HHS piling on the bad news for its assisted acquisition customers

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The decision by the Department of Health and Human Services to shut down the Program Support Center’s assisted acquisition services isn’t just hurting agency customers during one of the busiest fourth quarters in recent memory. HHS now says it cannot transfer existing contracts back to customer agencies and that decision will reverberate over the next year. It will cause agencies to  waste money and resources, and in the best of circumstances, the inability to transfer contracts is inconvenient, and in the worst case scenario, it will cause mission degradation.

What’s maybe worse than PSC’s untimely decision is its lack of communication, and some will say honesty, about the current situation.

Industry and agency sources said PSC has all but shut down communication with its customers.

If you email Melissa McAbee, PSC’s acting head of contracting activity, you receive an automatic response detailing the current situation.

“Due to the volume of calls/emails from non-DoD and DoD customers, PSC is currently unable to respond to individual requests for information. PSC is prioritizing communication by date of expiration of the current contract period of performance for each affected agency. PSC assisted acquisition contracting officers are not authorized to schedule calls or release documents from contract files,” the email states.

So as agencies enter the last six weeks of fiscal year 2019 and the pressure mounts to spend annual money before Sept. 30, PSC, which helps agencies spent more than $1 billion a year for agencies including the Defense Department, the Environmental Protection Agency and many others, has basically gone silent.

HHS announced in June PSC would immediately cease providing any assisted acquisition services because it didn’t have the policies, procedures and internal controls to continue to provide these functions.

One source in an agency that is a customer of PSC said they haven’t heard from anyone since June despite having active procurements with the organization.

The source, who requested anonymity in order to talk to the press, said they tried to reach out by email and phone, but received no response.

Existing contracts will expire

Agencies and vendors alike are in limbo about the status of current awarded contracts and those that are far along in the procurement process.

“We’ve had additional conversations with our member companies and we are doing what we can to help them navigate the situation,” said Alan Chvotkin, executive vice president and senior counsel for the Professional Services Council, an industry association. “Agencies themselves are not getting great feedback or support from PSC. There are some stonewalls there too. Maybe people are on vacation or unavailable, but there is still a lot of unknown information and I’m concerned. The area that is most concerning is the evaluations that are underway within PSC which have not been completed in a timely manner before end of the fiscal year. That is the most immediate impact vendors are worried about.”

McAbee’s email also says, “Existing PSC contracts/orders will expire by their terms at the end of the current period of performance.”

A HHS spokesperson said PSC is in touch with its customers.

“PSC is working with customer agencies independently to support their mission needs,” the spokesperson said. “PSC has taken the position that it is in the best interest of all parties to conduct an orderly phase out of this line of business.”

A source familiar with PSC said the idea that HHS is performing an orderly phase out is ridiculous.

“This is the very definition of a disorderly phase out. This Orwellian rhetoric would be entertaining, if the impact wasn’t so devastating to PSC’s government customers and their missions,” the source said.

And it seems McAbee’s email supports growing concerns about just how “orderly” this phase out is.

McAbee said PSC determined that it doesn’t “have the policies, procedures, and internal controls in place to support the transfer of PSC contracts to non-HHS agencies.”

This means any current procurement will end, no matter how many option years are left. So if PSC awarded a contract in March on behalf of a customer agency that is for one year with four one-year options, the customer agency now has to recompete that contract that they just spent 9-12 months working to get it awarded.

Sources say transferring existing contracts from one warranted contracting officer to another is normally not that difficult. It’s just a matter of re-delegating authorities.

“The bigger challenge is the option period because administrative contracting officer doesn’t have the authority to exercise an option, which is essentially a new contract,” Chvotkin said. “So if PSC goes out of business and I don’t know if another contracting officer outside of HHS could exercise that option. It’s a wrinkle I’ve not run across.”

HHS doesn’t have transfer authority

At the same time, the HHS spokesperson continues to push an alternate narrative. When asked to further explain McAbee’s email, the spokesperson said in an email, “Many but not all of the PSC customers have acquisition offices within their respective agencies. PSC is providing contact information for other acquisition shared service providers when appropriate.”

