Fraud continues in small business preference programs

Contractor fraud in small business set-aside programs is difficult to detect and prove, but its annual costs to government are significant in dollars and damage to legitimate business that deserve the work, two federal watchdogs told a House panel Thursday.

In fulfilling the Obama administration’s goal of giving 23 percent of prime federal contracts to small business, agencies need to do better at making a public example of “bad actors” and at vetting contractors that misrepresent their qualifications for minority advantages through self-certification, according to Peggy Gustafson, inspector general for the Small Business Administration, and Brian Miller, IG for the General Services Administration.

They spoke at a hearing of the House Small Business Subcommittee on Investigations, Oversight and Regulations called by Chairman Mike Coffman, R-Colo., who sought to learn why much contractor fraud goes unpunished and unprosecuted.

“Just as we all benefit from small business prime contracting, we all suffer when fraud rears its ugly head,” Coffman said. “Legitimate small businesses lose the ability to perform when contracts go to firms that do not qualify for, or who are not following the rules associated with, the small business contracting program. The government suffers from this fraud because bad actors give all small businesses a bad name, so contacting officers are more reluctant to use the small business programs, which in turn results in less competition and a less vibrant industrial base.”

The set-aside programs consist chiefly of preferences for section 8(a) business development, Historically Underutilized Business Zones, women-owned businesses and the service-disabled veteran-owned program. Both inspectors general testified that their own agencies had fallen victim to fraud. SBA and the HUBZone certification program played a role in the sensational case exposed with the arrests earlier this month involving $20 million in fraud allegedly committed by contractors and two employees of the Army Corps of Engineers, Gustafson noted.

Miller described a recent $6 million contract awarded to a company that claimed to be run by a disabled veteran whose documents said he served three tours of duty during the Vietnam War and received medals and citations. It turned out, Miller said, he was a mechanical engineer serving stateside in the National Guard.

“It’s difficult to prove a monetary loss to the government because it did receive the goods and services,” Miller said. “But the real loss is to program integrity, to the legitimate small businesses that didn’t get the contract.” He added that fraudulent self-certification is difficult to detect and agencies rely on such information in the majority of the preference contract awards because their resources are limited.

“Strong penalties are needed to deter” the fraud, he said. “The tougher it is to detect, the tougher penalties must be,” though the rules should avoid punishing innocent companies simply because of a clerical error, he said.

Gustafson said each type of set-aside has its own level of vetting and the Section 8 program is the hardest for contractors to qualify for. She agreed that agencies could deter more fraud by publicizing their reviews of such programs, which in one instance prompted “contractors to drop out in droves.” It is acknowledged by all IGs, she added, “that the federal government doesn’t use suspension and debarment enough — that hits contractors in the pocketbook.”

Miller noted that GSA has an interactive map on its website providing other agencies with links to state databases reporting contractors that have been suspended or debarred.

Coffman asked whether agencies should take more responsibility for policing fraud. “It’s hard to draw simple rules,” Gustafson said. “Overburdened” agencies focused on awarding contracts are “not expected to know all the ins and outs” of the set-aside programs. Also, “the more difficult the rules are to administer, the harder it is to present the case to a jury,” she said.

But the issue “needs more discussion in the executive branch and guidance from Congress since it’s not always clear who’s minding the store,” she said. “If the programs don’t have integrity, we might as well throw them open to open competition.”

– by Charles S. Clark - Government Executive – October 27, 2011 – http://www.govexec.com/story_page.cfm?articleid=49156&dcn=e_gvet

SAM deployment likely to be delayed; GSA might replace DUNS

A General Services Administration (GSA) effort to consolidate federal online acquisition systems will likely receive no development money during the current fiscal year, causing GSA officials to anticipate a delay in the project.

However, GSA officials are going forward with a planned sources sought notice, to be released shortly, seeking private sector input on the viability of replacing mandatory federal vendor acquirement of a DUNS number from Dun & Bradstreet with a government-generated unique identifier. [Editor's Note: The sources sought was published on Oct. 27, 2011, with response deadline of Nov. 21, 2011.  Details on the sources sought may be viewed at https://www.fbo.gov/?s=opportunity&mode=form&id=4cfa1aa7d67a29f5aeb3146f1cbf4758&tab=core&_cview=0.]

