Trends in Procurement
Inside This Issue… Shay Assad: Pentagon, GSA Working for Contract Options, Efficiency................2 DoD FY2013 Budget Request....................3 New OFPP Administrator Sights Set on Workforce, ‘Buying Smarter’...............3 Senate Confirms Jordan As New OFPP Administrator..............................................3 Suspension and Debarments Rise for Irresponsible Contractors....................4 Subscribe to NISH Public Policy Update..............................................4 Take Steps To Mitigate Effects of Spending Cuts.........................................4 Senators Back Off call for Automatic Contractor Suspensions.............................5 GSA Makes Changes to Improve Operations...................................................5 CBO Director Says Sequester Will Hit Federal Agencies Early...............................6 Dempsey Maps Sequestration Cuts at Defense....................................................6
DoD Faces Struggles on Path Toward ‘Better Buying Power’
he Pentagon has made some progress toward driving better business
deals with industry, but has a “long way to go” in the effort to buy the products and the military needs at prices that are affordable, a top Department of Defense (DoD) acquisition official said in late April. It’s been a year and a half since DoD first published its acquisition principles known as “Better Buying Power.” Then Undersecretary of Defense Ashton Carter laid out 23 separate initiatives designed to drive down costs, promote competition and improve the acquisition workforce. One key tenet in the initiative is called “should cost” management—the idea that DoD officials should manage programs in accordance with what they should cost, not what history has suggested they will cost. Instilling the idea of should-cost has been the biggest struggle so far, said Shay Assad, director, DoD Defense Pricing. “We’re still stuck on ‘does cost’ and that’s a problem,” he told a Coalition for Government Procurement Conference. “We’ve got to get people’s mindsets into what things should cost. Now, once we’ve established what they should cost, the next question is whether or not industry can get there. Is there a reasonable path from what things presently do cost to what they should cost?” Assad said contracting officers and program managers on the government side are also being told to do all they can to remove barriers that
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A Message from the Vice President, Regional Operations
e are all aware of the challenging economic
climate of the country. The volatility in the procurement environment is impacting all federal contractors. The articles in this edition of NISH eTiPs discuss DoD initiatives as well as changes at the Office of Federal Procurement Policy. We provide information about recent changes to the contractor suspension and in debarment process and the changes General Services Administration is making their operations. As discussed in past issues, the Budget Control Act passed August 2011 called for $1.2 trillion in reduced federal spending over the next 10 years. If these can’t come up with a reduction bill matching Congress’ reductions by January 2013, the Budget Control Act will trigger across-the-board cuts, with half of those cuts coming from defense spending.
Marie McManus, the NISH Air Force key account manager drafted an excellent article providing recommendations to mitigate the effects of spending cuts before they occur. NISH staff is closely tracking these and other issues and will keep the AbilityOne® community updated through Martin Williams a variety of NISH publications and presentations. Please direct any comments, suggestions or questions regarding information and updates you would like to receive, please forward them to Sheila Sandford, director, Special Projects at email@example.com or 571-226-4574.
Shay Assad: Pentagon, GSA Working for Contract Options, Efficiency
he Defense Department and
General Services Administration (GSA) are collaborating to change how the agencies buy goods and services. Speaking at the Coalition for Government Procurement conference, Shay Assad, Pentagon’s director, Defense Pricing, said his department is concerned with how the government uses contract schedules. Assad said the acquisition and procurement environment should be based on fair competition and effective schedules but the departments are not yielding those outcomes. Pilot programs that allow the agencies to try different methods for contracting and procurement are one of the efforts Assad said he is pursuing to improve efficiency. Assad said the Pentagon is working with GSA to establish a set of contract schedules that would 2 ★ NISH eTiPs ★ Summer 2012
allow the Pentagon to pursue a cost-reimbursement contract rather than fixed-price. The Pentagon wants more contract options where the lowest price does not mean poor quality, Assad said. Assad said he instructs contractors seeking a product with the highest-value technical performance to pursue best-value procurement. When there are multiple suppliers, he said it is not necessary to pay more for a service that can be bought from more than one provider, according to the report. One program Assad is promoting would establish a contractor business analysis repository. The repository, which is in its beta testing phase, would gather data on a provider that contracting officers can use to access contractor background information. This and other efforts aim to align corporate and
division administrative contracting officers, improve pricing and integrate contractor analysis tools to help in decision-making, Assad said.
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prevent companies from bringing their costs down. He said the Pentagon also is trying to make it easier for vendors to make informed decisions about where to invest their limited bid and proposal dollars.
