Cleaning Up Contracts

Industry groups doubt Rep. Henry Waxman's reform bill will have much impact.

No one is likely to accuse Rep. Henry Waxman, D-Calif., of the delays and inaction that plagued last year's Congress. Take, for example, a three-day span in mid-March. Tucked neatly among the passage of four of his good government bills and hearings on the world's foremost former covert agent,Valerie Plame, was his opening salvo against "out-of-control federal contracting." On March 15, the House overwhelmingly passed Waxman's Accountability in Contracting Act (HR 1362) by a vote of 347-73. But since it has thus far failed to find a Senate companion, many of the contracting provisions were inserted in the House's emergency supplemental bill. President Bush has vowed to veto the bill, which sets a timetable for the withdrawal of U.S. troops from Iraq.

The reform drive grabbed headlines for crowd-pleasing verbiage such as "minimizing no-bid contracts" and "disclosing contractor overcharges," but some industry officials argue that the thrust of the legislation fails to match its hyperbole.

With few exceptions, HR 1362 does not make a dent in the problems that afflict the procurement system, says Stan Soloway, president of the Professional Services Council in Arlington, Va., a trade group that represents contractors. The bill, he says, takes a punitive approach to the entire industry, adding layers of unnecessary oversight and restriction while neglecting to focus on the root cause of most contracting woes-an understaffed federal acquisition workforce.

"The bill is born out of a lot of misinformation about the federal contracting process," Soloway says. "It sends two messages: 'Here's where we want you to clean up your act' and 'We don't trust any of you in the government workforce community.' "

The measure would require agencies to lessen their reliance on noncompetitive sole-source and cost-reimbursement contracts, although language calling for maximizing the use of fixed-price contracts was not included in the supplemental bill. Generally, agencies can use noncompetitive contracts for no longer than one year, unless the "government would be seriously injured by the limitations on the contract period." After that time, the contract must be replaced by a competitively awarded deal.

"Spending on sole-source and other noncompetitive contracts has more than doubled in the last five years," Waxman said as he introduced the bill. "The administration has justified the awarding of these lucrative sole-source contracts by citing urgent and compelling needs, but then they allow these contracts to continue years after the emergency has passed."

But many in the private sector say the provisions are unnecessary and counterproductive. For example, Federal Acquisition Regulation policies already give preference to fixed-price contracts. And, according to the Federal Procurement Data System, fixed-price contracting represents the overwhelming majority of total contract spending. Critics also say the bill is administratively burdensome. Agencies would have to detail plans to minimize sole-source and cost-reimbursement contracts in reports to the Government Accountability Office and various congressional committees. Meanwhile, those who continue to use noncompetitive contracts would have to disclose and justify their approval by posting documents on the Federal Procurement Data System within 14 days of the award.

Agencies also would be required to report quarterly on any completed audits that identified more than $10 million in disputed or unsupported costs or found major problems with a contractor's performance.

The bill's most far-reaching measures, however, never made it to a vote in the House. During markup, the House Armed Services Committee struck language that would have doubled the one-year cooling-off period for contracting officers who oversee deals involving a former employer. And a provision requiring agencies to invest at least 1 percent of the total cost of contracts in procurement personnel, oversight and planning was dismissed as an overreach.

The policy recommendations are disconcerting to the contracting industry, but many think the bill's tangible impact could be minimal. "I don't expect it to have a dramatic effect on the industry, unless agencies overreact," says Colleen Preston, senior vice president of public policy for the Contract Services Association in Arlington, Va. One such overreaction would be an abandonment of cost-plus contracts, which allow procurement officers to use their discretion to secure the best deal for taxpayers, says Paul Denett, administrator of Office of Federal Procurement Policy for the Office of Management and Budget. Cost-plus contracts are time and material deals-with the plus indicating an added contractor fee-typically used when the scope of a project cannot be estimated accurately. "We should be focused instead on ensuring that cost-type contracts are being used effectively and in appropriate circumstances," Denett says. "As the FAR ex-plains, cost-type contracts are an appropriate tool for helping government get the best possible results when uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed-price contract."

Waxman sees things another way. Cost-plus deals have spiraled out of control, he says, growing by 75 percent between 2000 and 2005. "Cost reimbursement type contracts leave the taxpayers vulnerable to wasteful spending by providing contractors with little or no incentive to control costs," he says.

Despite their objection to the bill's hard-line tone, industry groups say it's too soft in addressing government shortfalls. The bill called on Denett's office to study the size and skill of the contracting workforce and to extend the Acquisition Training Fund, which is scheduled to expire in November 2008. Critics say those provisions, which were left out of the supplemental bill, would do little in the short run to beef up procurement personnel, leaving acquisition offices without the staffing to navigate additional administrative duties and contracting restrictions. "The workforce is really the linchpin to trying to get good results," says Allan Burman, president of Jefferson Solutions in Washington. "But it's not just the numbers. It's, do you have the right people with the right skill sets to do the job."

Waxman's office anticipates that language from his original House bill will be worked out in conference with the Senate. Additional contracting legislation also could be on its way from the Senate Homeland Security and Government Affairs Committee. Sponsored by Sen. Susan Collins, R-Maine, the bill would require additional disclosure of sole-source contracts, expand training for the federal acquisition workforce, allow companies to protest orders placed against multiple-award contracts and encourage interagency contract studies.