Outsourcing at the local level: Examining the role of the Chief Procurement Officer in the decision-making process

Outsourcing in the public sector means “contracting out” functions that  historically have been provided by public employees. The belief that there are  functions best performed by the private sector is not new, and moving these  functions from the public to the private sector requires a fair and open process  in the public’s best interest.

The Institute for Public Procurement recognizes that the outsourcing of  particular governmental functions can be a fiscally sound tool of responsible  public administration. However, identifying and assessing the elements of public  performance most appropriate for outsourcing — and ensuring a successfully  executed outsourcing decision – is a substantial challenge for everyone.

Public procurement offers a uniquely qualified and professional resource for  government decision-makers considering outsourcing alternatives. The Chief  Procurement Officer (CPO), Procurement Director or Purchasing Manager serves a  strategic role in a public entity’s decision to outsource. The CPO is central to  a fair, transparent and effective outsourcing process. While the decision is  ultimately reserved for an elected body or senior executive, the CPO is prepared  to provide informed insight on market structure, cost, risk, competitive methods  and contract form as these factors impact the quality and cost of services. The  CPO is uniquely positioned to help design and manage a process to achieve a  successful public outsourcing effort. It is therefore important to engage the  CPO early as a strategic partner to assess and to administer any ensuing  selection and contract formation process.

Keep reading this article at: http://govpro.com/resource_center/procurement_prof/public-sector-outsourcing-201212-201301/

Acquisition workforce unprepared for challenges of sequestration

Most federal acquisition professionals are not prepared to quickly renegotiate contracts or handle other responsibilities if automatic budget cuts take effect next month, according to a survey released Monday, Dec. 17, 2012.  

Sequestration — the automatic spending cuts required if Congress and the White House fail to agree on a deficit reduction plan by Jan. 2 — would require acquisition employees to quickly renegotiate, cancel or change the scope of contracts. Of the 40 federal officials surveyed, including senior acquisition executives, contracting professionals, congressional staff and representatives from the oversight community, 60 percent said those skills were weak or nonexistent in the acquisition workforce.

Sequestration “will present a host of issues, such as contract terminations. There is the potential for millions in broken contracts, so this is a critical area,” one survey respondent said.

Keep reading this article at: http://www.federaltimes.com/article/20121217/ACQUISITION02/312170004/Acquisition-workforce-unprepared-challenges-sequestration?odyssey=nav%7Chead.

See survey at: http://www.pscouncil.org/i/p/Procurement_Policy_Survey/c/p/ProcurementPolicySurvey/Procurement_Policy_S.aspx

Agencies should file better reports on their service contracts, GAO says

The Obama administration’s effort to better calibrate which functions are inherently governmental and which are better contracted out will require improvements in agency inventories of service contracts, according to a new Government Accountability Office report.

Forty eight of the 49 agencies that GAO reviewed had filed the required lists of their contracts for such services as professional management support, information technology support and medical support, which together totaled $126 billion in fiscal 2011. But due to differing methodologies among agencies, the Office of Management and Budget and Congress could not “meaningfully use these service contract inventories to compare service contract obligations among agencies or develop spending trends,” the report said, adding, “agencies did not have a complete universe of service contracts to consider for review.”

Keep reading this article at: http://www.govexec.com/contracting/2012/09/agencies-should-file-better-reports-their-service-contracts-gao-says/58451/?oref=govexec_today_nl 

Senators to DOD: Use more of your own employees

Defense Secretary Leon Panetta received a letter from 26 senators April 25 who urged him to use more civilian employees instead of contractors.

The senators, led by Sherrod Brown (D-Ohio) and Kirsten Gillibrand (D-N.Y.), wrote that they understand the need to cut back on civilian employees because of tightened budgets. However, they raised concerns that the private sector wasn’t given similar constraints.

Keep reading this story at: http://fcw.com/articles/2012/05/02/senators-dod-workforce-constraints.aspx.

GAO reports Defense Department barely moving toward a comprehensive service contracts database

Earlier in April, the Government Accountability Office (GAO) released the second in a series of new, congressionally mandated reports assessing the Department of Defense’s (DOD) efforts to compile an inventory of service contracts. Congress intends for the Pentagon to include these reviews in its yearly budget work and expects “inherently governmental work” currently performed by private contractors to be brought back “in-house.” This review process will help the Pentagon find ways to reduce costs and limit the over-reliance on contractors.

