The Procurement Pendulum

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The Procurement Pendulum

Procurement law is not rocket science. It is a pendulum that swings back and forth between competition and regulation.

That's why companies that wanted freedom from burdensome government procurement regulations last year now want some curbs on those proliferating blanket purchase agreements, governmentwide acquisition contracts and indefinite-delivery, indefinite-quantity contracts.

The National Institutes of Health's Electronic Computer Store II contract, which saw 45 companies winning a chance to get a piece of the expected $2 billion contract, is the latest example of this trend. Another contract that will soon select up to 30 contractors to chase $40 million of work is certain to draw industry fire.

Company executives say they are exhausted from winning contracts that offer just the opportunity to compete for work. And they've started looking for ways off this treadmill - limits on the award of BPAs and GWACs and longer contracts with some form of predictable revenue stream.

But there is little prospect that this relief will come soon. After decades spent preparing gargantuan, drawn-out contracts that rarely succeeded, agencies can now spit out BPAs in a month.

And guess what? Agency officials are enjoying awarding BPAs, GWACs and IDIQs. "It's like being a kid in a candy store," said one agency official.

Indeed, it's so much fun that agencies are awarding some contracts that don't really define what work is to be done, industry officials say. To fill in the gaps, the agencies then must hire vendors to describe the work to be performed by other vendors.

With these practices, the agencies are putting enormous pressure on companies, which are forced to spend money to bid for upcoming BPA, GWAC and IDIQ contracts and then spend again on aggressive marketing to win a share of the contract.

These companies also must quickly hire workers when a task order is received and just as quickly fire them as soon as the task is completed. That's hard on the workers, who can't trust their job to last and must search for a new employer as soon as their work nears completion. Managers rightly point out that this is a recipe for worker-employer mistrust, higher wages and lower quality.

The pressure also forces companies to cut the prices they charge government customers, reduce their profits and focus on a few customers to which they can provide premium service. If the pressure continues, some industry officials warn, they will simply back out of particular contracts and avoid many new contracts, preferring instead to funnel their products and services to the government via a few widely accepted contract vehicles.

Contractors may also try to cut out some of the extras - such as warranties and quality.

These responses are undesirable but plausible. To avoid them, agencies must - and will - be forced to shut down little-used contract vehicles that cost money to set up and run and offer more longer-term contracts with predictable revenues.

Steve Kelman, the procurement czar who just left the Office of Federal Procurement Policy for Harvard University, argues that the benefits of competition are well worth the price of the teething problems with the new procurement system. The government need not swing back and forth between bouts of regulatory and deregulatory fever but rather should steadily improve the procurement process.

The data bears a closer watch for the next few months. If industry is right, the government should swing the pendulum back a bit toward regulation. It might even get it into just the right spot this time.

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