EPA experiences the upside of contracting reforms

OMB issues a fact sheet detailing successes across the government. Agencies are using fewer risky contracts and achieving more competition. One expert, however,...

By Jason Miller
Executive Editor
Federal News Radio

The Environmental Protection Agency is using the money saved from changing the way it contracts for Superfund remediation cleanup services to fund other mission critical needs.

John Bashista, the director of EPA’s office of acquisition management, says the savings enable the agency to meet needs that otherwise the agency would not have had money for.

EPA’s savings come from the government-wide initiative to improve contracting through more competition and by using fewer risky contracts such as time and materials.

The Office of Management and Budget released a fact sheet Wednesday detailing how agencies are doing in meeting President Obama’s goal of saving $40 billion in contracting annually by fiscal 2011.

“When I go out and speak with the acquisition workforce and especially listen to the acquisition workforce, I hear people who are charged up and focused in way hasn’t been true for years,” says Dan Gordon, administrator of the Office of Federal Procurement Policy in an interview with Federal News Radio. “When we talk about the need, for example, to avoid sole source contracting, which are sometimes called one bid or no bid situations, I’m hearing real effort to get that competition out there and I think the acquisition workforce can make all the difference. You see same thing on cost reimbursement. For too long we’ve had situations where we do a contract using cost reimbursement pricing because the prior one was cost reimbursement and why was that one cost reimbursement, because the one before was cost reimbursement. In other words, we have too much inertia and not enough rethinking.”

And it’s that rethinking that is helping EPA-and other agencies-begin to see change in their acquisition cultures.

“I think the initiative really helped facilitate a more innovative thinking among agencies to get out of the paradigm or get out of box of doing things the traditional way,” Bashista says. “I think it also heightened the visibility of the perspective that the acquisition workforce involves more than contracting officers and specialist, but does involve a wide variety of people–the program organizations have a role in the acquisition process, the budget folks, the legal counsel, finance folks–and from that perspective the initiative really helped to facilitate a broader thinking about how we approach acquisition.”

He adds that EPA looked beyond OMB’s requirements to see how they could take advantage of rebates through purchase cards or reutilization of excess property.

Chuck Gherardini, EPA’s deputy director in the office of acquisition management, says his office used historical data to specifically identify the services needed and estimate what the cost would be for Superfund cleanup services.

In the end, more contractors competed for the work and that lowered the price, he says.

EPA estimates that it is paying 65 percent less under the firm fixed price contract than under the cost reimbursement type of contract previously used for these services.

Along with EPA, OMB highlighted the Homeland Security Department’s use of reverse auctions to purchase commercial products. DHS says it paid $40 million less overall than it estimated it would pay.

The National Nuclear Security Administration acquired cybersecurity and IT services by splitting up one large contract into two smaller ones. NNSA received more competition and saved $22 million, or paid 15 percent less than previously for the same or better services.

And finally, the Defense Department and the Interior Department worked together to procure call center operation services where the price is based on the volume of calls and not a single fixed price.

Gordon says sharing lessons learned such as these is the way the administration plans on keeping the momentum going around the contracting reforms.

“This is really about changing the culture,” he says. “As we strengthen our acquisition workforce, which is going on in every agency of the government right now, as we improve the training we give to the acquisition workforce, we are working hard to change the culture. To give you a concrete example, award fee contracts should absolutely not be used unless the appropriate criteria are met. That means they should be the exception and not the rule.”

Gordon says the same goes for cost reimbursement and sole source contracts as well. He says getting contracting officers to recognize the limits is as much a culture change as anything else.

“Fiscal responsibility means using competition and that can be a slow battle,” he says. “We are turning the tide.”

Part of the evidence the administration points to in turning the tide is recent progress made by agencies in increasing competition and reducing the use of risky contracts.

OMB says during the first two quarters of 2010, the number of new contracts awarded without competition dropped by 10 percent as compared to the same time period in 2009; the number of contracts receiving only one bid dropped by 2 percent and the number of risky contracts dropped by 7 percent.

Overall, OMB says acquisition grew by only four percent in 2009, down from an average growth rate of 12 percent over the eight previous years.

“We are stepping up and saying in agency after agency-led by the Secretary of Defense frankly in terms of dollars that’s involved–saying this is something we cannot afford or this is something we do not need,” Gordon says. “When we are running acquisitions, we are running acquisitions in a smarter way so the taxpayer’s dollars are going further.”

OMB’s numbers do cause some experts to pause. Robert Burton, a former OFPP deputy administrator and now an attorney with Venable in Washington, says he isn’t sure if the statistics tell the entire story.

Burton asks whether the number of competitive contracts and fixed price contracts also increased over the last decade as part of the overall procurement expansion.

Burton says many of the decreases likely are because of the administration’s focus on insourcing of contract positions.

“What you are seeing here is to a large extent the results of government’s aggressive insourcing initiative,” he says. “The reduction in time and materials and cost reimbursement contracts can be attributed to agencies bringing work back in house. Clearly if you look at these numbers, everything is being reduced, the percentage of dollars spent overall and across all categories. I think the reduction is primarily by moving work into the federal government and not savings per se.”

Gordon says the administration’s insourcing initiative is not part of the contracting savings effort.

“We have succeeded in slowing the growth of procurement spending, because it’s not as if the dollars spent dropped,” he says. “It’s not a case of a shrinking pie, but a case of frankly agencies acting more responsibly.”

Burton says several of his clients-many of which are small businesses-are feeling the effects of insourcing. He says they are losing people and contracts.

He also points to several other reasons for the change in how agencies are procuring goods and services.

Burton says the ability of vendors to protest task order contracts worth more than 10 million dollars is one such reason. He says that gives agencies a lot of impetus to do a better job knowing a protest is possible and could slow down the entire procurement.

“The move to firm fixed price contracts also is a move away from performance based contracting,” he says. “I can understand why because the government has had real difficulty in developing performance based contracts. Fixed price contracts are a simpler method of procurement.”

Burton says all of this goes back to training the acquisition workforce.

“No question, the ability to define requirements well is an ongoing issue for every agency,” he says. “The government constantly has issues in doing that and the result is litigation. It is the one issue that is the biggest obstacle for the government to do good contracting. That is area where training is needed and the emphasis must be placed.”

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