Private sector advises acquisition panel

The Services Acquisition Reform Act Advisory Committee, a group assigned under the 2004 Defense Authorization Act to examine government procurement practices, looked at how the private sector acquires goods and services Wednesday.

In the panel's second substantive meeting, executives from Proctor & Gamble, a consumer products company, and Everest Group Inc., an outsourcing consultancy, discussed best practices for buying goods and services in the commercial world.

Robert Miller, general counsel for Proctor & Gamble, said his company maintains leverage in contracts by retaining the right to terminate them for bad performance. At any time, he added, P&G can decide to return to doing the work itself.

P&G employees also actively manage the quality and price of contracts, he said. He added that most contracting problems arise from undocumented changes to the contracts.

He focused on contracts for information technology services, building services, employee services, and accounting and financial reporting. Work in these areas was formerly done by P&G employees. The company decided it could save money by outsourcing the work to vendors with that expertise, he said.

P&G first screens potential bidders and then invites a handful to bid on a contract, he said. In the big service contracts he discussed, he said the company did not look at small, minority-owned, or women-owned businesses because there weren't any with the ability to do the job, although P&G does consider diverse suppliers for smaller contracts.

Panel members also discussed the progress of their five working groups. Melanie Sabelhaus, chairwoman of the small business group and deputy administrator for the Small Business Administration, emphasized the importance of "unbundling contracts," or combining multiple contracts into one large one. The Bush administration has discouraged contract bundling in the past.

Sabelhaus also recommended that her panel look into the increased use of rules other than the Federal Acquisition Regulations, which are known as "other transactional authorities." Agencies such as the Homeland Security Department and Federal Aviation Administration use their own acquisition rules.

She also said she was concerned that primary contractors don't always comply with their subcontracting plans or pay small business contractors on time. Small businesses, she said, can't afford to wait an extra month for their paychecks.

Joshua Schwartz, member of the federal workforce group and professor of law at George Washington University Law School, said acquisition personnel are challenged, not only because many are nearing retirement but because while the number of small purchases has declined as a result of purchase cards, the number of large purchases has grown dramatically.

He said his working group plans to define the acquisition workforce and assess agencies' human capital planning.

Contracting ethics, which had not been explicitly assigned to any of the working groups a month ago, was added to the workforce committee's agenda.

Carl DeMaio, a member of the workforce group and president of the Performance Institute, an Arlington, Va.-based think tank, had urged the panel to pay attention to ethics at the last meeting in February. He recommended that the panel take care not to propose excess regulations just because a few people had made unethical decisions.

Complicated rules would prevent acquisition personnel from shopping smartly, he said. He was glad that ethics was now officially on the agenda, and that Sabelhaus had also emphasized the importance of integrity, he said.

Speaking for the interagency contracting working group, Jonathan Etherton, vice president of legislative affairs at the Aerospace Industries Association, said his group will focus on socio-economic programs, oversight, pricing, and workforce issues. He invited public comments on all those topics.

DeMaio, co-chair of the performance-based contracting working group, noted the lack of data on performance-based contracts. He said contracting officers can't just measure contractor performance, but they also have to solicit bids based on results and pay attention to past performance.

James Hughes, co-chair of the commercial practices working group and deputy general counsel for acquisition at the Air Force, said he wanted to ask the private sector about acquisition practices, including obstacles to full and open competition and training for personnel.

Marcia Madsen, the panel chairwoman and partner at the law firm Mayer, Brown, Rowe & Maw LLP, emphasized the importance of narrowing the group's focus to selected topics in order to meet the deadline of creating a report by the end of the year. She proposed early deadlines, including writing an initial draft of the report by September.