Industry group urges new approach to service contracts

A service industry group urged the government to break down the distinction between the acquisition of goods and of services in a report released earlier this week.

"There's no reason to have separate systems for thinking about purchasing of services," said Alan Chvotkin, senior vice president and counsel at the Professional Services Council, an industry group based in Arlington, Va.

The organization, which was created by the Arlington, Va.-based Contract Services Association, also recommended a greater emphasis on acquisition planning and encouraged the use of performance-based contracting for both goods and services.

"We believe that a little bit more planning needs to go into the thought process," said Cathy Garman, senior vice president of public policy at the Contract Services Association. "We're just saying, 'Hey, let's raise the visibility of service contracting,' " she added.

The report makes some potentially controversial suggestions. For example, while the group stopped short of recommending the elimination of Part 37 of the Federal Acquisition Regulation, which deals with service contracts, it hinted that the section was unnecessary.

"Everything in Part 37 is somehow covered elsewhere," said Garman.

The report also suggested that agencies can determine appropriate prices through methods other than competition, which would make it easier to award sole-source contracts.

"Competition should not be viewed as the only method to secure price reasonableness," the report stated. It listed market surveys, a check of past contracts, and review of published prices as other sources, adding that prices from vendors themselves should be used only as a last resort.

Chvotkin acknowledged that acquisition watchdogs, including inspector generals, may be wary of using pricing mechanisms that aren't based directly on competition. "They would probably assert that it's not an independent place for price determination," he said.

Service agreements, which include information technology and maintenance contracts, have beein in the spotlight in recent years, as often for problems as for innovations. In March, the Government Accountability Office reported that the Defense Department did not exercise proper oversight of its service contracts.

The 2003 Services Acquisition Reform Act created a workforce training fund and positions for chief acquisition officers in an attempt to address some of these problems. SARA also created a panel, which debated performance-based contracting Tuesday.

Much of the focus on service contracts in recent years can be attributed to their growth. "Quite frankly, the federal government is spending more dollars on services and more sophisticated services than ever--in many cases, more than on weapon systems," said Chvotkin.

According to GAO, the Pentagon spent $118 billion on service contracts in fiscal 2003, an increase of 66 percent compared to fiscal 1999.