Outside experts emphasize contracting relationships

Private sector acquisition experts on Tuesday told a federal advisory group that strong relationships between government officials and contractors are more important than the deals themselves.

"This industry is built on relationships," Peter Allen, partner and management director for global practices at TPI, an acquisition consultancy, told members of the Services Acquisition Reform Act Advisory Committee, a group created by the 2004 Defense Authorization Act.

Other speakers also suggested eliminating all but a few bidders before the final competition for contracts and recommended using tools such as online auctions to force bidders to offer their lowest prices.

The panelists included high-ranking federal acquisition officials as well as consultants and lawyers. Some questioned whether private sector lessons applied to the federal sector.

Carl DeMaio, panelist and president of the Performance Institute, an Arlington, Va.-based think tank, asked Allen if contracting officers needed more emotional intelligence in order to enhance their relationships with contractors.

"Soft skills are very important," said Allen, before adding that the focus should be on creating a long-term relationships between vendors and government officials and not on training acquisition personnel in people skills.

Robert Zahler, a partner in Pillsbury Winthrop Shaw Pittman's global sourcing group, said the U.S. education system doesn't produce graduates with skills to manage large service relationships. He characterized this as a "major failing."

Zahler advocated shifting acquisition work to the vendors by encouraging contracting officers to issue requests for proposals that describe their requirements without outlining the potential solutions and allowing suppliers to come up with the solutions themselves.

Zahler equated this strategy with getting free consulting for the government, while giving the suppliers a chance to differentiate themselves.

"Words of specificity can be words of limitation," he said. At the same time, suppliers and officials have to communicate frequently about their mutual goals, he added, because most contracting failures come from misunderstandings between suppliers and vendors.

Neil Hassett, assistant general counsel at United Technologies, said his company frequently uses online auctions to elicit the best price from vendors. "In the last few minutes, it gets really exciting," he said, because vendors tend to quickly try to match the best bid.

Hassett advocated selecting only four bidders to compete in the final rounds of competition. At his firm, he said, such contests continue even after a winner is selected. After choosing the best proposal, his company approaches the vendor and says it will win the contract if it will agree to further demands. "We're kind of ruthless," he said.

Allen emphasized that a certain degree of profits for vendors is desirable. "If we squeeze these providers to the point where they're bleeding, it's counter to developing a good business relationship," he said.

Speakers also emphasized the value of competition, a common theme in the acquisition world. Allen discourages his clients from accepting agreements that limit their ability to recompete contracts. "I will not be in a position where I don't have options," he said.

Zahler warned panelists that contracting officers should be suspicious of vendors who say they can be more "intimate" with them -- in other words, offer them better deals -- if they have an exclusive relationship without competition.

Hassett said his company tries to retain the right to audit contracts, discontinue contracts and complete the work in house, or reassign the work to another company, saying, "Once you have that right, it provides a lot of muscle."

Prior to the meeting, the Acquisition Reform Working Group, a collection of contractor representatives that includes the Contract Services Association and Professional Services Council, submitted a letter to the panel advocating a variety of legislative reforms, including increased protection of intellectual property rights for contractors and more efficient payment systems, such as a requirement for electronic invoicing by fiscal 2006.