If the government does replace DUNS with its own unique identifier system for vendors, the transition would likely be tied to the third phase of the online acquisition system consolidation effort, said Kathleen Turco, head of GSA’s office of governmentwide policy, during an Oct. 21 interview.

The integration effort seeks to consolidate 9 currently separate systems into one, to be known as the System for Award Management, or SAM. IBM received a $74.4 million contract in 2010 to develop the SAM architecture; part of the consolidation effort includes unifying the currently disparate databases into a single, unified one.

Because GSA received $7 million in development funds during fiscal 2011, which ended on Sept. 30, it will be able to proceed with the first phase of the consolidation, which will tie together Central Contractor Registration, Online Representations and Certifications Application and the Excluded Parties List System.

Starting in May, front-end users will find that they have to log onto SAM only once to access the functionalities of all three systems, Turco said.

However, a request for $15 million in development, modernization and enhancement money for the current fiscal year has bumped up against spending constraints; the Senate Appropriations Committee markup of GSA’s fiscal 2012 spending bill denied the request in total. The House version would appropriate about $3 million in DME money for the project, Turco said. Congress has yet to pass any fiscal 2012 appropriations bill; the federal government is operating under a continuing resolution that expires on midnight of Nov. 18.

As a result of the House and Senate marks, Turco said GSA will likely postpone roll out of phase 2, under which GSA plans to consolidate FedBizOps, the Electronic Subcontracting Reporting System, and the Assistance Program Catalog. Originally, GSA had planned to unveil that phase in the spring of 2013; if GSA receives sufficient funding for fiscal 2013, it would be able to complete that phase in spring 2014, Turco said.

The third phase would consolidate FPDS , Wage Determinations Online and the Past Performance Information Retrieval System. The earliest phase 3 could now be completed–it was originally planned for spring 2014–is now spring 2015, Turco said.

It’s in conjunction with phase 3 that GSA would likely also transition from using DUNS as a unique vendor identifier to a government-generated number, if GSA decides to do so, Turco added.

Vendors wishing to do business with the government must receive a unique identifier–in some cases, more than one, depending on the number of physical locations and legal divisions a company has–and GSA has long contracted with Dun & Bradstreet for government vendors to receive Data Universal Numbering System identifier for free.

But, the government pays Dun & Bradstreet $18 million a year for the service, making it the single most expensive element of the Integrated Acquisition Environment, the name GSA gives to 9 systems set for consolidation into SAM.

“We’ve had a lot of push on us from the Hill and many vendors have said to us ‘Why is it only Dun and Bradstreet?’” Turco said.

However, replacing DUNS would be no easy task, she acknowledged, since DUNS are used in financial systems to pay vendors and have become deeply integrated into IAE feeder systems.

– by David Perera, Fierce Government IT, Oct. 24, 2011 – http://www.fiercegovernmentit.com/story/turco-sam-deployment-likely-be-delayed-gsa-might-replace-duns/2011-10-22?utm_medium=nl&utm_source=internal

House subpoenas four agencies for small-business noncompliance

Four federal agencies were issued subpoenas by the House Small Business Committee on Oct. 20 for not complying with the Small Business Act’s procurement policies, according to a committee staffer.

The departments of Justice, Agriculture, Treasury and State were summoned to appear before the the Small Business subcommittee on contracting and workforce on Nov. 1 to testify why they are in noncompliance.

At issue is the “structure” of these agencies’ Small and Disadvantaged Business Utilization Offices (OSDBU) and “the fact that they are not reporting to the agency head or deputy head,” wrote Darrell Jordon, house committee spokesman, in an e-mail to Washington Technology.

OSDBUs were conceived in 1978 with the purpose of having federal agencies set aside contracts for small and disadvantaged businesses. The Small Business Act also has requirements that agencies report their procurement activities with small and disadvantaged businesses.

Justice, Agriculture, Treasury and State were warned of their missteps and given a chance to remedy the situation after a June Government Accountability Office small business contracting report found seven agencies not in compliance.

Following that report, letters to agencies were sent by subcommittee Chairman Mick Mulvaney (R-SC). As a result, the Interior Department and Social Security Administration are now in compliance, and a third, the Commerce Department, was pardoned due to an administrative issue.

In September, agencies were reminded of their noncompliance by memo and a hearing was held on Sept. 15 by the subcommittee to examine the GAO report and the economic impact of noncompliance.

