How agencies bury noncompetitive procurements

I get a daily FedBizOpps feed of widget and gadget procurements and awards, and have spent literally hours the past two days poring through year-end sole source contract awards.

These are taxpayer dollars expended in an end-of-fiscal-year “use it or lose it” frenzy, but eyeballing these sole source awards is a manual process that requires opening multiple windows to divine what agencies bought and how much they spent.

In many cases agencies don’t disclose what they spent on the sole source contracts, which raises my reporter antenna.

The justification for these non-competitive awards all contain standard boiler plate language — only Vendor X can supply the gadget, software or service and if the contract is not extended or the gizmo acquired, vital operations will cease, often with a threat to national security.

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VHA could save $24M with wider use of purchase cards

Wider use of purchase cards could save the Veterans Health Administration $24  million annually, a report from the Veterans Affairs Department office of  inspector general says.

Using purchase cards saves money because writing  purchase orders is more time-consuming and complex. The banks that provide  purchase cards also offer rebates, around 2 percent, for money spent on the  cards, says the OIG report, dated Aug. 9. The VHA spent about $3 billion on purchases worth $3,000 or less  in fiscal 2012, earning it more than $65 million in rebates.

From April  2011 through March 2012, VA medical facilities did not use purchase cards for $432 million worth of purchases under $3,000. For $244 million of that spending,  the OIG found they had acceptable reasons not to use the cards. Some vendors  don’t accept purchase cards, and the VA can’t use them to pay veterans for  pharmacy copayments or tort claims.

For the remaining $188 million, spent on medical supplies, office equipment, patient transportation, employee  training and more, the VA could have used purchase cards, the report says.  The  OIG estimated that it could’ve saved $20 million in processing costs and  could’ve earned about $4 million in rebates.

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GAO: Government could save $50 billion through strategic sourcing

The Government Accountability Office released a report today detailing how the government is leaving at least $50 billion on the table annually by not taking advantage of strategic sourcing — “a process that moves an organization away from numerous individual procurements to a broader aggregate approach,” according to the report.

The federal government spends roughly $537 billion on federal procurement spending each year, yet just a small fraction of that is managed with strategic sourcing efforts. Four agencies — Defense, Homeland Security, Energy and Veterans Affairs — manage 80 percent of the overall procurement budget, but only 5 percent of their spending is managed with strategic sourcing, the report found.

“While strategic sourcing makes good sense and holds the potential to achieve significant savings, federal agencies have been slow to embrace it, even in a time of great fiscal pressure,” the report reads.

The basic idea behind the Federal Strategic Sourcing Initiative — launched in 2005 — is collaboration among the agencies: collaboration to bargain for the best price on contracts and collaboration to share best purchasing practices. But the initiative was only applied to a small amount of federal procurement spending in 2011, according to the report.

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Unraveling the facts about GWACs

Obama administration officials say there are too many IT procurement vehicles, and they want agencies to consolidate their buying around existing interagency contracts rather than launch new ones. There is even a strong case to cut back on current contracts, which officials say are often duplicative in what they provide for buyers.

Where does that leave governmentwide acquisition contracts (GWACs)?

In early 2012, the Office of Federal Procurement Policy (OFPP) issued rules requiring agencies that wanted to award their own multi-agency contracts (MACs) to submit a business case arguing why those contracts were necessary — something agencies that wanted to award GWACs have had to do for years.

“Agencies are required to balance the value of creating a new contract against the benefit of using an existing one, and whether the expected return on investment is worth the taxpayer resources,” said Dan Gordon, who was OFPP administrator at the time.

Following the 1996 Clinger-Cohen Act that authorized their creation, GWACs became a poster child of sorts for that kind of contract inflation. Many agencies were looking to create their own contracts as testimony to their procurement mojo in an era of huge growth in government IT acquisition. For vendors, GWACs were seen as a hunting license to pursue lucrative government IT business.

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Pentagon says 20 vendors can meet its electronic health record needs

The Defense Department has found 20 commercial software vendors capable of modernizing its electronic health record system, Frank Kendall, undersecretary of Defense for acquisition, technology and logistics, told reporters at the Pentagon today.

Yesterday, Defense Secretary Chuck Hagel backed the use of commercial software in a memo to Kendall. Hagel said he supported competitive procurements for undefined “core” EHR commercial software systems. Kendall said these procurements will provide a modernized Defense health record to replace the department’s existing Armed Forces Health Longitudinal Technology Application system, known as AHLTA.

Kendall said the department’s market research identified three out of the 20 commercial vendors who could provide versions of the Veterans Affairs Department’s electronic health record, the Veterans Health Information Systems and Technology Architecture, known as VistA. While acknowledging VistA could be a candidate for the Defense EHR, Kendall emphasized throughout his briefing the Pentagon wants a modern, “smart” commercial EHR that meets its needs.

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Federal acquisition executives grapple with retirement wave

As the government’s largest buyer, the Defense Department is building up expertise in its acquisition workforce, with perhaps with greater success than some other agencies in this era of contract austerity, the exception likely coming at the most senior executive level.

