For the third year in a row, the annual Defense authorization bill the House Armed Services Committee will begin considering today is chock full of provisions that are meant to reform the acquisition system – including one that would represent the biggest change in decades in the way the government buys commercial goods.
Among the more than five dozen acquisition provisions in the bill is committee chairman Mac Thornberry’s proposal to require DoD to buy its commercial-off-the-shelf products from private sector “online marketplaces” like Amazon. The chairman first floated the idea in a discussion draft a month ago, and the version the panel will consider today is mostly unchanged with two major exceptions: it would apply to the entire federal government, not just DoD, and it would require the government to do its buying through at least two online platforms rather than “one or more.”
But the revised version seems to have done little to satisfy industry’s many concerns with the proposal, including that it does not make clear how agencies would comply with numerous other acquisition laws and regulations – including protections for small business – and that it would bypass the Competition in Contracting Act.
The measure would let GSA select two or more marketplaces for the government’s use without a competitive process. Proponents argue a bidding process isn’t necessary, since the transactions inside the portals are happening in an inherently competitive marketplace.
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But that logic is flawed, said Roger Waldron, the president of the Coalition for Government Procurement. In reality, he said, it would force hundreds or thousands of commercial firms that already have their own online platforms to make most of their government sales through one of the GSA-selected portals – perhaps operated by one of their direct competitors.
“It clearly says that the government can’t alter the standard terms and conditions of the online platform provider, so that sets the terms at maybe as little as two points of entry into the federal market for certain commercial firms,” he said. “They’ll be paying fees to those organizations, and there’s also the question of what those organizations can do with the data they collect. Can they use it to turn around and compete directly against the same suppliers they’re serving? In traditional government contracting, that would be an organizational conflict of interest.”
The legislation would require the new portals to identify small businesses selling goods within the portal, but does not take any active steps to promote small business utilization or help agencies comply with the Small Business Act. Nor, industry officials say, does it deal with the legal requirements agencies have under the Buy American Act, the Trade Agreements Act or their day-to-day responsibilities to audit and oversee their purchasing activities.
Trey Hodgkins, a senior vice president at the IT Alliance for Public Sector, said his members were intrigued by the marketplace concept because met the trade group’s prescription for “transformational” changes in government technology procurement.
“We like the direction it’s taking, but we still have questions about how to make sure this is something that’s feasible and that people can effectively comply with it,” he said. “They do not list the bulk of the [Federal Acquisition Regulations], many of which are statutorily based. So what happens with all of those requirements when people are buying through this portal? Those are the things we’re still working the committee on for answers.”
Thornberry has said that his overall objective with the measure is to continue to prod the Defense Department to behave more like a commercial buyer and move away from government-unique terms and conditions when it’s buying off-the-shelf goods.
Waldron, a former longtime GSA official, said that’s a laudable goal so long as Congress doesn’t end up restricting competition in the process. Thornberry told reporters last week that he wants the government to avail itself of “multiple” online marketplaces. But the actual bill language only stipulates “more than one,” meaning agencies could wind up with a duopoly.
“Having worked in the government for 20 years, the default is going to be to the path of least resistance, so it’ll more than likely lead to two providers,” Waldron said. “We do need to streamline and get back to commercial item contracting. It’s vital to improving access to products and services. We support that, but we would like to see that approach applied to all types of online capabilities if you’re really trying to tap into the commercial marketplace.”
The online marketplaces provision is just one of 66 provisions in the acquisition section of the “chairman’s mark” that the House Armed Services Committee will begin debating and amending today.
Another would make significant changes to the way the Defense Department plans and budgets for service contracts, which make up more than half of all of DoD’s contracted spending.
It would require DoD to submit detailed spending plans for its service contracts for the upcoming fiscal year along with the annual budget it sends to Congress, just as it does for weapons systems. The plans would have to be based on historical data and rigorous analysis of what all the military services and agencies believe their requirements for contractors will be in any given year as part of the military’s “total force.”
It would also attempt to reform the way DoD uses services requirement review boards (SRRBs), the internal panels that scrutinize service contracts. The committee appears to believe that the department has been using the “contract courts” only critique the contracting techniques Defense organizations are using to buy services, and not forcing them to demonstrate that they actually need the contract personnel they’re proposing. The measure would require the SRRBs to “critically examine requirements in light of total force management, available resources, analysis of past spending, and contracting best practices.”
And, to encourage DoD to better plan for its service contract needs, it would try to deter Defense organizations from using bridge contracts to cover the period between when one contract expires and a new one is awarded. The first time a contracting officer signs a bridge contract for a given requirement, it would trigger a notification to a “senior official” in his or her organization. Subsequent bridge contracts would require the assent of officials at progressively higher levels in the chain of command.
The bill also includes numerous provisions telling DoD to do everything possible to plan for and reduce the long-term costs of its weapons systems while those platforms are still early in the planning stage.
For instance, one provision would require the military services to make reliability and maintainability a key performance parameter when they’re first setting the requirements for a new system. Another would mandate that they determine the intellectual property they’ll need to acquire to sustain a weapons platform over its entire service life before a new system enters production.
“It’s been a well documented fact that something like 90 percent of the life-cycle cost of a system is determined before you’ve spent 10 percent of your dollars,” a senior congressional aide said. “Those decisions get locked in early and they drive downstream costs, but there really aren’t incentives in the current system to force trade offs and thinking about those long-term sustainment strategies. That’s what we’re trying to encourage, both in terms of government program offices and in terms of contractors who are proposing these systems.”