Seventy cents of every contracting dollar spent by the federal government in 2010 was spent by the Pentagon; $371 billion of the $530 billion in federal contract spending was awarded through DOD contracts. Moreover, DOD contracting is continually plagued by stories of $435 hammers, 19 cent washers that cost almost $1 million to ship, and other impossible-to-justify charges.

As a result, Congress has enacted legislation demanding that the Pentagon take steps to improve its acquisition and service contract management systems. In 2008, Congress inserted language into that year’s National Defense Authorization Act requiring the Pentagon to compile and review an annual inventory of service contracts, including the collection of key data, such as:

  • The “function and missions” performed by the contractor
  • The name of the contracting organization
  • The funding source and operating agency paying the contract
  • The number of full-time contractor employees that the contract is paying for

Additionally, Congress required the Pentagon to integrate the information on contractors into its annual strategic workforce plans and budget justification materials.

Congress directed the GAO to assess the progress DOD and its departments were making in cataloging this data over the following three years. The first report in the series, released in January 2011, paints a picture of disorganization and inefficiency.

The Pentagon has no database that officials can use to create a common inventory. In fact, due to the challenges in addressing “the different requirements of the military departments and components,” the Pentagon estimates that it will not be able to field the common database system until 2016, which may be too optimistic since GAO found that “DOD has not established milestones or time frames for the development and implementation of the data system” within its work plan.

Pentagon departments have to rely on the Federal Procurement Data System – Next Generation (FPDS-NG) to compile their inventory reports, but the FPDS-NG dataset does not contain much of the specific data DOD is looking for, including multiple services provided through a single contracting action, services provided through a contract predominantly for supplies, or contractor employment numbers.

Moreover, GAO found that some Navy commands contacted were not even aware that they were supposed to conduct a review, and Navy headquarters did not follow up to ensure that they had conducted the inventories. In fact, the Pentagon was not able to tell Congress that all DOD departments were either collecting or had plans to start collecting the appropriate contractor data, including employment figures, until November 2011. All other federal agencies began collecting this information earlier.

Although not comprehensive, the 2009 inventory was able to identify more than 2,000 instances of contractors performing inherently governmental functions, as determined by Army and Air Force reviews. When GAO performed a random check to see if these jobs had been converted back to civil service jobs, they found private contractors still in eight out of 12 positions. While GAO found that DOD made some improvements between its 2009 and 2010 service contract inventory reports, providing greater detail and higher levels of accuracy, the Pentagon plan for establishing a department-wide service contract database has yet to incorporate appropriate milestones and timeframes or to hold managers responsible for in-sourcing contracts.

– published Apr. 17, 2012 by OMB Watch at http://www.ombwatch.org/node/12046.

DOD struggles to limit contractors to appropriate jobs, GAO finds

The challenge of separating inherently governmental work from contractor-appropriate work may still bedevil the Defense department.

Defense officials have allowed contractors to perform work that only a federal employee should do because, in part, military departments have not done well in itemizing their services contracts, according to a new Government Accountability Office report.

Army inventory reviews of fiscal 2009 services contracts found 1,935 instances of contractors conducting inherently government functions, or work only a federal employee is supposed to do. The Air Force found 91 instances, the GAO reported. In its review of 12 cases related to inherently governmental functions, GAO found officials had not rectified the situation in eight cases.

Although the study was from fiscal 2009, GAO said it’s not possible to know yet if the problems are solved. GAO reported that defense officials have made some changes in gathering data in its fiscal 2010 contract inventory reviews that could help. However, officials said they could not get a complete picture for the reviews until at least 2016.

One case detailed in the report involved a $6.1 million IT support contract at Army Training and Doctrine Command’s Defense Language Institute. A contractor held a “project manager” function, which officials said was an inherently governmental function. The contractor continued to perform the work at least through the period of the study.

