COUNTERPOINT: Commercial buying practices not in danger

Marsha Madsen

The sky is not falling.

The "Buy Lines" column in the Jan. 30 issue ("For 2006, troubling signs on the horizon") about the Acquisition Advisory Panel raised false alarms that are not supported by the panel's work or any law.

The column assumed that "commercial" rules for government contracts reflect best practices for commercial buyers, and that any potential change signals a retreat from commerciality. Both the premise and the conclusion are mistaken.

The panel was tasked with, among other things, examining commercial practices and how the government might benefit from them. A premise of the panel's work is that government access to the commercial market is critical.

No one is proposing to roll back Federal Acquisition Regulation Part 12. The government must take advantage of the best commercial practices. The panel has received extensive testimony from more than 90 witnesses, including large private sector buyers of IT and business services.

Early on, the panel decided its analysis would hold no favored perspectives, but instead would examine commercial practices and assess how the government could use them. The Buy Lines column, however, appeared to assume that what it means to operate in a commercial-like manner was determined for all time a decade ago. That view is antithetical to the notion of commercial-like, because the commercial marketplace constantly changes and adapts.

Private sector buyers testified that the cornerstone of commercial buying is head-to-head competition based on a well-researched, thoughtful statement of requirements that has strong institutional support.

Witnesses said that best commercial practices include:
  • Fixed-price contracts for services wherever possible

  • Contract terms of between three and five years for technology-heavy buys

  • Standardized terms and conditions that buyers and sellers accept as fairly allocating risk

  • A structure to manage change

  • Recognition that the seller is entitled to make a profit.

Witnesses told the panel that this approach produces better value, reduces cost, encourages innovation and delivers better results. A smaller skilled workforce can manage procurements.

The "Buy Lines" column argued that preliminary proposals by the panel's commercial practices working group alter the "fundamental" concept of a commercial item or service in government contracting. The column alleged that this concept involves consideration only of the type of product or service and to whom it is sold, and cannot consider price or terms offered in the commercial marketplace.

That view is at odds with the law and the history behind the definition of a commercial item. The statutory definition of a commercial item repeatedly refers to sales in the commercial marketplace. For services, it mentions sales under standard commercial terms and conditions.

Commercial transactions do not occur in a vacuum, but in a competitive marketplace. Based on the testimony, the panel is keenly interested in competition and how to make it work better for the government.

The panel's working group also is considering how to deal with circumstances when competition is not practical or when the seller has no commercial business. It has reached no conclusions, but the working group is trying to achieve balance in determining the basis upon which prices can be established. The panel has adopted no recommendations, but is seeking information from all available sources.

Just because the panel is focusing on today's commercial practices, rather than clinging to a decade-old approach, does not mean it is rejecting the precept that the government can and should benefit from best commercial practices. The sky is not falling on commerciality, but there may well be new and better solutions in the private sector. The panel is open to exploring them.

Marcia Madsen is chair of the Acquisition Advisory Panel. She is a partner at the Washington office of the law firm Mayer, Brown Rowe and Maw.

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