Interagency contracts aren't big money-savers, panelists say

The rapid proliferation of interagency contracting vehicles has reduced competition and hindered management of government spending, while failing to significantly reduce the cost of goods and services, witnesses told a Senate committee on Thursday.

Contracting professors and attorneys told members of the Senate Homeland Security and Governmental Affairs Subcommittee on Contracting Oversight that interagency acquisitions have grown out of control during the past decade, with relatively little oversight or governmentwide leadership.

"I remain concerned that these vehicles incentivize agencies to pursue the generation of fees for providing services to another agency, rather than providing services to the public," said Steven Schooner, co-director of the Government Procurement Law Program at The George Washington University. "I do not believe our government exists for that purpose."

Interagency contracts, in which procurements are awarded through fee-based arrangements with other agencies, generally fit into three categories: GSA's Federal Supply Schedule program; governmentwide or enterprisewide acquisition contracts; and interagency assisting entities. The assisting entities -- such as the Interior Department's GovWorks -- often are controversial because they offer their services to other agencies for a fee.

"I am somewhat troubled that all the discussion and effort at federal agencies has focused on simply creating more vehicles, not whether the additional vehicles are necessary," said Sen. Claire McCaskill, D-Mo., chairwoman of the subcommittee. "I am also concerned that interagency contracts may not be resulting in lower prices, both because there may not be enough competition and because the negotiated prices are too high."

Witnesses at the sparsely attended hearing said short-staffing in acquisition offices has forced agencies to seek alternative ways to deliver contract services. These vehicles also became a popular way for agencies to park funds so they can be used for more than one fiscal year.

"Agencies want to protect their turf," said Sen. Bob Bennett, R-Utah, the subcommittee's ranking member.

Proponents of interagency contracting originally argued that competition among vehicles would lead to better prices and improved acquisition strategies. But witnesses said those savings have yet to materialize.

"Proliferation of overlapping interagency contract vehicles and the resulting competition between interagency contract vehicles should not be mistaken for competition in the marketplace to provide goods and services for the government," said Joshua Schwartz, the other co-director of The George Washington University's Government Procurement Law Program.

Contract management also is a concern. Critics note that interagency vehicles blur the division of responsibility for overseeing performance between the hosting agency and the procuring agency.

Additionally, no governmentwide office tracks these contracts. The Acquisition Advisory Panel in 2007 recommended that the government create a comprehensive database, but that never materialized. The panel was authorized by the 2003 Services Acquisition Reform Act to review various aspects of the procurement process and to offer tips for improvement.

"We really do have chaos," said Ralph Nash, a professor of government contracts law at The George Washington University. "I don't know how you make someone manage something. But we need leadership."

Nash and others called for a steep reduction in interagency vehicles, leaving only a few specialized acquisition offices.

Schooner noted that the Office of Management and Budget's Office of Federal Procurement Policy has the authority to shut down interagency contracting vehicles. But such a move likely would face stiff resistance from the agencies that have come to rely on these contracts.

"Agency personnel will fight tooth and nail against any changes to this system that basically allows them to award to any competitor they want," said Marshall Doke Jr., a partner in the Dallas law firm Gardere Wynne Sewell LLP. "It is human nature, and my clients that are public agencies also want this discretion and chafe when restrictions are imposed. It is not because they want to cheat -- they just want the freedom of choice."