Analysis: New guidance creates contracting conundrum

In the span of just two days last week, three government offices issued advice about improving the $550 billion per year federal procurement system long plagued by waste and inefficiency.

On Sept. 14, the Office of Management and Budget outlined in a memo ideas about how to “save money, reduce risk and get better results” from government contracts. On the same day, the Defense Department released guidance for “obtaining greater efficiency and productivity in defense spending.” On Sept. 15, a presidential task force published its recommendations for improving federal contracting opportunities for small businesses.

The flurry of top-level attention is a welcome sign that the Obama administration is serious about reforming procurement at a time of fiscal constraint and budget deficits.

But the recent directives also unintentionally underscore the immediate need for better coordination among agencies and a more coherent reform agenda. Examined side by side, they reveal conflicting guidance that could sow even more confusion in a world so complex it vexes the most sophisticated lawyers and accountants. “The rule set becomes further confusing through these many efforts, and makes me worry what exactly will be the ‘real’ rules as those leading these initiatives depart and new ones arrive,” former Air Force Secretary Michael Wynne said in an interview.

Consider, for example, last week’s guidance about how the government should go about finding the best vendors and suppliers. The OMB memo recommended “pooling the federal government’s buying power” in pursuit of strategic sourcing. The president’s small business task force, on the other hand, urged “strategies to prevent unjustified contract bundling,” or aggregating in one contract supplies or services “previously provided or performed under separate smaller contracts.”

So what should a procurement official do? Create efficiencies and drive cost savings through pooling, or create more opportunities for small business by eschewing bundling?

To be sure, there could be scenarios in which these two policies actually can complement each other, but that’s not necessarily self-evident to procurement officers and others involved in government contracts on a day-to-day basis.

There are other potential conflicts in the directives. All three documents urge data standardization, for example. But the small business task force focuses on a coding system called the North American Industry Classification System while the Defense memo prefers the Product Service Code. And there are other standards out there, such as the United Nations Standard Products and Services Code used in two governmentwide systems. The documents’ diverging guidance on competition and contract types also could confound government contracting officers.

To avoid such confusion there must be better coordination among the offices entrusted with the important work of reducing costs and eliminating waste in federal acquisitions. Here are some suggestions:

• Governmentwide procurement reform should be centrally coordinated, preferably at OMB. That doesn’t mean every initiative must be run from the White House, but there should be enough central oversight to identify and address potential conflicts.
• The implementation of reform initiatives should be formally designed with other efforts in mind. “With the plethora of rules that govern the procurement system, it is important that we provide adequate implementation guidance to avoid creating more confusion on the part of the workforce,” says Steven Kelman, a public policy professor at Harvard University’s John F. Kennedy School of Government and a former administrator of the Office of Federal Procurement Policy.
• The reform must speak in a unified voice. Ultimately, the success of these initiatives rests in the hands of thousands of government professionals, as well as the vendor community. Leadership across all agencies must commit to and deliver the same message with as little ambiguity as possible.

These communication problems are not insoluble, but left unaddressed they could hamper the administration’s admirable and intense focus on improving procurement. The stars do seem to be aligned, for the first time in years, in support of meaningful reform. We must not miss this opportunity.

By Raj Sharma – GovernmentExecutive.com – September 24, 2010 – Raj Sharma is a visiting fellow at the Center for American Progress who focuses on improving government procurement and supply chain management practices.