By Jared Serbu
Reporter
Federal News Radio

The Defense Department’s efforts to infuse more competition into service contracting, while well-intended, has had unintended consequences, a Congressionally-mandated report found.

The findings are part of a DoD task force report which concluded that senior leaders in the Defense Department don’t pay enough attention to service contracts, and are locked into an outdated culture that is driven by contracting for products, not people.

“People within DoD don’t now recognize the fact that more than 50 percent of their total force are contractors,” said Dr. Jacques Gansler, chairman of the Defense Science Board’s task force on service contracting. “They’re not recognizing the value of contractors in a contingency environment, they’re not training with them, they’re not doing the planning and procedures.”

The task force on service contracting, first organized in December 2009, reported its findings to the full science board last month. Its report has not yet been released to the public, but Gansler previewed their findings in testimony before the Commission on Wartime Contracting Monday.

Gansler, a former undersecretary of Defense for acquisition, technology and logistics, said the panel arrived at eight findings related to service contracting across DoD. One of those findings is that senior leaders in DoD pay little attention to services and have little visibility into service contracts. He said an “outdated, product-driven defense culture” caused leaders to reward compliance with a contract over a vendor’s performance.

“We don’t do any training,” he said. “When I was undersecretary, I paid for a hundred case studies to be written for the Defense Acquisition University. They all came out to be on products. No case studies on services. The people are being trained on products, all the rules are being written around that, and the field commanders don’t have any education or training about the fact that they’re going to have all these people doing services around them—50 percent of their workforce. The emphasis has to shift.”

Gansler said his panel also found that the methods DoD has used so far to introduce more competition into service contracting have had unintended consequences. He said there has been a trend toward awarding contracts on the basis not of best value, but on the basis of “lowest bid, technically acceptable.”

“That’s good for buying bread and towels. But not for engineers—the idea that you hire an engineer because he got a degree from the back of a matchbox and his body temperature is 98.6, and pay the low hourly rate for an engineer,” he said.

Gansler said DoD’s competition strategies for services also have created an environment in which incumbent contractors automatically feel disadvantaged when a contract comes up for recompetition.

“Too frequently now, what we’re doing is giving it away to a low bidder—somebody who, knowing how much it’s cost in the past is simply lowballing it in order to get the contract, and then not worrying about the quality,” he said. “I would argue that if you’re an incumbent and you’re not doing a good job, you don’t deserve the follow-on. But if you’re an incumbent who’s doing a really outstanding job and improving performance and getting lower cost, I would say that they deserve the follow-on on a sole-source basis. But it’s performance and cost that we should be evaluating. And too often we’ve been moving to low-bid technically acceptable and not using prior performance at all.”

Gansler said DoD’s approaches to service competition also had discouraged vendors from approaching the department with unsolicited proposals, because they feared that their own new ideas would be put out for competition as new contracts.

Among the task force’s other findings, according to Gansler:

• DoD has a long way to go when it comes to acquiring service contracts through commercial best practices, something Gansler said is permitted under Part 12 of the Federal Acquisition Regulation. The panel found only 18 percent of DoD’s service contracts are secured using those practices. Gansler said this maintains barriers to entry for commercial vendors who could introduce competition into the marketplace.
• DoD needs to update its guidance on what “inherently governmental” truly means. Gansler said the panel found the department’s definitions of inherently governmental around its insourcing initiatives were too open ended. The Office of Federal Procurement Policy is working on redefining inherently governmental as well as functions considered critical and close to inherently governmental for all agencies, including DoD.
• DoD needs better visibility into its service contract spending. Gansler said the task force found the department’s eight portfolios of services were defined too broadly to give an accurate picture of where service contracting dollars were being allocated. Some contracts are too complex to easily fit in one portfolio, the panel found.

DoD’s current leadership agrees that it needs to improve the way it acquires services. Improving tradecraft in service acquisition in one of the planks in the Better Buying Power initiative being led by the current undersecretary for acquisitions, Ashton Carter.

Carter told an audience at the Heritage Foundation April 20 there is a textbook for acquiring services—DoD just doesn’t follow it. He said one cause is that most of the people handling large service contracts are not acquisition professionals.

“It’s a collateral duty for them, so it’s no surprise they’re not very good at it,” he said. “I do not intend to make them into experts in it, I intend to help them get better at it. I believe, mostly because we haven’t done that yet, that we’ll be able to realize some great productivity in the acquisition of services.”

This story is part of Federal News Radio’s daily DoD Report. For more defense news, click here.

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