The largest federal employees union says industry is price-gouging the Defense Department. The American Federation of Government Employees urges Defense Secretary Lloyd Austin to consider emergency waivers, to recapitalize DoD’s own production capabilities. This as commitments to Ukraine diminish U.S. supplies of ordnance and launch platforms. For industry reaction, the Federal Drive with Tom Temin spoke with the president and CEO of the Professional Services Council, David Berteau.

Interview transcript:

Tom Temin  And David, they do point out a real issue and that is it’s tough to resupply the Stinger missiles and javelins and so forth, that have shipped to Ukraine. But maybe there’s a better answer than calling price gouging.

David Berteau Tom, thanks for having me on this morning. You’re absolutely right. We’ve got a major illumination that’s occurred ever since the Russian invasion of Ukraine, February, a year ago, that shows that our total stockpile that we had for munitions was more inadequate than we thought for the kind of combat that we’re providing support to there. And I think the AFGE letter, to the extent that it highlights that issue, is adding on to a debate that’s been going on for more than a year now. The real question, though, is what do you do to address it? If you go back to the Cold War, which is obviously when I got my start in [Department of Defense (DoD)], we actually had the capability inside the department to determine what kind of surge capacity we would need for certain types of weapon systems, ammunitions, as well as spare parts and supplies. And we actually funded the provision of that surge capacity in industry and throughout the federal government, including, by the way, in the organic depots themselves.

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Tom Temin The AFGE does reference the organic capabilities. These are places like the Watervliet arsenal and places where there is casting and polishing and production capability. Factories operated by DoD.

David Berteau Well, yes, And throughout the history of America, actually, we’ve had a combination of public sector facilities and workers and capabilities and capacities, and private sector facilities and capabilities and working capacity. That’s been the partnership that’s been true since before the Revolutionary War. And it’s gotten us through a lot of tough times together. I think that partnership still exists, but in many ways, the letter that the AFGE sent to the Secretary of Defense doesn’t either highlight that partnership or talk about ways in which we can optimize it. Investing in the organic capability, and what that means is government owned, government operated facilities, or in some cases, government owned contractor operated facilities has often been neglected, especially since the end of the Cold War when the demands weren’t there. It’s very useful to think about how you replenish those. But that alone is not nearly enough, and the real answer is how do we work together to actually identify the problems, get the resources in place, find the workforce needed and solve them?

Tom Temin And the other issue that the AFGE brings up is that the government treats these items as commercial items. Javelin missiles and so forth, and the launching platforms too, we should say the weapons platforms. And therefore, it doesn’t get the real production data it would be entitled to get if these were not commercial items, if they were military specific items. Fair to say they’ve got a point there, too.

David Berteau Well, they may have a point, but the most of the evidence actually would point in the opposite direction, because the vast majority of government procurement contracts does include government access to the technical data. And in fact, the government has more data than it actually is able to use. So I don’t think the problem is in either the act, the 1994 [Federal Acquisition Streamlining Act (FASA)] Act, which started moving us in the direction of being able to access commercial items or in the implementation of it. It’s in the individual cases where in fact the government may not have gotten what they needed, largely because they didn’t anticipate needing it and weren’t willing to actually pay for it as part of the process. Obviously, companies intellectual property does have value and the government should have access to it, but companies should be compensated for their investments there. But I think the larger question is, that the government’s ability to actually, we’ve had a an evolution in the way innovation is going on in America and around the world. It used to be, again, back to the Cold War days, most of the necessary innovation for the military and for national security came from government invested research and development or from government reimbursed independent research and development by the companies. That’s no longer true. In Fact, even starting in the nineties, where the federal government investment in global R&D is somewhere between two and 4% per year. So innovation is coming from the commercial marketplace, both at home and abroad. It’s essential that DoD and the federal government have access to that commercial innovation, undermining that in ways that the letter suggests would not work to our advantage.

Tom Temin We’re speaking with David Berteau, president and CEO of the Professional Services Council. I guess that debate is going to go on for some time. And I want to move on to another topic, which is the recently released list of successful bidders in the NIH, [NIH Information Technology Acquisition and Assessment Center (NITACC)] program, their CIO-SP, what are they up to four.

David Berteau CIO-SP4.

Tom Temin And already there’s protests and it was not coming out very clearly, was it.

David Berteau Tom, this entire process of solicitation and evaluation criteria, for more than a year now, has been such a morass for for both contractors and for the government, itself. It’s important for the government to have the governmentwide what acquisition contracts necessary for it to access those unanticipated innovations, in fact, that we just talked about. CIO-SP4 building on the CIOSP, predecessors three and before, has been a good access point to that, not only for NIH and the Department of Health and Human Services, but for the whole federal government. But the misstarts and stops, and literally changes made on the day bids are due is really complicated this thing. Releasing a partial list has left almost everybody in limbo. I guess if you’re on the list, you can be pretty sure that you’re going to be on the final list. But if you’re not on the list, you don’t know where you are here. You’ve invested time and money to be part of an acquisition process. It’s vital, but certainly has not been straightforward.

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Tom Temin Yeah, it’s almost like these companies that don’t know or merit semifinalists and they’re on the waitlist of a bunch of colleges.

David Berteau It’s hard to know where you are if they don’t tell you that.

Tom Temin Have you ever seen a situation where there’s a partial list of winners released and everyone else is in limbo that either you are on there or you’re not?

David Berteau I suspect it’s happened before, but I went back through my own records and I couldn’t find any examples of it, especially at the magnitude that we’re talking about here. Hundreds of companies, joint ventures that were formed solely for the purpose of meeting the arbitrary and constantly changing criteria that NITAAC laid out. And now you don’t know if you’re in or out, even though you’ve put it in place. And they don’t have much time, Tom. Because the end of April is when this thing needs to be up and running in order to not have a break in necessary services provided across the government. It’s not easy to see how the path forward is going to work here.

Tom Temin Well, I guess, that’s going to be their problem because it’s going to be resolved one way or the other, because [Government Accountability Office (GAO)] has a deadline on deciding that case, the protest. So this could spin out through the summer.

David Berteau I think it does, Tom. And it’s not just the government’s problem. It’s a problem for the companies as well, and those companies are providing essential mission support and capability across the entire federal government and really needs to be resolved much more forthrightly than it has been up to now.

Tom Temin What will be resolved sooner? The CIO-SP4 or the federal debt limit question?

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David Berteau Well, they both are operating on a short timeline, although the debt limit extension, it will be necessary at an undetermined point. There will be one day where the federal government wakes up and the Treasury Department says, we don’t have enough cash in the coffers to pay all the bills that are due today. And that date, Janet Yellen, the secretary of the Treasury said, no sooner than early June. The Congressional Budget Office in its update, said maybe July, maybe early August. That timeline is upon us, but the battle lines are pretty clearly drawn. The House Republicans have said they’re not going to vote for a debt limit extension unless there are spending cuts. And the White House has said we’re not talking about spending cuts in exchange for a debt limit extension. One or both of those sides is going to have to move and pretty quickly.

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