As part of the subpoena procedure, the four agencies must produce a number of documents, including paperwork relating to their small business procurement programs, attainment of small business goals or challenges to decisions not to restrict competition to small business between Jan. 20, 2009, and Sept. 30, 2011.

About the Author: Alysha Sideman is an online content producer with 1105 Government Information Group. Published by Washington Technology – Oct. 21, 2011 at http://washingtontechnology.com/articles/2011/10/21/small-biz-committee-subpoenas.aspx

Obama opposes ban on contracts with tax-delinquent contractors

Obama administration officials are concerned that a Senate appropriations bill would hinder agencies’ ability to make informed decisions about contracting with tax-delinquent companies.

The administration agrees that a provision in the Senate’s fiscal 2012 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act (H.R. 2112) combats waste and fraud in the government marketplace. However, officials warn that the bill, as it reads currently, would hurt contracting decisions.

Like a version recently passed by the House, the Senate bill would prohibit agencies from awarding contracts to companies with unpaid federal taxes. But the Senate version would go further by barring the award of a contract or grant worth more than $5 million if a company cannot certify it has paid its taxes in the last three years or has not been convicted of a tax-related crime. A company cannot even have received a notice of an unpaid tax assessment in the previous three months, unless it’s being paid off.

“As written, the provision would deny agencies the ability to make informed decisions about contracts, grants, and other federal assistance,” according to an Oct. 17 statement of administration policy. “It thus risks causing unintended consequences that could translate into unwarranted penalties on businesses and unjustified costs on taxpayers.”

In 2010, President Barack Obama moved against contractors who don’t pay their taxes. He called on officials at Treasury Department, IRS, and the Office of Management and Budget to find ways to share more information across departmental lines to keep tax delinquents out of the federal marketplace. This summer the president launched the Campaign to Cut Waste, led by the vice president, which coincides with the emphasis on doing business with contractors of good standing.

Tax delinquent contractors are a problem. In May, the Government Accountability Office reported that at least 3,700 federal contractors that received economic stimulus law funds owe $757 million in unpaid federal taxes.

The Senate has been considering the bill, but has not passed it yet. The House passed its version in June.

About the Author: Matthew Weigelt is a senior writer covering acquisition and procurement for Washington Technology.  Published Oct. 24, 2011 at http://washingtontechnology.com/articles/2011/10/24/senate-appropriations-bill-tax-delinquent-contractors-obama.aspx?s=wtdaily_251011.

Procurement chief defends Obama’s commitment to small business

A proposed rule to curb agencies’ little used capacity to offer higher payments to needier contractors “will have no impact on the government’s ability or commitment to drive contracting opportunities for small disadvantaged businesses,” Dan Gordon, administrator of the White House Office of Federal Procurement Policy, said Friday.

In a blog post for the Office of Management and Budget, Gordon sought to reassure some in the minority business community that a proposed regulation issued in September by the Small Business Administration is a routine “housekeeping” tool designed to catch the law up with a 2008 court ruling that declared such price premiums unconstitutional.

“The proposed rule in no way changes the fundamental policies, practices or programs that agencies have been using in recent years to achieve strong SDB participation in the federal marketplace, including the goal of awarding 5 percent of federal procurement dollars to SDBs,” Gordon wrote.

The affected agencies — the Defense Department, NASA and the U.S. Coast Guard — have not used price premiums to attract disadvantaged small contractors in years, Gordon noted. But the administration has “been working with the Minority Business Development Agency to strengthen the bond between contracting, small business and program offices at every agency,” Gordon wrote. “Since the beginning of [fiscal] 2009, agencies have awarded more than $85 billion in contracts to SDBs, exceeding the goal of awarding at least 5 percent of contract dollars to SDBs.” In fiscal 2010, he added, contract awards to small disadvantaged businesses accounted for 7.95 percent of all eligible contract dollars, “well above the goal.”

Gordon’s clarification came as the Obama administration readied a new set of executive actions designed to spur job creation in large and small businesses while Congress debates the president’s larger proposed jobs package.

The perception among some that ending premium payments to disadvantaged businesses was a pullback in the administration’s commitment was rejected by Molly Brogan, vice president of public affairs for the National Small Business Association. “At the end of the day, small businesses just want a level playing field,” she told Government Executive. “Ensuring that small businesses — including SDB businesses — have a fair opportunity to compete for federal dollars ought to be the No. 1 goal. We don’t believe this new rule will change [that] in any way.”