In two cases, contracting and program officials didn’t know that the inventory review process deemed as inherently governmental a contractor’s work on an engineering support contract at an acquisition support center. The contractor provided technical expertise and coordination with the program office, other military departments, Congress and private companies. The other case involved a $409,000 Air National Guard contract for financial analytical support.

Both contracts had expired, but the work continued under subsequent contracts, GAO reported.

Officials also said a $120,000 task order for advice and advocacy on Air National Guard positions and programs to staff and commands included inherently governmental work.

In four instances, contractors served as systems coordinators at the Army.

Military officials have several ways to address the problem. They include:
•Modifying the statement of work.
•Assigning the work to a government employee.
•Stopping the work altogether.

Getting better at itemizing annual services contracts would also help, according to the report. The inventories are intended to make it plain which jobs should be off limits to contractors. Officials could stay abreast of what’s happening by keeping detailed records about each services contract.

Nevertheless, GAO said military departments’ fiscal year 2009 inventories of contracted services were incomplete. Besides the Army and Air Force, Navy headquarters officials had no assurance that their commands conducted the reviews, and GAO found no evidence at the commands it contacted that officials had conducted the required reviews.

GAO recommended that officials describe in policy who’s in charge in doing the reviews and the authority they have to get them done correctly. DOD agreed with the recommendation.

About the Author: Matthew Weigelt is a senior writer covering acquisition and procurement for Federal Computer Week. This article appeared Apr. 9, 2012 at http://fcw.com/articles/2012/04/09/army-air-force-inherently-governmental-function.aspx?s=fcwdaily_100412.

DHS requires ‘Hi, I’m a contractor’ introduction

Homeland Security Department officials want to draw a bright and shiny line between the two teams that work inside a federal department: the federal employees and the contractors.

Under DHS’ FirstSource II draft request for proposals, officials are telling contractor employees to announce in all interactions that they are not federal employees but are, instead, contractors.

For example, contractor employees must introduce themselves, in person and in voicemails, as employees of their companies. They cannot try to elide the difference by saying they work for DHS. And if they’re employed by a subcontractor, they have to identify the company, not say they are employees of their prime contractor.

And federal Homeland Security Department officials—not to be confused with contractors—are suggestion that these announcements aren’t something for people to laugh about over lunch.

“Failure to adhere to this requirement may constitute grounds for termination for default of the base FirstSource II contract,” the draft states. Serious stuff.

The Defense Department has a similar rule. Contractors must announce, wherever they go, that they are contractor, not a federal employee. Officials instituted the rule in 2010.

The “Hi, I’m a contractor” rule may show who’s who in a conversation or meeting. But it won’t help in blending the workforce, some readers have said.

Contractors fear that the rule could undermine the teamwork that’s essential in that type of workforce.

“How do you maintain unity of community when segregation is forced?” a reader asked.

– by Matthew Weigelt – Washington Technology – Oct. 31, 2011 at http://washingtontechnology.com/blogs/acquisitive-mind/2011/10/dhs-contractor-announcement-firstsource-ii.aspx?s=wtdaily_021111 

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.

Experts: Workforce investment today saves dollars tomorrow

Agency officials must invest in their workforce, even in these times of shriveling budgets, to ultimately save money down the road, said several federal procurement experts at a Congressional committee hearing.

An organic government employee base with adequate skills is the alternative to over-reliance on contractors, and could be the key to reducing fraud and waste in contingency operations, the members of the Commission on Wartime Contracting in Iraq and Afghanistan told the House Oversight and Government Reform Committee on Oct. 4. But it requires investment now, despite tight budgets.

“There has to be some spending to save money,” said Dov Zakheim, a commissioner and former Defense Department comptroller and chief financial officer.

In the same vein, Rep. Gerry Connolly (D-Va.), a member of the House committee, said the government could have saved the at least a portion of the money wasted because of poor contracting in the decade-old contingency operations in Iraq and Afghanistan.

The Government Accountability Office too blames DOD’s lack of planning for workforce shortfalls—including the number of employees at the Defense Contract Audit Agency—along with contractor accounting problems. The two problems are costing DOD money due to delayed audits of the contractors’ incurred costs.

Zakheim told the House committee that DCAA needs auditors, and without them, the government is bearing the cost of delayed audits and contracts that are not properly closed.

