contractors intend to continue to plug away at their business. They say they know their roles as aiding their federal customers in reaching their objectives.

Thomas and other business owners said they also recognize the reality of reform.

“Can he change the way work has been done for the last 30 years?” Thomas asked. “No one person can do it.”

Backing the president

Nevertheless, “it makes the most sense to get behind the reforms,” said Tim Conway, senior vice president and managing director at Affiliated Computer Services' Government Solutions Group. The industry must embrace change, he said.

“The real difference, I think, is that the industry is going to have to invest in solutions that are quickly implemented, configurable and built to evolve," he said. "This will enable true fixed-price contracting to occur.”

Companies such as ACS won’t see significant change, though, Conway said. Most of its federal contracts are fixed-price performance-based agreements.

Similarly, AFL Telecommunications LLC, of Monroe, N.C., won’t see much change as a fiber-optics dealer on NASA’s Solutions for Enterprise-wide Procurements governmentwide acquisition contract, said Randy Murphy, the company’s director of government business development. Its contracts are largely fixed-price already.

However, systems integrators working on a completely new program might see agencies at least considering fixed-price contracts as a possibility. But many experts say agencies likely won’t think long and hard about the possibility.

“For a one-of-a-kind project that has never existed, there are too many parts moving to do a fixed-price contract,” said Dennis Christmas, president of Enterprise Solutions Realized Inc., of Marriottsville, Md., an IT services and software company.

In his March 4 memo about reforms, Obama wants to build stronger barricades against contractors that commit fraud or simply those he believes are working too closely to core contracting decisions. He wants forceful management of contracts so agencies achieve their goals and avoid useless spending. He also expects safeguards to protect the government from noncompetitive contracts. The government needs to get away from contractors as much as it can by keeping work in-house, he said.

The contracting community, former federal officials and people inside government say it takes more than speeches from the White House for reform. It takes cultural shift, changing the way the contracting officers, program managers, chief information officers and inspectors general do their work.

For instance, the Internal Revenue Service IG reported in March that agency program managers were writing their contract proposals angled toward cost-reimbursement contracts. And the contracting officers awarded them as such. The result was cost-reimbursement contracts for general operations and maintenance for the service.

“Obama is now choosing to be more aggressive in getting executive agencies to make the right judgments and choosing the right type of contract,” said Ray Bjorklund, senior vice president and chief knowledge officer at FedSources Inc.

Obama might have hurt his chances for reforms, some business owners and former federal officials said.

Obama said the government must uphold a fundamental public trust. “The American people’s money must be spent to advance their priorities — not to line the pockets of contractors or to maintain projects that don’t work,” he said.

Malik Balil, chief architect and procurement strategist at Computer Systems Center Inc., of Springfield, Va., said the company has built a good reputation as an honest broker to the point of telling a customer agency when it doesn’t need its services.

“We live by that creed,” Balil said.

Thomas, a former Marine who was injured while in the military, echoed that attitude. “We’re not trying to rob the government,” he said. “We’re not out here trying to get rich on the back of the taxpayer.” Instead, his intent as a service-disabled veteran-owned small business with 40 employees is to make a living and give people jobs. It’s the way to keep the economy from falling further, he said.

“The way the government does business frustrates me as a taxpayer — forget being a contractor,” he said.

Targeting fraud

Companies intent on exploiting the government exist, though. In March, the FBI arrested Sushil Bansal, president and chief executive officer of Advanced Integrated Technologies Corp., on charges of bribery and money laundering. The FBI also arrested a former employee of Obama’s new chief information officer, Vivek Kundra, on allegations involving contract kickbacks. The employee worked with Kundra in the District of Columbia’s Office of the Chief Technology Officer.

Furthermore, companies abuse small-business certifications. In 2008, the Government Accountability Office reported that it easily found numerous instances of companies cheating the system to get Historically Underutilized Business Zone contract set-asides. GAO also reported in 2007 that contractors were receiving award fees from performance-based contracts even though the companies didn’t meet the contracts’ objectives.

But Obama painted all contractors with an incredibly broad brush, said Angela Styles, former administrator of the Office of Federal Procurement Policy. “Unfortunately, someone failed to realize that for this initiative to be successful, the administration will need the good contractors to lead the charge. By demonizing contractors that follow the law and successfully perform vital services for the United States, the administration lost a critical opportunity.”

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