Raul Espinosa, founder of a Jacksonville, Fla. – based university nonprofit called the Fairness in Procurement Alliance, which has been pressing for stronger rules on accelerating payments to small disadvantaged businesses, said he was grateful for the administration’s overall effort, but worries it might be “lip service.” Changes “will mean nothing unless they’re codified into the federal acquisition regulation and referred to in actual contracts,” he said.

–  by Charles S. Clark - Government Executive - October 24, 2011 – http://www.govexec.com/story_page.cfm?articleid=49130&dcn=e_tma

GAO strikes down part of cloud e-mail RFQ

The Government Accountability Office on Monday struck down part of a blanket bid solicitation for cloud computing services that protesters claimed would unfairly restrict them from storing government data including email and records management systems in cloud facilities abroad.

A May 9 General Services Administration request for quotation for government cloud services stated bidding agencies could store government information abroad but only in countries designated under the 1979 Trade Agreements Act.

That list includes war-riddled nations and failed or failing states such as Somalia, Yemen and Afghanistan, the protesters pointed out, but restricts some major tech havens, such as India, Brazil and South Africa.

GSA had wanted to prohibit storing any government data outside the U.S. but was told by the United States Trade Representative that position would violate numerous trade agreements. The two agencies settled on the TAA list as a compromise that saved GSA from developing a country-by-country analysis of where data could be stored and where it couldn’t be, according to Monday’s decision. The result, though, was an arbitrary list of approved nations that couldn’t stand up to reasonable scrutiny, GAO said.

The agency recommended that GSA amend its RFQ to include a more reasonable rule and re-open the bidding.

The government has embarked on a massive program to move roughly one-quarter of its $80 billion information technology budget to Internet-based cloud storage, a move officials say will save the government $5 billion annually.

– by Joseph Marks – NextGov.com – 10/17/11 at http://techinsider.nextgov.com/2011/10/gao_strikes_down_part_of_cloud_email_rfq.php?zone=NGtoday.

Coast Guard commandant girds service for possible budget cuts

Adm. Robert J. Papp Jr., commandant of the Coast Guard, is determined not to repeat the pitfalls of the past.

The service has already lived through an era of declining budgets. In the 1990s, the Coast Guard lost some 6,000 personnel as its top line funding took hits year after year.

“I understand fully what it is like to be in a declining budget situation,” he told National Defense magazine. “I know everyone in the government has to tighten their belts.  The president has asked us to do that. What I would like to do is hold on to what we have.”

The mistake made during the 1990s was the decision to sacrifice support personnel in order to keep the Coast Guard on the frontline carrying out its plethora of duties such as drug interdiction, security, search and rescue, and environmental and fishery enforcement.

“If there is any lesson to be derived from that as we go forward, it’s that I’m not going to hollow out our force,” he said.

The last 10 years have been a mixed bag for the Coast Guard. It benefited from the post-9/11 federal budgets, which saw increases for agencies involved in homeland security. It regained most of those 6,000 lost personnel. But its major ship and aircraft acquisition program, the Integrated Deepwater System, suffered cost overruns and delays.

The root of those problems came in the 1990s, when many acquisition personnel were let go. “If you’re going to sustain operations, continue to rescue people, do drug interdiction and everything else. What do you cut? Generally you cut support,” Papp said.

By the time the money to purchase new boats, aircraft and the electronic backbone of sensors and communications gear that go with them started flowing after 9/11, the service did not have an adequate work force to oversee the complex, multi-billion dollar project.

“If we face reductions in the future, it’s going to have to come across the board in terms of cutting back on frontline operations in addition to those support activities as well. I’m hopeful that won’t happen,” he said.

To make up for the lack of contracting and management experts, the Coast Guard hired a Lockheed Martin-Northrop Grumman joint venture called Integrated Coast Guard Systems to run the project. After the cost overruns began to mount, the service fired the company, and took the reins of the program. By that time, it was becoming increasingly hard to find experienced acquisition experts, especially those who specialized in shipbuilding.

The Coast Guard has worked hard to hire and train these kinds of contract specialists, and Papp said he is “delighted” with the progress the acquisition cadre has made.