DoD FY2013 Budget Request The Fiscal Year 2013 Budget Request from the Office Of The Under Secretary Of Defense (Comptroller)/Chief Financial Officer provides details of present-day budge but also provides historic budget trends. One of particular interest in the reduction in budget after wars or conflicts: • Korea - FY52-56: -42.3% reduction • Vietnam - FY68-74: -29.6% reduction • Buildup/Cold War FY86-98: -33.0% reduction • Iraq/Afghanistan FY10-17 – projected -21% reduction One of the guiding principles detailed in the document include more disciplined use of defense dollars. The Budget Control Act (BCA) of 2011 mandates all federal agencies to cut their budgets to 10 percent or more below current appropriations. DoD has committed to saving or avoiding spending $259 billion over the next five years and $489 billion over the next 10 years. DoD is working to ensure there is more disciplined use of defense dollars. There are a number of initiatives to accomplish this including strategic sourcing, better buying practices and streamlining installation support.
ISH eTiPs is published quarterly by the Regional Operations Department in collaboration with Corporate Communications. If you have questions or submissions, please contact Sheila Sandford, director, Special Projects at 571-226-4574 or firstname.lastname@example.org. Martin Williams ❘ Executive Sponsor Sheila Sandford ❘ Publisher Nancyellen Gentile ❘ Editor in Chief Marie McManus | Contributor Vatrice C. Jones ❘ Content Coordinator
Senate Confirms Jordan As New OFPP Administrator
he Senate confirmed Joseph Jordan as the Obama administra-
tion’s new chief of contracting policy on May 24. As administrator of the Office of Federal Procurement Policy (OFPP), Jordan will be expected to reduce federal contract spending, consolidate duplicative contracts across the government, and tighten rules to ensure that agencies properly use and manage contracts. Members of the Homeland Security and Governmental Affairs Committee pointed to improper contracting practices by the General Services Administration (GSA) in preparation for a 2010 conference in Las Vegas as an example of the type of waste and abuse that they would like Jordan to stop. GSA’s inspector general found that officials failed to publish solicitations and use competition when awarding contracts for team-building exercises and audiovisual services at the conference. Jordan brings a wealth of knowledge from his lengthy private sector resume. Before former OFPP administrator Dan Gordon stepped down at the end of 2011, Jordan joined the Office of Management and Budget in December as a senior adviser on procurement issues. In his prior job, Jordan spent more than three years as the Small Business Administration’s associate administrator of government contracting and business development. That office oversees programs and services that help small businesses win government set-aside contracts. Jordan also worked in the private sector helping companies develop purchasing and supply management strategies and advising state governments on how to cut costs. Source: Federal Times, May 25, 2012
New OFPP Administrator Sights Set on Workforce, ‘Buying Smarter’
n Joe Jordan’s leadership role at
the Office of Federal Procurement Policy, he’s wasting no time setting priorities, which include building the federal acquisition workforce and “buying smarter.” Jordan detailed his three main areas of focus during a recent interview with Federal New’s Radio: • Buying smarter and buying less. One way this can be accomplished is through strategic sourcing and by using more data analytics during the procurement process, he said. • Doing business with responsible parties. This includes increasing the
use of small business contractors to meet the federal government’s goals as well as bolstering oversight, “where we’ve got a lot of responsibility to protect the taxpayer dollar and prevent fraud, waste and abuse,” he said. • Continue to expand the acquisition workforce. “And this is not just the 1102s, the contracting officers, but also the project managers and the contracting officers’ representatives as well, because we need to strengthen the accountability for all of the tax dollars that we spend OFPP continued on page 4… Summer 2012 ★ NISH eTiPs ★ 3
Suspension and Debarments Rise for Irresponsible Contractors
or years, Congress has pressed federal agencies
to employ the suspension and debarment process more often to weed out irresponsible contractors. Federal statistics strongly suggest agencies are listening. In 2010, the most recent year that governmentwide statistics are available through the Interagency Suspension and Debarment Committee, agencies took 4,200 suspension, debarment and proposed debarment actions, compared with 2,700 in 2009. In the Defense Department, which provided data to Federal News Radio for 2011 and which accounts for about 70 percent of all government contracting dollars, the trend continued. The military departments and the Defense Logistics Agency took 1,525 actions to bar contractors from government. While the FAR spells out several black-and-white circumstances in which agencies can bar a given vendor from future work with the government, it also includes a catch-all provision that gives agencies an extremely wide berth: “any other cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor” can be grounds for
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and we really need to maximize the value for the American people,” Jordan said. OFPP’s workforce strategies are two-pronged: Recruit “the next generation of procurement leaders,” Jordan said and retain the skilled workers agencies already employ. Aside from developing the acquisition workforce, Jordan said the Obama administration is emphasizing “buying smarter” in procurement. “We are being very thoughtful about what we buy, how we buy it and that (for) every dollar .... we’re putting to work, it better be to procure something that we need for our mission.” One way to do that is
debarment. “Present responsibility” lies in the eyes of the beholder; in most cases, companies tend to avoid being placed on the government’s excluded parties list if they discuss problems early with their agency suspension and debarment officials, show that they are responsible contractors and present a detailed plan to avoid future problems. Under federal law, suspension and debarment in procurement cases can’t be used as a penalty for misconduct, whether real or perceived. Its only purpose is to protect the government against potentially unscrupulous contractors. NISH will track this issue and keep the CRP community apprised of any changes that may affect them.