“If you don’t have auditors, you don’t have audits. It’s as simple as that,” he said.

However, procurement experts say officials opt to cut training and other resource investments in the workforce during tough financial times. Some agencies have already halted hiring new workers to survive these times, just as senior Obama administration officials say the acquisition workforce is in dire need of some support troops. A new policy from the Office of Federal Procurement Policy tells agencies to improve their in-house skills to do work that is suited for government workers.

“I’d like to think the acquisition workforce will be better trained and that the role of acquisition professionals will evolve to that of a business adviser, rather than a buyer,” said Larry Allen, president of Allen Federal Business Partners. “We’ve been saying that, though, for at least a dozen years now.”

But the budget crisis hopefully will make federal officials think of savings further out, rather than immediately, if they allocate resources to their employees, said Katherine Schinasi, commissioner and former GAO managing director for acquisition and sourcing management.

“It’s a perfect time to make an investment,” since the dividend pays off in the end with savings, she said.

About the Author: Matthew Weigelt is a senior writer covering acquisition and procurement for Federal Computer Week.  Published Oct. 4, 2011 at http://fcw.com/articles/2011/10/04/workforce-investment-budget-crisis.aspx.

Will OFPP’s new guidance be used to take jobs from contractors?

“Critical function” is now the controversial term as agency officials interpret new regulations on what work only federal employees should be doing and could be used to increase the insourcing of contractor jobs.

“Inherently governmental function isn’t the big problem,” said Robert Burton, former deputy administrator of the Office of Federal Procurement Policy (OFPP). “It’s the broad category called ‘critical function.’”

A new policy letter from OFPP defines critical function as work that is “necessary to the agency being able to effectively perform and maintain control of its mission and operations.” Beyond that, the letter tells agency officials to decide case-by-case if work should be done by their own employees or by contractors.

If a contractor is doing the work, agencies must have employees who know the job and who would be able to manage the contractor who is doing the work, according to the policy letter, which was released officially Sept. 12.

The policy holds an agency responsible for making sure it has an adequate number of positions filled by federal employees with appropriate expertise and experience. Those employees need to understand the agency’s requirements and be able to formulate alternative options, if needed, while also monitoring any contractors supporting the federal workforce, thr letter said.

“The more important the function, the more important that the agency have internal capability to maintain control of its mission and operations,” the letter stated.

However, Burton said officials can argue that any job is critical to meeting their agency’s mission and also decide the adequate number of federal employees they need to do it, under this policy.

“We’re missing the elephant in the room,” said Burton, now a partner at the Venable law firm. “What this policy letter does is institutionalize insourcing in the federal government.”

He said these critical functions are the jobs agencies are already insourcing, often to the detriment of small businesses.

The policy letter goes into effect Oct. 12, and, because it came from the OFPP, it is more than guidance. It will be added to the Federal Acquisition Regulation. These will be rules to live by.

The term “critical function” came from the fiscal 2009 National Defense Authorization Act, which told the administration to draw up a single definition of “inherently governmental function” and also lay out criteria for a critical function. OFPP drafted the definition in 75 pages.

As deputy administrator from 2001 to 2008, Burton said the issue isn’t necessarily with writing the policy. It’s how the agency officials apply it.

“The challenge of so much of this is the interpretation,” he said.

Stan Soloway, president of the Professional Services Council, said the policy must have clear guidance for interpreting the intent correctly. He has raised concerns in the past about making agencies prove that their choice to insource work is a good deal.

“As such, it is vital that clear guidance be given to the agencies on how to conduct their cost comparisons to ensure the right outcomes for the American taxpayer,” he said Sept. 9 in a statement.

Burton also said the OFPP missed two important points in the policy. It should have required agency officials to talk with small businesses about the effects that insourcing would have.  And it should have required agencies to share their cost comparison data with, at least, the company who faces the loss of its work.

It’s often too late to use the Freedom of Information Act to get the data, he said. By then, the insourcing is completed.

About the Author: Matthew Weigelt is a senior writer covering acquisition and procurement for Washington Technology.  Published  Sept. 12, 2011 at http://washingtontechnology.com/articles/2011/09/12/critical-function-interpretation-ofpp.aspx?s=wtdaily_140911