“I’m willing to stack up our acquisition work force against any other agencies in government in terms of their commitment, their talent and in terms of their getting a good return on investment,” he said.

The name “Deepwater” is no more, he added. One reform was to disaggregate the so-called “system of systems” — the myriad ships, boats, aircraft and information technology infrastructure that made up the program — and create a separate budget line and manager for each
platform.

If the Coast Guard enters another era of declining budgets, the service will not be gutting any one department, he said.

This may ultimately mean fewer hours dispatching ships and aircraft to carry out missions.

“A lot of times people ask me, ‘What missions are you going to cut if you don’t get the support you need?’” Papp said.

Most Coast Guard missions are mandated, he noted. “I, as the commandant, can’t say, ‘We’re not going to do a mission.’ Or ‘We’re going to cut a mission.’”

The fact is that even on the best days, the service cannot do 100 percent of its missions 100 percent of the time. Every day, it makes tradeoffs, he said.

Regional commanders decide on a daily basis which assets will go where and perform which duties. So a drug interdiction task force that normally has four Coast Guard boats assigned to it, may in the future have only three, he said.

As for reducing the number of new ships and aircraft, Papp is optimistic that it won’t come to that.

Key for the service is the acquisition of the 418-foot national security cutters, the most technically advanced and largest of the service’s ships.

The 378-foot high-endurance Hamilton-class ships they are replacing are 40 years old “and literally falling apart,” he said. Three of the new cutters have been built and are afloat. Construction is beginning on the fourth vessel, and a contract was just awarded for number five. There is funding in the fiscal year 2012 budget to buy long-lead material for number six.

The Office of Management and Budget has signed off on a capital investment plan for the next five years that shows numbers six, seven and eight included, he said. “I’m optimistic that we will get it done. We need to get it done and I’m committed to getting those eight ships built.” Some experts who watch the Coast Guard aren’t so sure.

James Jay Carafano, a national security analyst at the Heritage Foundation, said the cutters are at risk.

“I do think that they are fighting a rear guard action with OMB, which would love to see the national security cutter go away,” he said. The OMB’s opposition has nothing to do with the ships themselves, or the requirements to operate them, it’s just a budget target because of their high price tags, he said.

The contract for the fifth boat totaled $482 million.

“They are critical,” Carafano said. “They are the hub of the spoke that allows the Coast Guard to operate in a number of different environments.”

Joe Carnevale, senior advisor to the Shipbuilders Council of America, said the Coast Guard is also ramping up to develop and acquire the offshore patrol cutter, which Papp has said is “critical to long-term effectiveness.” Current plans call for up to 25 of the sleeker, faster boats.

“I don’t think there will be enough money in the budget to fund procurement of both those cutters at the same time,” he said.

The Coast Guard has published some initial requirements for the offshore patrol cutters, and from what Carnevale has seen, they would make for an expensive ship, roughly half of what a national security cutter costs. An industry day was held in 2010 and the service is conducting market research to see what companies have to offer.

Some of the preliminary specifications the Coast Guard is asking for are “significantly greater” than those of the 210-foot and 270-foot cutters
currently in use, he said. The proposed cutters may have to sail at higher speeds, and would deploy more small boats. That increases deck space and, therefore, the price tag.

“If the requirements get out of hand, the cost is going to go up too much,” he said.

Meanwhile, these larger ships are prime targets for those wielding a budget ax.

“The cost of the civil servants and uniformed personnel who work on these programs is in the noise level,” Carnevale said. “You’re not talking a billion dollars in personnel costs to manage these programs. I don’t think the Department of Homeland Security gets much in terms of savings by eliminating a few civil service positions.”

Papp said that all indications he is receiving during the budget drills show that the Coast Guard is “doing okay.”

“We are making sure that we are doing our absolute best that there is no fat in our budget. We are looking at administrative costs, travel, things like that, to get every dollar we can devoted to frontline operations and rebuilding our infrastructure.”

However, the service may not be able to acquire new ships, boats and aircraft as quickly as it would like, he added.

He noted that the $482 million contract the Coast Guard signed for the fifth national security cutter is only $2 million more than what it paid for number four. The negligible cost increase is an indication that the service has overcome the acquisition work force woes of the past.

“That sends signals to both the administration and members of Congress that you have a good, mature, stable program that can be invested in and not only does it provide us capability and reliable new ships, but it also provides jobs to the public, to this work force, and the economy that is suffering right now,” Papp said.

