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By Nick Wakeman

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Nick Wakeman

Obama’s memorandum opens a new era of procurement reform

I’ve become somewhat conditioned over the last couple of years to think that critics who paint government contractors as evil are at best uninformed or at worst motivated by some other agenda.

As I read President Barack Obama’s memorandum on government contracting a red flag went up when I saw that he was lumping solo-source contacts together with contracts that have a limited field of competitors.

To quote the memo: “Excessive reliance by executive agencies on sole-source contracts (or contracts with a limited number of sources) and cost-reimbursement contracts creates a risk that taxpayer funds will be spent on contracts that are wasteful, inefficient, subject to misuse, or otherwise not well designed to serve the needs of the federal government or the interests of the American taxpayer.”

Am I wrong in reading the “limited number of sources” part as meaning task-order contracts where contractors have gone through a competition to see if they qualify for the work?

These kinds of contracts make good business sense to me. The field of competitors has been narrowed and then as the government has tasks to be performed, this limited set of companies bid and compete against each other for the work. There is actually two levels of competition.

But after that red flag, I think the Obama administration is headed in a healthy direction. And it sounds like it is taking a reasonable approach.

Two examples:
1. He says: “There shall be a preference for fixed-price type contracts. Cost-reimbursement contracts shall be used only when circumstances do not allow the agency to define its requirements sufficiently to allow for a fixed-price type contract.”

That last part is worth focusing on because a fixed-price contract only works for the government and the contractor if requirements can be well defined.

Defining requirements has long been a shortcoming in the government. Executives have complained to me that customers often can’t articulate what they want.

Perhaps the Obama memo will lead to more resources for requirements development and definition.

2. The memo directs that agencies get help to properly manage procurements.

This is an often-repeated theme from the Obama administration, and it is a clear-eyed acknowledgement that the agencies in their current states don’t have enough people and resources to manage the volume of procurements.

It would be nice if there was a specific mention of the need for more program management support, but you can’t have everything.

The memo is a step in the right direction. But what it will mean will have to wait until the administration and the agencies define things such as “inherently governmental” or “sufficient.”

Let’s hope the administration doesn’t spend the time spent between now and Sept. 30 when the guidance comes out in a vacuum.

The last thing anyone needs — particularly taxpayers — is for a policy to get thrown over the transom without input from a wide variety of players in government procurement, including the private sector.

Posted by Nick Wakeman on Mar 04, 2009 at 9:53 AM

Reader Comments

Thu, Mar 5, 2009 antbird New Orleans

You did not mention that a lot of cost plus contracts are the result of incrementally funding contracts. The FAR specifically prohibits incrementally funding fixed priced contracts. The other problem is the fallacy that Fixed priced contracts will save the World. They don't. I worked on a tiger team at a major systems command on settling claims. We did an analysis on what the common denominators were for claims. Number one on the list was fixed priced development contracts. Two of the claims exceeded $500M.

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