What does ‘best-in-class’ really mean for federal contracts?

Forgive me for a minute while I play a little semantics. What does the term “best-in-class contracts” really mean?

If you are NASA and your SEWP contract is “best-in-class” does that mean the rest of your contracts are, say, “worst-in-class” or “meh-in-class?”

I bring this up now because the new category management memo from the Office of Management and Budget strongly encourages agencies to use “best-in-class” contracts to help meet the initiative’s goals.

Among the things OMB told agencies to do is: “Annually establish plans to reduce unaligned spend and increase the use of BIC solutions for common goods and services, consistent with small business and other statutory socioeconomic responsibilities.”

Additionally through the President’s Management Agenda, OMB is setting specific spending goals for each agency to use those vehicles like NASA SEWP or the General Services Administration’s enterprise infrastructure solutions (EIS) contract.

“The BIC goal is a reflection of the many benefits that have been realized from increasing the visibility and use of model contract solutions – including billions in cost avoidance aided by reduced contract duplication for identical products at wide price variations, increased use of common specifications, and greater reliance on government and industry best practices,” the memo states.

There currently are 38 BICs, including 25 that GSA runs, ranging from IT services to IT products to leasing cars to booking hotel rooms to body armor to hearing aids.

Several are duplicates, including four different “best-in-class” contracts for IT products and seven for IT services as well as seven BICs that OMB decided were “mandatory.”

OMB put out a definition of “best-in-class” when the term first came up a few years ago. Best-in-class criteria is:

  • Rigorous requirements definitions and planning processes
  • Appropriate pricing strategies
  • Data-driven strategies to change buying and consumption behavior (i.e., demand management)
  • Category and performance management strategies
  • Independently validated reviews

I — and real procurement experts — contend that the term “best-in-class” in-and-of itself is problematic for many reasons.

“What are you buying when you use a BIC?” Roger Waldron, president of the Coalition for Government Procurement and host of the Federal News Network podcast Off the Shelf, asked. “The use of BIC is confusing for contracting officers. The Federal Acquisition Regulations have priorities already, and this is another way to articulate priorities? The language around BIC, I think, sends the wrong message. A single agency contract might provide better outcomes than a governmentwide vehicle or vice versa. So much of this really depends on the agency’s mission and what they are trying to accomplish through the procurement action.”

And even OMB admits the definition could be improved.

“Initial designations of BIC contracts have been based largely on demonstrated use of strong contract management strategies. Designations will become more outcome-based as prices paid, performance and other information about agency vehicles within a given category becomes more readily available,” OMB writes in a footnote of the memo.

Same mistakes as strategic sourcing?

Larry Allen, president of Allen Federal Business Partners, took the question about “best-in-class” one step further, asking if the use of BIC is an attempt to reduce the supplier base, similarly to what started as strategic sourcing and eventually turned into category management.

“If you follow logic of the memo, it will result in a reduced supplier base in the federal market. What you are really talking about is reducing channels for acquisition and reducing the lanes where contractors have to supply services and products,” he said. “Just like there are winners and losers when bidding on acquisition vehicles there will be winners and losers among contractors because of the BIC designation. The administration has to be okay with that.”

In the memo, OMB was clear about giving agencies flexibility to consider BIC contracts first and then others as needed to meet small business or other mission-related goals.

But experts warn that aggregation of contracts around this term “best-in-class” could lead to unintended consequences like what happened with strategic sourcing where the office supplies industrial base dropped by 24 percent over six years.

“If the goals of category management is to buy smarter through the use of preexisting vehicles, then those are all good goals and things industry shares and are worth pursuing. The question still gets to process and how the government should go about buying smarter,” Waldron said. “How does that translate into requirements development? I’m not sure it does. Perhaps BIC should be a concept around requirements development where OMB is identifying organizations and processes that deliver sound requirements development. I think getting to that fundamental level is where BIC should evolve to at some point.”