by strategic sourcing, which allows agencies to leverage the full power of the federal government when they procure something, Jordan said. “The use of strategic sourcing supports the administration’s overall goal to procure more efficiently. We’re the largest procurer of goods and services in the world. Yet for far too long, the government purchased as if it were 130 mid-sized businesses,” he said. “That’s not smart. That’s not delivering the best value to the taxpayer. And this doesn’t mean that driving down prices is the only goal. It means that we’re being thoughtful, we’re being strategic.”
Subscribe to NISH Public Policy Update The NISH Public Policy Update is published on an as needed basis to share breaking public policy news. If you are interested in receiving these updates, please contact Alicia Epstein (email@example.com). 4 ★ NISH eTiPs ★ Summer 2012
Take Steps To Mitigate Effects of Spending Cuts
ave your contracts with
federal agencies been the subject of reductions in scope? If you have a custodial contract supporting an Air Force installation, you are already painfully aware of reductions to your contracts due to the FY 12 budget and implementation of Air Force custodial standards. In FY 13 you will have to contend with the potential for “sequestration” or other budget cuts implemented to avoid it. Sequestration is the automatic reduction of spending by $1.2 trillion that will trigger on January 1, 2013 if Congress approves spending that exceeds “caps” established by the Budget Control Act of 2011 for FY 13 through 21. The likelihood of deep budget cuts makes it necessary for you to take steps to mitigate the effects of spend-
Senators Back Off call for Automatic Contractor Suspensions
a federal official determines that the contractor failed to pay or refund the government what’s due in connection to a contract with the departments of Defense or State or the U.S. Agency for International Development. That provin a new bill on contingency sion applies only to those three contracting, senators have agencies. backed off earlier demands for Federal officials and experts automatic suspensions of contrac- have shied away from automatic tors charged with wrongdoing. suspensions, arguing that it takes The new version of the Compretoo much discretion away from hensive Contingency Contractagencies. The Commission on ing Reform Act (S. 3286), which Wartime Contracting in Iraq and was introduced June 12, would Afghanistan, whose report was require an automatic referral of the basis for the legislation, ena contractor to the suspension courages enforcement of the and debarment official for certain suspension rules, but not comallegations, including criminal pulsion. Former administrator of charges and accusations of fraud. the Office of Federal Procurement The referral would also come if Policy, Dan Gordon, also said
mandatory suspension was a bad idea. The new bill, introduced by Sen. Claire McCaskill (D-Mo.), strengthens provisions in the original contingency contracting legislation that came out in February. It would elevate oversight responsibility and improve management structures. With the new bill, Sens. Joe Lieberman (I-Conn.) and Susan Collins (R-Maine), chairman and ranking member, respectively, of the Homeland Security and Governmental Affairs Committee, joined Sens. Webb, McCaskill, Al Franken (D-Minn.), Richard Blumenthal (D-Conn.) and Bernie Sanders (I-Vt.). The bill was sent to Lieberman’s committee for further consideration.
ing cuts before they occur. Some key areas that should be addressed are identified in the following paragraphs: • Resolve performance issues. Address any actual or perceived performance issues immediately. Adverse performance can affect future business as well as that of all other AbilityOne providers. Poor quality performance as a contractor can weaken an agency’s argument for maintaining current budget levels. • Identify cost savings of contract funding. Foster a proactive dialogue with federal customers to identify areas for cost savings, even if those savings may impact jobs. Request all employees to report dripping faucets, inefficient electricity use, deteriorating materials, opportunities for process improvement and low levels of recycling to save funds. Tighten overhead with lean processes and policy then pass the realized savings to the federal customer. • Look for different opportunities. Become attuned to the areas where government requirements are likely to increase. Seek opportunities buried in larger requirements that can be segregated. As an example, a recent requirement for vehicle development included kitting and inventory replenishment. Operations and maintenance (O&M) budgets will suffer the greatest reductions. Consider diversifying the contracts from traditional lines of business such as custodial, food service and grounds maintenance to more strategic lines of business, healthcare environmental services, contact centers, or supply chain management services, which are less likely to be O&M funded. Budget cuts are inevitable in the coming years. One should begin preparing for the fallout now. There are some things that are well beyond one’s control. The key is to focus on those things that can be controlled and to turn an era of challenge into an era of innovation and opportunity.
