Risky Business

DHS launches hiring spree to plug holes in swamped procurement shop.

The Homeland Security Department's Office of Procurement Operations is on a hiring spree.

Since October, staff has more than doubled. And if all goes as planned, the office will start off fiscal 2006 with 127 people-more than quadruple the 30 employed last October. Procurement Operations was established in January 2004 as a catch-all to handle purchases for the corners of DHS lacking independent acquisition capabilities.

But despite its growth spurt, the DHS procurement office is "woefully understaffed," says Bob Welch, a partner at the Oakton, Va.-based consulting firm Acquisition Solutions Inc. The office is short-handed compared with DHS' seven other purchasing shops and industry standards.

The shortfall has forced Procurement Operations, which buys for 35 DHS offices, including the Science and Technology directorate and Citizenship and Immigration Services, to rely heavily on interagency contracts negotiated by other departments, often for a fee. Such contracts are growing in popularity, but made the Government Accountability Office's list of "high risk" management areas for 2005 (GAO-05-207), because they are difficult to oversee and it's unclear who's accountable if they're misused.

Procurement Operations purchased $1.9 billion in goods and services in fiscal 2004, and obtained more than 80 percent, or $1.6 billion, through interagency contracts. The office only negotiated $372 million worth of agreements itself. DHS' other procurement shops spent a collective $1.4 billion on interagency agreements out of $7.3 billion in purchases, negotiating $5.9 billion in contracts themselves.

Homeland Security has issued guidelines to ensure the proper use of interagency contracts. But in reviewing 136 interagency agreements entered by Procurement Operations, GAO found that the office often failed to follow the directions.

For instance, 94 percent of the files lacked proof that contracting staff had completed the analysis necessary to justify asking for help from another agency. And 96 percent lacked evidence of proper contract oversight, GAO said in its March report (GAO-05-179).

These problems were due in part to a dearth of "basic information on how to use interagency contracting," but in "large part" to staffing shortages, the auditors found. Procurement Operations recognizes the risks inherent in relying so heavily on contracts negotiated outside the office, says DHS spokesman Larry Orluskie. "That's why we need to get these people on board," he says. As of mid-May, the office had 62 employees and five more people on deck. Procurement Operations also had extended 18 offers, he says.

An $8.9 million working capital fund, collected from the DHS components using Procurement Operations' services, will allow the hiring to continue until the office has 127 employees. The office is hiring people at the rate of six a week and has every intention of reaching full staffing by October, Orluskie says.

Ultimately, a staff of 127 won't be enough, Welch says. Defense, aerospace, energy and security companies generally aim for less than $6 million in purchases per procurement employee each year, according to benchmarks compiled by the Center for Advanced Purchasing Studies, a nonprofit research organization affiliated with Arizona State University and the Institute for Supply Management.

Federal agencies should boast a comparable ratio, Welch says. At most, federal contracting officers should handle $10 million in acquisitions each year, he says, adding that exceptions might be necessary for those working on weapons systems or such large modernization projects as the Coast Guard's Deepwater program to upgrade its aging fleet.

At Procurement Operations, each officer handled about $64 million in fiscal 2004, according to agency staffing figures. GAO put the number at $101 million, but that was before the close of the fiscal year. In either case, it's clear that the ratio is well above the recommended $10 million ceiling. DHS' other procurement offices came closer to the ideal.

Contracting officers working for the Emergency Preparedness and Response directorate and the Transportation Security Administration's purchasing shops handled the next largest average dollar amounts per person in fiscal 2004, but both fell below $34 million. The department's five remaining shops all fell under $20 million per employee, with the Federal Law Enforcement Training Center and Secret Service handling the least money, each at around $2.7 million per person. "Disparities such as this may indicate the need to assess the numbers of contracting staff across the department to determine whether imbalances exist and whether actions are needed to correct the imbalances," GAO said in the March report.

Procurement Operations plans to spend $2.3 billion on acquisitions this fiscal year. It would take about 380 staff members to bring the ratio of dollars procured per employee to $6 million, and nearly 230 to bring it to $10 million.

Even if the office planned to hire that many people, "You get to the bigger problem [of] where do you get the people," Welch says. Qualified procurement professionals are difficult to find, he says. "There's a real issue of supply and demand."