Procurement reform critique angers executives
A scathing speech about the state of the federal procurement system by the chair of a once-powerful government oversight board has angered federal procurement executives.
At a lecture sponsored by the Office of Federal Procurement Policy last month, Stephen Daniels, the chairman of the General Services Board of Contract Appeals (GSBCA), ridiculed procurement reforms enacted in the mid-1990s for reducing competition for government work, subjectively favoring large companies over small ones and, ultimately, wasting the taxpayers' money on inefficient purchases and projects.
The reforms freed agencies from restrictive and cumbersome purchasing regulations and allowed agencies to model their purchasing strategies after those used by private firms.
"We have learned that some of those business practices at whose shrine many in government worshipped are not quite all they were cracked up to be," Daniels said. Those methods, which Daniels called "Enron/WorldCom/whatever-company-is-in-the-news-this-week style of business practices," precipitated the recent spate of corporate accounting scandals and the implosion of the commercial technology market, he said.
The board Daniels chairs formerly handled protests by companies that lost competitions for government contracts, particularly in the technology arena. The 1996 Clinger-Cohen Act stripped the board of almost all its judicial authority. Daniels spoke at the invitation of OFPP Administrator Angela Styles, whom he praised as "leading the effort to bring balance to our procurement system."
As a result of reforms, "openness, fairness, economy and accountability have been replaced as guiding principles by speed and ease of contracting," Daniels said. "A club of industry partners," made up of large vendors, exerts inordinate influence over the procurement process to the exclusion of small businesses, he said. These companies are judged too heavily on their performance during previous work for the government, which he called "an inherently subjective measure."
"By relying heavily on a quantification of an unquantifiable factor, every award decision is of suspect validity," Daniels said.
Current procurement regulations require agencies to consider a vendor's past performance on federal contracts in their overall evaluation of the vendor's bid.
Daniels also said the personal interactions between company representatives and procurement officials that have flourished in the wake of reforms has more impact on a firm winning a contract than does the company's technical qualifications. "Whether a firm is part of the 'industry' that participates in those informal communications has become critical to the company's ability to compete for and win contracts," he said.
Federal procurement executives contacted for this article reacted to Daniels' remarks with anger, although only one of them had attended the lecture. (The speech is available online at http://www.contracts.ogc.doc.gov/cld/papers/ofpplecture.html.) One executive, who asked to remain anonymous, called the speech "offensive," and said Daniels' assertions were based entirely on generalizations that failed to prove the procurement system is unfair or illegitimate.
The executive took issue with the allegation that judging a contractor's previous work is deleterious to the competitive process. "Clearly, [Daniels] doesn't understand that past performance isn't just someone's opinion," the executive said, noting that there are established methods that contracting officials use to rate past work.
OFPP has sponsored two lectures on the state of procurement, but both speakers were critics of reform, the executive said, adding that no one has been invited to speak in favor of today's system.
A private sector source also said that many government contractors also are concerned that the OFPP discussions have been one-sided.
OFPP administrator Styles said of Daniels' remarks, "We were pleased that Judge Daniels took the opportunity to share his expertise with [the Office of Management and Budget], agency officials and invited guests. We look forward to continuing the dialogue on this vital issue of how the government should buy goods and services."
Other critics of Daniels' views say that as chair of GSBCA, he perpetuated a moribund procurement process by tying up contracts in frivolous legal disputes.
"Daniels was a key figure in one of the most dysfunctional management systems ever imposed on the federal government," said Steven Kelman, the OFPP administrator during the Clinton administration and one of the fathers of acquisition reform.
When GSBCA had authority to hear bid protests, numerous Washington law firms created a cottage industry representing losing contractors, sometimes charging fees exceeding $100,000 per case in one month, according to some estimates. Today, the General Accounting Office hears bid protests, which have declined dramatically in number.
Styles, who before taking her post last year was an attorney with Miller & Chevalier, a Washington law firm that specializes in government contract litigation, said in prepared remarks for her Senate confirmation hearing that she was concerned OFPP hadn't examined whether the procurement system has "compromised competition, fairness, integrity, and transparency, including the promotion of small and disadvantaged businesses."