Mismanaged Competition

If David Safavian, President Bush's nominee to head the Office of Federal Procurement Policy, is confirmed, he should listen to senior procurement executives who sense that the administration's relentless pressure to put federal jobs up for competition with private firms risks becoming a fool's errand. Agencies lack qualified acquisition, contract management and quality control personnel to effectively manage the projected competitive sourcing burden. Moreover, the crusade effectively guts another administration effort: to rely more heavily on performance-based service contracts.

Facing pressure during the 1990s to reduce government's size, agencies slashed their acquisition workforces. Without waiting to see if it would be more efficient, reformers traded acquisition personnel for increased purchasing flexibility. These reductions assured an aging and retirement-eligible workforce, and foreclosed an infusion of new blood.

No one should be surprised by the result. Comptroller General David Walker has said that "reductions in the acquisition workforce, along with . . . procurement reforms, including an increased reliance on services provided by commercial firms . . . have placed unprecedented demands on the federal acquisition workforce."

Despite a clear need for additional resources, OFPP steadfastly refused to call for increasing or upgrading the acquisition workforce. Nor can we expect congressional action with ballooning deficits looming.

Competitive sourcing depends on skilled professionals planning, competing, awarding and managing sophisticated long-term service contracts. But despite mandates to contract out government functions, the administration placed no concurrent emphasis on retaining or obtaining suitable acquisition personnel.

It's easy to forget that replacing government employees with contractors means more service contracts. And successful service contracts are tough to write. As OFPP noted in a May 1994 policy letter: "Contracting for services is especially complex and demands close collaboration between procurement personnel and the users of the service." If you've ever relied on a contractor to remodel your kitchen or bathroom, think how much time you spent choosing one, then looking over his or her shoulder.

The competitive sourcing initiative has exacerbated the crisis in the acquisition workforce. The General Accounting Office has reported that "the increasing significance of contracting for services has prompted-and rightfully so-a renewed emphasis . . . to resolve long-standing problems with service contracts. To do so, the government must face the twin challenges of improving its acquisition of services while simultaneously addressing human capital issues. One cannot be done without the other." (GAO-01-753T)

Public policy scholars, such as John Forrer and Jed Kee of The George Washington University, increasingly recognize this. "If government is to have a larger role and yet reduce its responsibilities as public provider . . . public servants will have to become better public contract managers," they wrote earlier this year. But simply demanding that people do more with less is irresponsible. It also flies in the face of OFPP's policy that, prior to contracting for services, agencies must ensure that "sufficient trained and experienced officials are available . . . to manage and oversee the contract administration function."

Instead, a decade of cuts and mounting demands has promoted a triage-type focus on buying. Agencies focus on awarding contracts not on managing those contracts once they've been awarded. "The administration of contracts once they have been signed has been the neglected stepchild" of procurement reform, says Steven Kelman, a chief architect of acquisition reforms during the Clinton administration. This lack of oversight hides significant downstream costs.

Nowhere is this more acute than with regard to service contracts. GAO's report notes that "it is becoming increasingly evident that agencies are at risk of not having enough of the right people with the right skills to manage service procurements." OFPP echoes this sentiment: "Reliance on service contractors [requires] a sufficient number of trained and experienced staff. . . . The greater the degree of reliance on contractors, the greater the need for oversight by agencies."

Acquisition personnel shortages also have contributed to the proliferation of poorly structured personal services contracts. This is particularly unfortunate because it neutralizes another significant acquisition reform initiative: performance-based service contracting.

In traditional contracting, the government delegates a task or function to a contractor, such as operating a mess hall, overhauling an aircraft engine or operating an information technology help desk. Under such contracts, drafting the statement of work is paramount. But under the performance-based service contracting model, agencies describe the work in terms of what is required rather than how the work should be accomplished.

Agencies have struggled to adopt performance-based service contracting as the norm. GAO recently reported that in fiscal 2001, the government awarded slightly less than a quarter of its service contract dollars through performance-based contracts (GAO-03-443).

At the same time, workforce reductions and outsourcing pressures have conspired to increase the government's reliance on personal services contracts, under which the government retains the function, but contractor employees staff the effort. Under such contracts, rather than using a performance-based approach, agencies all too often merely purchase labor.

Filling empty seats with substitute employees won't lead to increased quality, cost savings or efficiency. But outsourcing's convergence with a depleted acquisition workforce leaves procurement professionals with little choice.

Replacing hordes of civil servants with contractor personnel without proper planning, well-crafted contracts and careful contract management isn't efficient. Nor does it serve the public interest. Without sufficient skilled acquisition personnel, an aggressive competitive sourcing policy risks a high volume of poorly structured contracts. It's time to replenish and upgrade the acquisition community to address the burgeoning reliance on service contractors.