When asked how HHS’ claim that it’s working with agency customer contracting offices matches up with McAbee’s email that they can’t transfer contracts, the spokesperson said, “Ms. McAbee’s email corresponds appropriately as PSC is working with customers that have acquisition offices to transfer contracts and is providing contact information for other acquisition shared services providers when appropriate.”

Sources said the HHS General Counsel determined that PSC didn’t have the authority to accept assisted acquisition work and/or accept funds associated with those contracts in the first place and that is the reason it can’t transfer contracts back to other agencies. Again, this ruling comes despite nearly 25 years of providing shared services in one form or another, and decades of clean audits.

The HHS spokesperson offered no insight into the General Counsel’s decision, saying only, “PSC’s review is ongoing. All appropriate divisions are involved. PSC’s review is focused on improving compliance, accountability and customer satisfaction.”

Part of the issue with HHS’s  determination is not that PSC will no longer offer assisted acquisition services, it’s been the poor communication and the lack of understanding of how to carry the decision out in a way that doesn’t overtly effect agency missions and contractors.

Source said HHS built its decision around several potential problems that so far have turned out to be untrue.

The internal controls around the form DD-254 required to perform classified work, for example, became hallow when internal auditors found PSC didn’t do any classified work.

Another potential issue was a “missing” $40 million from the acquisition supply fund, which is the revolving bank account PSC uses to accept agency fees and pay for its people and activities.

That reason also fell part and initially was the reason HHS placed the leadership of PSC — Al Sample, Bill McCabe and Patrick Joy — on paid administrative leave.

House and Senate appropriations committees’ spokespeople said they had not heard from HHS about the “missing” $40 million.

Sources said the “missing” funds had to do with the new leadership — Scott Rowell, the assistant secretary for administration, and former principal deputy assistant secretary Catherine Bird — lacking the understanding of how the acquisition supply fund works.

Sources said once the Office of Management and Budget got involved and explained how the fund works and therefore $40 million was not missing, HHS management “drummed up” this national security concern.

The HHS spokesperson said the agency is conducting a review of its financial systems and processes to improve operations and strengthen transparency.

“This is part of a larger process improvement effort across PSC and we have reached no conclusion that government funds are missing or have been misused,” the spokesperson said.

Review of HHS processes complete?

The HHS spokesperson also wouldn’t offer any details on what Federal Acquisition Regulations or Defense FAR rules they violated that led them to the decision to stop offering services because of national security concerns.

“PSC’s review is ongoing,” the spokesperson said.

But the source familiar with PSC said that is untrue and the review has been complete for more than a month, and found no violations.

The continued narrative from the spokesperson and in internal emails from James Simpson, the acting deputy assistant secretary for acquisitions in the Office of The Assistant Secretary of Administration, which Federal News Network obtained, show a serious lack of disregard for agency customers and employees.

“So while it may appear that there are a lot of changes and unknowns, there is one constant. We need to continue to provide great service to our customers. Through your leadership, we can make this happen,” Simpson wrote in an Aug. 8 email to PSC staff. “As we approach the end of the fiscal year, I encourage you to stay focused on taking care of our people and continue to provide great customer service. We must continue to properly assign work, provide detailed work analysis, and produce quality contract/procurement documents. We can make AMS a great organization by working together. It’s all about communication and teamwork. I encourage all of you to work as a team and continue to leverage each other’s skills, as we shift work around. Do not be afraid to bring issues to me; I want to solve problems and help make things better.”

One way to do that, honestly communicate with your customers and employees because the lack of transparency is startling and causing widespread harm.

“Customer Satisfaction was at an all-time high prior to the removal of Al Sample and Bill McCabe, the realignment of PSC under the assistant secretary for administration and their subsequent derelict decision to close down PSC’s Assisted Acquisition and then attempt to try and find a reason to justify it,” said the source familiar with PSC. “Note that neither in the HHS press reply nor in the PSC head of contracting activity auto-reply do they talk about classified work being performed or the DD-254.  They are intentionally vague because they have no basis and no reason to back this derelict decision and justify all of the harm they have done to the warfighter — 500 DoD contracts worth $1billion.”

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