Carafano said the Coast Guard, like all federal agencies, may have to spend the next two years treading water as far as funding. After the next presidential election, the outlook may change. As for near term cuts, simply eliminating major acquisition programs, or trying to reduce personnel numbers, doesn’t happen overnight. That takes years, he said.

That leaves easy-to-chop items such as training, maintenance and operations. Cutting back on those would erode the operational capability of the Coast Guard, he said.

Does the general public understand that budget cuts may lead to more drugs on the streets, or a service that is less capable of launching search-and-rescue missions?

“Of course, they don’t. Nope. Nobody thinks about that,” Carafano said.

Other programs have not garnered the media attention, or the dollars, that the program formerly known as Deepwater has received.

Ice breakers that operate in the Arctic and boats that conduct missions on rivers are two examples. Also, the Coast Guard’s backlog of shore infrastructure projects has reached $2 billion, Papp said.

Despite the increase in personnel over the last decade, and the large amounts of money going into Deepwater, the Coast Guard still has
recapitalization needs “that would make you cry,” said Carafano.

Papp said some of the Coast Guard boats that operate on navigable rivers such as the Ohio, Missouri and Mississippi are 60 years old, and maintaining and finding spare parts for them is expensive. But when faced with tough choices to replace one of them or a ship that operates on the Bering Sea with its large swells, for example, the choice is where the crew’s safety is most at risk.

Papp’s predecessor, retired Adm. Thad Allen, also made a point of calling attention to the Coast Guard’s small fleet of icebreakers. There are three. One medium icebreaker, the Healy is about 10 years old. But the two larger ones, the Polar Star and Polar Sea, are antiquated. The Polar Sea recently sustained significant damage to its engines and is not operational. The Coast Guard has received $67 million to refurbish Polar Star, using some parts from its laid-up sister ship, and it is expected to be operational in 2013. One medium and one heavy icebreaker should be enough to operate in the Arctic for the next 10 years, Papp said.

“That is ample time for our country to make decisions on what it wants to do in terms of recapitalization,” he said.

There is increasing activity in the region as the ice cap recedes. Two oil companies will start drilling there soon, Papp said.

“In order to have an effective presence, in order to have a year-round presence, we have to have ice breakers. I’m trying to make the case that we have to sustain the ones we have and make plans for replacements,” Papp said.

As for the on-shore infrastructure, legislation was recently passed that allows the Coast Guard to sell excess property and plow the money back into new buildings.

“We have some real nice property that we don’t necessarily need anymore and if we sell them we can reinvest that in projects inside the Coast Guard,” he said.

One of the first pieces of property sold was the $2 million commandant’s home in Chevy Chase, Md. Papp found alternative housing for himself at Bolling Air Force Base, near Coast Guard headquarters in the District of Columbia. The $2 million garnered will be used to refurbish enlisted personnel housing. First Lady Michelle Obama, who has taken an interest in improving the living conditions of military service members and their families, also helped the service get a $20\ million appropriation for housing programs.

But cuts are coming somewhere, Carnevale warned.

“Both the Departments of Defense and Homeland Security will have to make significant budget cuts. Where they do that remains to be seen,” he said.

– by Stew Magnuson for National Defense magazine, November 2011 at http://www.nationaldefensemagazine.org/archive/2011/November/Pages/CoastGuardCommandantGirdsServiceForPossibleBudgetCuts.aspx.

What’s really behind wasteful contracts?

In its Aug. 31 final report, the Commission on Wartime Contracting raised a number of important questions about project planning, coordination, oversight, and the importance of organizational and human capital strategies.

But its two most resonant messages were the substantial waste the commission suggests (as much as 20 percent of the total $200 billion in expenditures) and its conclusion that there was an “over-reliance” on contractors. Given the centrality of these issues to future U.S. contingency operations, both deserve additional discussion.

With regard to waste, there can be no doubt that the issues identified are real and should be of concern. That said, as the U.S. comptroller general testified a few years ago, the term “waste” has multiple meanings and causes. While no waste is desirable, some waste clearly results from poor agency planning and execution. But in a contingency environment especially, other “waste” is often driven by the messy realities of the environment itself. Unfortunately, this critical distinction is inadequately addressed in the report.

