Procurement: Learning from the (Mistakes of the) Feds

Simply put, procurement practices are desperately in need of solid management and accountability. The good news: Help is on the way.

Imagine the Defense Department entered into a contract with a private vendor to deliver $900,000 worth of services in Iraq. Now imagine that same contract was modified nine times without any agreement between the Department of Defense and the contractor on the scope of the work. Finally, imagine that, after all these changes, the cost of the contract had escalated to more than $200 million.

Unfortunately, you don't have to imagine any of these things, because they actually happened. Even worse, this is hardly an isolated incident. Simply put, procurement practices are desperately in need of solid management and accountability. The good news is that a new project is underway that is helping to inject some much-needed energy into the process, which will hopefully lead to less waste and, more importantly, better government performance.

Many of the problems with acquisition practices stem from a period of dramatic and rapid change. Since 9/11, annual spending on federal contracts has nearly doubled, rising to $388 billion in 2005. As evidenced by the news reports out of Iraq, the Gulf Coast and elsewhere, this increase in spending was not accompanied by a corresponding increase in performance accountability.

It's important that leaders respond to this problem, but it's equally important that they not overreact. Numerous pieces of legislation have already been passed -- and numerous policies adopted -- to govern contracting policies. Despite much-needed progress over the past several years, there remains a web of regulations that has promoted static or inflexible infrastructures, processes and cultures within procurement functions. The imposition of additional laws and regulations is more likely to exacerbate current hurdles than to help overcome them. A closer look at the nation's contracting challenges suggests that an entirely new approach, using existing tools, is needed.

Understanding these challenges -- and recognizing the stakes -- the Partnership for Public Service's Private Sector Council sought to find a solution by enlisting some of the nation's top talent in federal and corporate acquisition. PSC brought together more than 35 top procurement executives from federal agencies and private sector organizations in an unprecedented effort to lay out a road map for improving the procurement system. Participants were uninterested in assigning blame for the system's shortcomings. Instead, these executives pledged to roll up their sleeves to build realistic solutions.

The group quickly reached a consensus about what some of the common characteristics of these solutions should be. They would leverage the laws and flexibilities currently in place; identify and address the procurement community's genuine challenges, not their symptoms; and share existing models of successful innovation in the federal procurement community with practitioners across government.

Having established these ground rules, the group then debated what aspect of federal contracting would be its primary focus. Seeing as how most organizations that have examined this topic have prioritized up-front contracting activities like the bidding process, the group chose to examine the "neglected stepchild of procurement reform" -- post-award management. This area deserves attention not only because it had been largely ignored, but because it doesn't matter if a contract is awarded completely by the book, if you botch it on the back end.

Drawing heavily on its own experience and the experi­ences of successful corporate and federal management teams, the group identified three keys to successful post-award contract management:

1. A sustainable and accountable partnership

An infrastructure for success, to include effective contract launch

3. A system of measures to monitor and improve performance

PSC developed an Acquisition Innovation Pilot Handbook that examines each of these success factors and offers comprehensive and practical solutions for achieving them. In addition, the Handbook provides hands-on tools that enable contract teams to put these solutions directly into practice. We are giving proven and scalable solutions to practitioners who -- in reality -- don't have the time or resources to reinvent the wheel in order to better manage their contracts.

To test the effectiveness of the group's solutions, three agencies have agreed to utilize the tools and recommendations enumerated in the Handbook during a nine-month pilot phase. "Pilot contracts" representing diverse work-scopes and values have already been volunteered by the Department of Homeland Security, USAID and the Department of Energy. Pilot contract teams are reporting their experiences to the project participants on a quarterly basis so that participants can assess the value of their own solutions and make adjustments accordingly. The Handbook will then be re-released and shared with agencies across government to maximize accessibility to the now-tested best practices and tools it contains.

This effort is giving public servants the tools they need to better utilize our limited resources. Where the layering of rules, red-tape and regulations have in the past created risk-averse, procedure-driven contracting environments, we are working to share proven tools, support the integration of proven strategies into federal practices and facilitate collaboration within and across sectors to meet the country's needs.

Download the Acquisition Innovation Pilot Handbook

Max Stier was a GOVERNING contributor. He is the president and CEO of the Partnership for Public Service.