The phrase “Why can’t the federal government buy more like Amazon?” might as well be the official battle cry of the Office of Management and Budget these days.
Real-time pricing, quick shipping, easy to use online tools: What’s not to like? Executives in and out of government nod in silent agreement with this mantra. The fact is, though, the majority of federal acquisition issues wouldn’t be solved if the government scrapped all of its procurement rules and started buying from Amazon today.
The federal government is a far, far larger buyer of services than it is of products. Defense Department officials have long stated that their department spends more on service acquisitions than it does on products, including weapons systems. While it might be really cool to buy an F-35 online, that capability would still not address the bulk of DoD’s spending issues.
Civilian agencies are in largely the same spot. The departments of Health and Human Services, Veterans Affairs, Energy and other agencies spend considerably larger sums on services each year than on new hardware. VA and Social Security Administration benefits, Energy laboratories, Homeland Security Department cyber solutions and more all rely on contracted support services.
Despite the fact that service acquisitions predominate, agencies continue to allocate resources to get a better handle on product acquisitions. This started with the well-publicized Strategic Sourcing Initiative for office supplies. Whether or not taxpayers are getting a good deal on service solutions, we now know that pencils and paper are less expensive.
Even today, almost all of the OMB Category Management efforts to date have been on the product side. Commoditizing IT and reducing the contracts agencies can use to buy it is the latest initiative.
Spending data is a hot commodity for NASA SEWP users. DoD has an established “should cost” initiative.
Perhaps the best example is the General Services Administration’s attempt to create a price comparison tool for its Multiple Award Schedule program. While services account for 68 percent of all sales, GSA is spending time and money — its own and potentially millions of contractor dollars — to drive at better pricing for products. It is far from certain that the tool will actually be workable. At best, it will capture only a minority of Schedule spending.
If federal acquisition leaders want to get a real handle on acquisition-related spending, they, like Willie Sutton, need to go where the money is.
While getting a handle on service spending is not as easy as tracking product dollars, it’s an essential exercise. Agency budgets aren’t likely to see sharp increases anytime soon, yet agency missions will demand increased use of services to meet those missions. Each service dollar needs to be spent wisely.
It should be a given that tools used to gauge product acquisitions won’t work here.
An open dialog with service contractors is perhaps the first step to be taken. Understanding how federal agencies are viewed as a service customer will likely lead to actionable information that can be used to start a process of service acquisition reform based on common sense.
This in turn can lead to best practices, and perhaps eventually, procurement rules that are made for service buying so that product-based rules don’t have to be used on something for which they were never intended.
Acquisition reform is a laudable goal, but resources aren’t being properly applied today. That needs to change if we’re going to get better outcomes tomorrow.
Larry Allen is president and founder of Allen Federal Business Partners.