Without a doubt category management is evolving. The thinking behind this concept initially was governmentwide strategic sourcing, which failed under the office supplies effort and had limited other successes around wireless and desktop/laptops bulk purchases.

Over the last few years, OMB brought in the concepts of spend under management (SUM), addressing inefficient buying methods and finally workforce development—all areas where OMB provides agencies with new goals around in the memo.

Memo replaces the 2016 circular

The new category management policy was more than a year in the making. The Trump administration is putting its mark on the initiative that started in 2014 with a series of pilots.

At one point, the Obama administration wanted to make category management a circular so it would be more institutionalized than just a memo. But that draft circular never got any legs in the Trump administration.

This memo, for all intents-and-purposes, replaces that circular and carries with it many of the same goals.

“Teams of experts in each category of spending help agencies increase their use of common contract solutions and practices and bring decentralized spending into alignment with organized agency- and government-level spending strategies by sharing market intelligence, government and industry best practices, prices paid data, and other information to facilitate informed buying decisions,” the policy states. “This memorandum is designed to build on these activities in order to help the government buy as a coordinated enterprise and avoid the waste associated with duplicative contract actions.”

OMB is hosting a question and answer session this Thursday on the new memo and category management with industry.

Jack Coley, president and CEO of Coley and Associates, which consults with small businesses on government contracting, said while he doesn’t have too much concern about the term “best-in-class;” the potential impact on small businesses is similar to that of strategic sourcing.

“Under the Office Supplies 3 vehicle, GSA was able to claim and did meet all small business and socio-economic goals, but tens of millions of dollars went to only a limited number of small businesses. We saw a number of small businesses going out of business who were doing well before getting shutout of strategic sourcing,” Coley said in an interview with Federal News Network. “My concern is that any effort by the government that starts to consolidate spending like category management using BIC contracts, what they are going to do to ensure they aren’t just funneling contracts to fewer and fewer small businesses. That will limit the number of small businesses available, which will negatively impact bringing new and innovative solutions to the government.”

Coley said OMB needs to improve how it defines what common goods are and services as well as what is threshold for a common good or service.

“It’s like the definition of a commodity, are we talking about something like printing paper or pens, if so, buying them on lowest price is fine. But when you get to services and solutions, those need to be defined clearly as what’s commodity,” he said. “I know they have category definitions for many of these services and products, but not everything fits into the category nice and clean, and agencies need some flexibility to create their own contracts.”

Hard to commoditize services

Give credit to OMB for recognizing the one-size-fits all approach of the previous administration doesn’t work.

Advertisement
In the memo, OMB told agencies that they still must meet their statutory small business goals and that the agency’s Office of Small and Disadvantaged Business Utilization (OSDBU) should use the small business dashboard and other information to help the agency achieve the best balance of BIC, governmentwide, agencywide and local contracts.

Additionally, agencies must develop a vendor management plan that includes pre-award and post-award strategies as well as a communication plan.

The bigger question is how OMB will hold agencies accountable. The latest data on category management shows agencies achieved several goals last year, including exceeding governmentwide goals around spend under management, using BICs and cumulative cost avoidance through more efficient buying.

Another big question is the prices paid portal and the inherent problems that comes with creating such as database and promoting widespread use.

Coley said data leakage is especially concerning particularly around proprietary information for vendors.

Allen tagged back to the Coley’s concerns around commoditization of services and no two purchases are exactly alike.

“This memo and this decision making process does raise questions about whether or not we are regulating by memo. Much of what’s going on here was articulated in circular back end of last administration and we continue to have questions that we raised back then,” Waldron said. “At the core of one of those questions is whether this type of micro management of agency procurement is consistent with the Office of Federal Procurement Policy Act and administrative authority. Asking to give comments before issuing memos is a fair thing to ask for, especially on something that directly impacts contractors and frames their opportunities to bid and win work. OMB should’ve put the memo out for comment first.”

Copyright © 2019 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.