So said Shay Assad, director of defense pricing, defense procurement and acquisition policy, on Wednesday (Apr. 17, 2013) speaking before an Arlington, Va., audience of contractors in the Coalition for Government Procurement. His own section of the Pentagon, despite the pay freeze and likely furloughs, he said, “has done remarkably well” in retaining talent, with employees who’ve moved on “only in the single digits, mostly because either they decided we weren’t right for them or they weren’t right for us.”

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Lawmaker wants proof agencies are complying with new small business rules

House Small Business Committee Chairman Rep. Sam Graves, R-Mo., last Tuesday (Apr. 16, 2013) stepped up pressure on agencies to comply with new rules requiring them to elevate their Small and Disadvantaged Business Utilization offices as a means for giving more businesses a leg up in competing for contracts.

In letters to the Defense Department and 34 other agencies, Graves said a recent hearing revealed that too many are ignoring new amendments to the Small Business Act enacted in January with passage of the 2013 National Defense Authorization Act. “It has come to my attention that some agencies were either unaware of recent changes . . . or had not yet implemented the changes,” Graves wrote. The requirements include new priorities in the small and disadvantaged business offices’ work, prohibitions on the offices’ leaders from holding other positions, and improvements to the reporting relationship between small business specialists and the offices.

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Agencies brace for exodus of contracting professionals

Agencies are bracing for what could be a mass exodus of seasoned federal contracting professionals.

Of the government’s 36,208 acquisition professionals, 13 percent — or 4,611 — are eligible to retire, according to 2012 data from the Office of Personnel Management. Another 6,386 employees, 18 percent of the workforce, are eligible to retire in one to five years.

At agencies with smaller staffs, such as the Federal Retirement Thrift Investment Board and Small Business Administration, those percentages are much higher.

“Our challenge is we don’t have a crystal ball … to know how many are going to retire next year versus the year after,” said Jan Frye, the deputy assistant secretary for acquisition and logistics at the Veterans Affairs Department. “We certainly have to plan on a good share of our workforce, and these are all seasoned people … departing in the next year or two.”

The number of retiring acquisition professionals jumped from 805 in 2009 to 1,239 in 2012, according to OPM’s FedScope site.

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Groups say veteran-owned contracting still broken

Despite a history of complaints to Congress and the Department of Veterans Affairs, veterans advocacy groups say VA is still placing far too many hurdles in front of veteran-owned small businesses in its contracting program. VA, meanwhile, says it’s making changes.

VA’s programs for preferentially awarding contracts to veteran-owned small businesses are unlike those of any other agency in government. In a 2006 law, Congress told VA to take a “veterans first” approach to procurement, making service-disabled veteran-owned small businesses its first choice for any given contract and all other veteran-owned small businesses its second choice.

But to deter fraud, Congress also told VA to set up a system to verify contractors’ veteran status before they could get set-aside contracts. That set up a careful balancing act for the agency between detecting potential fraud and making the process as easy as possible for legitimate veteran-owned businesses.  And veterans groups are telling Congress VA has allowed that scale to fall way too far in one direction.

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Court rules VA can ignore set-asides for veteran-owned businesses on GSA Schedule buys

The Department of Veterans Affairs takes the position that it is not obligated to consider veteran-owned businesses on goods and services it buys through GSA’s Federal Supply Schedule, and now the VA has a court decision that backs its stance.

On November 27, 2012, the U.S. Court of Federal Claims ruled that the VA has discretion to procure goods and services from GSA’s Federal Supply Schedule without first considering a set-aside acquisition for service-disabled veteran-owned small businesses (SDVOSBs) or veteran-owned small businesses (VOSBs).

The ruling is a departure from several recent U.S. Government Accountability Office decisions.  The GAO has consistently ruled that the VA must comply with the Veterans Benefits, Health Care, and Information Technology Act of 2006 before conducting a GSA Schedule buy. The 2006 Act created the “Veterans First” contracting program that gives priority to SDVOSBs and VOSBs in VA acquisitions.  The VA has maintained that the GAO’s interpretation of the 2006 Act was wrong and instructed its contracting officers to not apply the “Veterans First” principles to Schedule contracting. 

The Kingdomware case represents the first time a court has ruled on the question of whether the GSA Schedule program is influenced by the terms of the “Veterans First” program. 

In siding with the VA’s position, the Kingdomware decision found that the 2006 Act “is at best ambiguous as to whether it mandates a preference for SDVOSBs and VOSBs for all VA procurements.”   The Federal Claims Court ruled:

  • The [VA] Secretary’s discretion to set contracting goals for SDVOSBs and VOSBs under the ["Veterans First" Act] contradicts plaintiff’s interpretation of the statute as creating a mandatory SDVOSB and VOSB set-aside procedure for each and every procurement . . . the goal-setting nature of the statute clouds the clarity plaintiff would attribute to the phrase “shall award” . . . and renders the ["Veterans First"] ambiguous as to its application to other procurement vehicles, such as the FSS [GSA's Federal Supply Schedule].

The bottom line of the Kingdomware decision is that the VA did not act arbitrarily and capriciously when it used GSA Schedule contracts without first determining the appropriateness of a set-aside for SDVOSBs or VOSBs.

The full decision can be downloaded here: Kingdomware Technologies, Inc. v. United States.