Critics Expose Dark Side of Procurement Reform

Critics Expose Dark Side of Procurement Reform

By Nick Wakeman
Staff Writer


Robert Dornan
Congress and the executive branch are beginning to scrutinize what may be the downside of procurement reform - the perceived lack of competition for task orders under large, governmentwide contracts.

The same contract vehicles that made it easier and faster for agencies to buy products and services are now coming under fire from some government and industry officials.

In addition to reduced competition, critics also are raising concerns about the proliferation of these governmentwide contracts, such as the Department of Transportation's Information Technology Omnibus Procurement and the National Institutes of Health's Chief Information Officer Solutions and Partners contract.

The General Accounting Office is drafting a report, due by the end of July, on the competition issue. Some industry sources expect congressional hearings in the fall.

The Office of Management and Budget also has issued a memorandum warning agencies to curtail naming "preferred sources" when issuing statements of work for task orders. The preferred source designation discourages other contractors from bidding on a task order, said Edward DeSeve, acting deputy director for management at OMB.

The information technology industry and the agencies issuing the contracts are getting warnings from congressional staffers to address issues surrounding competition, said Robert Dornan, a senior vice president with the market research firm, Federal Sources Inc. of McLean, Va. The warnings have included the caveat that if industry and the agencies do not address the concerns, Congress will step in, he said. Sen. Carl Levin, D-Mich., is leading the charge on the issue.

The proliferation of governmentwide contracts also is raising the question of why agencies such as the Transportation Department and NIH have contracts that compete with the General Services Administration schedule, Dornan said.

"Why are they spending their resources to put out these procurements?" he said.

But the governmentwide contracts have their defenders. The agencies issuing the contracts like them because they can save on procurement costs and the contractors get more selling opportunities.

Both the GSA schedule and the contracts coming out of the agencies are important, said Lee Cooper, vice president of business development for Unisys Federal Systems Inc. of McLean. Unisys is a prime contractor on ITOP.

"Both provide unique features that the end users need," he said. "To eliminate either wouldn't be good for anyone."

Dell Barry, director of ITOP at the Department of Transportation, acknowledged that his contract has been criticized for having a high percentage of directed or sole-source task orders. But the data used to draw that criticism, which was raised in a GAO report on Department of Defense buying patterns, paints an inaccurate picture, he said.

GAO only looked at the number of task orders and found that 64 percent were issued directly to a specific contractor. But GAO failed to look at the dollar volume, he said. Of the $800 million spent through ITOP, only 23 percent has been spent through directed task orders, he said.

"The review should be by dollar volume," Barry said. "That is one thing we are trying to get [GAO and Congress] to do."

The pending GAO report, which was begun at the request of Levin, likely will lead to more guidance on how to use the governmentwide contracts, Cooper said. The guidance and training that is reaching the front-line personnel using the contracts has been lacking, he said.

ITOP has been wildly successful since it was awarded to 17 contractors in May 1996. So far, about $800 million has been spent through ITOP. The contract can be used for a variety of services, including business process re-engineering, life cycle management, telecommunications support, network support and software engineering.

The agency expects the ITOP to hit its $1.2 billion ceiling by the end of fiscal year 1998 on Sept. 30, about five years ahead of schedule.

The request for proposals for ITOP II was issued July 7. The new contract will have a $10 billion ceiling and will run for seven years. Barry said awards will be made by December.

An attempt to derail ITOP II apparently has fallen flat. The Coalition for Procurement Reform sent a letter in early June to Rep. Stephen Horn, R-Calif., saying the contract should be eliminated because other similar contracts exist, especially the GSA schedule. The letter also criticized the alleged lack of competition under the contract. Horn's office did not have a comment on the letter.

But lobbying on the issue by the Washington-based coalition, which represents a variety of companies and other industry associations, has ended, said Edward Allen, the group's executive director.

"We don't plan on following up with it," he said. Members of the coalition include IBM, Microsoft Corp., the National Association of Manufacturers and Silicon Graphics.

One reason was a rift among the coalition's members on how to proceed and whether duplicative contract vehicles are a problem, he said.

Agencies need more time to develop best practices for running the large procurements, Allen said.


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