For example, the report chides the government for flying supplies into Afghanistan using substantial numbers of security personnel, and for sustaining work crews for projects like the Kajaki Dam in Afghanistan. Missing from the commission’s discussion is any acknowledgement of the difficulty, if not impossibility, of using overland transportation to move supplies across Afghanistan; the threat environment that drove the security requirements; or the lack of alternatives to providing life support for the workforce involved.

While some efficiencies could, and possibly should, have been executed, the dynamics of the environment inevitably drove less than optimal solutions. Similarly, there have been numerous circumstances where security concerns or other factors unrelated to a given project impacted project timelines, implementation and costs.

Wasteful? Perhaps. But not necessarily in the way the commission portrays it.

A similar dichotomy exists with regard to the commission’s conclusion about an over-reliance on contractors. The report appropriately identifies shortfalls in the numbers of government personnel with the right skills in the war zone, leading to cases in which contractors performed some functions that, in more benign circumstances, should have been performed by federal employees. Yet, the report’s focus on an “over-reliance” on contractors misconstrues the issue.

To the extent the commission was focused on the core human capital requirements to support a contingency operation (i.e., acquisition and related capabilities), there may well have been some “over-reliance” on contractors. The Gansler Commission, among others, spoke eloquently to this challenge in its 2008 report.

But this commission went further, challenging the use of contractors more broadly and even prescribing specific workforce ratios and structures. Hence, while the report acknowledged that future contingency operations of this scale will continue to require substantial contractor support, and even recognizes that in most cases the cost of contracted support is less than the alternatives, it also sends a strong, broader message that overall contract support can and should be minimized.

However, the real issue is not the number of contractors — which is driven by the nature and scope of an operation (and Iraq and Afghanistan are huge by any measure) — but rather the lack of attention given to the government infrastructure needed to effectively award and manage contracted operations.

Workforce balance will necessarily be driven by a variety of factors, including both the scope of inherently governmental functions involved and the cost and viability of creating permanent government positions to support unknown and uncertain future contingencies. Therefore, our focus should be on strategically addressing the government’s capabilities, rather than preconceived or arbitrary numbers or ratios.

No objective assessment of contingency and reconstruction activities in Afghanistan and Iraq can deny the evident problems, whether they involve contractors, non-governmental organizations, or the government itself.

But effectively addressing these challenges in the future requires that we recognize the unique and constantly changing demands of a contingency environment, the differences between contingency and “routine” sustainment, and more.

From that perspective, the commission’s report comes up short. But that’s why the report’s conclusions are called recommendations. By definition, they merit much additional discussion.

About the Author: Stan Soloway is president and chief executive officer of the Professional Services Council.  Published Oct. 14, 2011 at http://washingtontechnology.com/articles/2011/10/03/insights-soloway.aspx?s=wtdaily_171011.

OMB optimistic on effort to change contracting mentality

Office of Management and Budget officials believe agencies are ready to collaborate on multi-agency contracts in order to squeeze the most value out of their funds and lessen their employees’ workload.

“Particularly in this tight budgetary environment, agencies have told us they are eager for tools that can help them stretch a dollar further and do more with less,” Moira Mack, a spokeswoman for OMB, said Oct. 5.

Agencies have dealt long enough with interagency contracts that duplicate one another, Mack said.

“We’ve heard from both contractors and federal employees that, for too long, limited staff time has been wasted setting up dozens of duplicative contracts for the exact same items and services,” she said.

Dan Gordon, administrator of the Office of Federal Procurement Policy, issued a memo in September requiring officials to justify interagency contracts and blanket purchase agreements before investing a lot of time in planning for the procurement. A potential interagency contract would first have to get approval from a senior procurement executive or chief acquisition officer.

Officials would also have to search through a federal website listing proposed interagency contracts. If they find one that suits their need, they should cancel their own contract idea. If no contract suits the need, they should gather support from among the agencies to determine interest in the community, which can possibly lead to bulk buying.

However, experts told FCW that OFPP will struggle with parts of its recent guidance on awarding new interagency contracts and building business cases for proposals.

Robert Burton, former deputy OFPP administrator and now partner at the Venable law firm, said Gordon’s guidance may push agencies toward curbing their own interagency contract awards. He said officials will avoid the homework that OFPP requires to write a business case for an interagency contract or a BPA.