GSA Makes Changes to Improve Operations
ongressional budget cuts
and a recent scandal are forcing the General Services Administration to change how it does business according to acting GSA Administrator Dan Tangherlini. Specifically, GSA will likely merge portions of its two main divisions — the Public Buildings Service, which manages federal buildings and building leases, and the Federal Acquisition Service, which oversees many federal contracting programs. Merging portions of GSA’s buildings division and contracts division—such as the information technology, finance and contracting operations—also will bring efficiencies and cut costs. In addition, budget cuts will push GSA out of the business of managing new building construction projects, at least temporarily. Instead, the agency will focus more on GSA continued on page 6… Summer 2012 ★ NISH eTiPs ★ 5
CBO Director Says Sequester Will Hit Federal Agencies Early
ederal government agencies and contractors are already starting to
feel the effects of the automatic sequestration cuts mandated by the Budget Control Act, and the effects are expected to build in the second half of this year, Congressional Budget Office (CBO) Director Douglas W. Elmendorf told reporters last week. While sequestration does not formally take effect until January 2, 2013, it will reduce spending by $109 billion over the course of the entire 2013 fiscal year, which begins three months earlier on October 1. The cuts would take $55 billion from defense and the balance from domestic programs. The cuts next year would total $1.2 trillion over nine years. There is growing concern that the scheduled spending reductions are making it difficult for agencies to decide whether to hire and to plan other spending leading up to next year. The cuts to come are creating similar headaches for companies and organizations that depend on federal contracts or grants. House and Senate Republicans have pressed the Office of Management and Budget to provide details of how the automatic cuts would affect agencies, which White House officials say will be released as more information becomes available. Source: CQ Roll Call
Dempsey Maps Sequestration Cuts at Defense
hairman of the Joint Chiefs of
Staff Martin Dempsey said on June 19 that automatic cuts to the Defense Department’s budget resulting from the sequestration deal struck by the Obama administration and Congress would have to come from military operations, maintenance, training and modernization. If lawmakers do not avert sequestration and the cuts take place next year, as scheduled, Dempsey still will have to pay the bill for the military’s “overseas contingency operations” in Afghanistan and the Persian Gulf, he told attendees at a military leadership breakfast sponsored by Government Executive. When other options such as personnel cuts and base realignment and closure are taken off the table as well, Defense isn’t left with many choices, according to Dempsey. “There’s talk about ex6 ★ NISH eTiPs ★ Summer 2012
empting manpower . . . and you’ve also said, ‘Thou shall not BRAC,’” he said. “So now you’ve limited the places where that money can come from. It can’t come from manpower. It can’t come from infrastructure. And you have to reinvest in Overseas Contingency Operations (OCO). And what’s left is operations, maintenance and training and modernization.” The chairman also emphasized the importance of transitioning military personnel to a stable civilian workforce while finding a better way to harness the younger generation’s “entrepreneurial” qualities as new recruits enter the armed forces. “If we don’t get the people right, the rest of it won’t matter. We’re going to put the country at risk,” he said.
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making existing federal buildings more efficient. New construction funding for GSA dropped from $894 million in 2010 to $82 million in 2011, and to $50 million in 2012. The president’s 2013 budget request asks for $56 million for new construction. “We are going to find it more difficult to construct new buildings in the next few years,” Tangherlini said. “I think the administration and Congress have had to make hard choices and recent construction budgets clearly show that.” The appropriations panel responsible for GSA voted last year to approve no funding for new GSA construction projects in 2012, and it is expected to do so again for 2013. Tangherlini said the agency will work instead on retrofitting older buildings to make them more energy efficient and to save agencies money on utility bills. The renovation budget dropped from $414 million in 2010 to $280 million in 2011 and $280 million in 2012. GSA is seeking $494 million for 2013. He also said a May 11 memo from the Office of Management and Budget that prohibits increases in leased space will push the agency to reduce the space agencies need by co-locating offices and making office spaces more efficient. Any increase in leased space must be offset by a consolidation of leased spaces elsewhere, according to the OMB memo. GSA has seen its leased office space climb over the last few years from about 178 million square feet in fiscal 2008 to almost 196 million in March. Will GSA be able to meet the mandates set by the OMB memo? “If OMB says we have to do it, we have to do it,” Tangherlini said.