Until now, only governmentwide acquisition contracts, which are for IT products and services, required business cases and approval from OFPP.

On the other hand though, the guidance could possibly cause agencies to launch stand-alone contracts without economies of scale, Burton also said. Agencies don’t like to lose control of their operations or money, and they don’t like paying a fee to use another agency’s contract.

Experts also said OFPP will have its hands full in getting agencies on board with the initiative. For instance, agencies may not jump on the idea of going to a website to see what other contracts are available already. Or agencies may use their writing skills to make a proposed contract seem justified. Mack disagreed though.

“The suggestion that agencies would avoid doing reasonable comparison shopping and cost benefit analysis is dead wrong,” she said. “This guidance will help agencies stop wasting time reinventing the wheel.”

She added that OFPP left out a lot of the bureaucracy to encourage agencies in the effort.

In a post on the OMBlog from Sept. 29, the day the OFPP guidance came out, Gordon wrote that agencies have not received the advantages of bulk buying because purchasing wasn’t done in concert.

“Too often in the past, agency spending for many commonly used items was fragmented across multiple departments, programs, and components, which means that agencies often spent time writing hundreds of separate contracts, with pricing that varies widely,” he wrote.

Mack said agencies have started to buy in bulk in recent years and most recently through governmentwide strategic sourcing contracts for office supplies and domestic shipping.

About the Author: Matthew Weigelt is a senior writer covering acquisition and procurement for Federal Computer Week.  This article appeared on Oct.  6, 2011 at http://fcw.com/articles/2011/10/06/ofpp-interagency-contract-guidance-success.aspx.

SBA proposals could make small-biz credit easier to get

The Small Business Administration is considering changes to its rules that would allow an agency spending its money through a task or delivery order to chalk up the awards to its own subcontracting plans, according to a Oct. 5 Federal Register notice.

Agencies could start to get credit toward their annual small-business subcontracting goals for their orders placed against multiple-agency contracts, a perk for agencies as procurement policy officials push strategic sourcing.

Each agency has to set its own annual goal to make sure that various types of small businesses have an opportunity to participate in its contracts.

Currently though, when purchases come through an inter-agency contract, the agency that holds the contract gets the credit. That applies to the General Services Administration Schedules contracts too.

For example, consider an agency that places an order against a governmentwide acquisition contract. Say a large company gets the award and subcontracts some of the work to a small business subcontractor. The agency that hosts the GWAC gets the credit for hiring a small business, not the agency placing the order.

Prime contracts work differently. If an agency awards an order placed on a GWAC directly to a small business, the purchasing agency gets the points.

Agency officials have told SBA they would like to get the small-business subcontracting credit when they’re spending the money. SBA is also considering giving discretion to the contracting officer from the agency that’s placing the order to establish the subcontracting goals related to the individual orders.

Officials also want real-time insight into subcontracting on interagency contracts. Contractor may have to report their subcontracts with small businesses to the host agency’s contracting officer for each order.

Currently, contractors are reporting to the agency twice a year at the most.

“Reporting on an order-by-order basis will allow the funding agency to receive credit towards its small-business subcontracting goals,” SBA writes in its proposal.

SBA is taking input on the proposal through Dec. 5.

In light of SBA’s changes, Dan Gordon, administrator of the Office of Federal Procurement Policy, has pushed agencies to think beyond their own purchasing and, instead, buy with the government in mind.

Strategic sourcing gives the government leverage over the contractor in setting prices. A greater quantity of potential orders encourages contractors to lower prices.

Office of Management and Budget officials believe agencies want to use more interagency contracts in order to squeeze the most out of their funds and lessen their employees’ workload.

“Particularly in this tight budgetary environment, agencies have told us they are eager for tools that can help them stretch a dollar further and do more with less,” an OMB spokeswoman said Oct. 5.

SBA’s proposed change may make subcontracting goals slightly easier to meet, especially if agencies are turning more toward the interagency contracts, said Ken Dodds, senior attorney at SBA.

He said agencies would find it more difficult to meet subcontracting goals if they didn’t credit.

About the Author: Matthew Weigelt is a senior writer covering acquisition and procurement for Washington Technology. This article appeared Oct. 12, 2011 at http://washingtontechnology.com/articles/2011/10/12/sba-subcontracting-credit-multiple-agency-contracts.aspx?s=wtdaily_141011.