Dec 31 2009

In Procurement, Change Is the Only Constant

What keeps federal procurement officers up at night are the shifting and growing number of regulations that define the process.

What keeps federal procurement officers up at night are the shifting and growing number of regulations that define the process.

Federal procurement officers just can't
seem to catch a break. Collectively, they
are responsible for one of the biggest
spending machines in the world.
The annual federal budget now
surpasses $2.3 trillion and represents
approximately 3,000 separate
appropriations. Even in a mixed
economic environment influenced by
lower tax revenues and ambitious federal
efforts to reduce government waste,
appropriations will continue to grow.

The Government Electronics and
Information Technology Association
estimates that spending for government
IT will grow at an average annual rate of
3.6 percent through fiscal year 2010.

Of course, spending money isn't a
challenge for most of us, and people
who do it for a living aren't
daunted by the magnitude of
these numbers.

What keeps them up at
night are the shifting and
growing number of
regulations that define
the federal procurement
process. In the name of
efficiency—and getting
the biggest bang for
each buck—changes
in how things should
be done just keep

Along with
numerous new
requirements, the
federal government's
procurement community
also finds itself with a host
of technology tools, such as
Web-based procurement
applications and automated
systems, that help create
efficiencies in the acquisition
process. Similarly, new techniques,
such as tying high-cost projects to well-defined business cases, ensure that best
practices from the private and public
sector are embraced by federal
procurement officers.

It's important to remind ourselves
how procurement has changed and what
a complex environment the new rules
have created.

Procurement officers continue to
grapple with three main areas:
performance-based acquisitions, share-in-savings strategies and competitive

Performance-Based Acquisitions

This approach stresses specifying needs
and outcomes rather than the exact
means by which a contractor performs
the work. It is intended to tie the job's
outcome to the agency's mission by
focusing on the desired results rather
than the "hows" of a contract. However,
writing a good performance-based
contract isn't easy.

The federal government has pushed for
performance-based contracts at various
levels for more than a decade, and the
push continues. The Office of Federal
Procurement Policy expects agencies to
use this strategy for no less than 40
percent of service procurements worth
$25,000 or more in the current fiscal year.

For this approach to be successful,
contractors need to do more than simply
understand a particular project. They
also must maintain a dialogue with
procurement officers, CIOs, CFOs and
program managers to understand an
agency's current mission and goals.

Share-in-Savings Strategies

This approach has the potential of forging
closer ties between government and
private industry by sharing in the rewards
and the risks of large projects. In theory,
payment for projects could come from the
profits of technology initiatives or in the
form of cost-avoidance improvements
delivered by the new systems.

According to the U.S. General
Services Administration, prime
applications for share-in-savings efforts
come by developing new fee-based
services, enhancing the communications
infrastructure and
systems, such as
programs and data

However, a
recent survey by
the Professional
Services Council
found confusion and, in
some cases, resistance
to this approach among
officials. Some
called share-in-savings
methods "the
least effective
services contract
incentive," while
others termed it a
"niche product."

While this approach
is theoretically
useful, the
struggles with
accounting for and
assessing future cost
savings, cost
avoidance and
rewards in the budgeting process.

Competitive Sourcing

With competitive sourcing,
government must evaluate whether
certain functions are best handled by
the public sector because of their
unique components or whether
commercial activities are best
performed by the private sector.

The question isn't whether the
government can handle certain
functions efficiently, but whether the
government needs to perform the
function at all.

Done poorly, competitive sourcing
forces agencies to justify their existence,
which can cause a morale hit. Done well,
competitive sourcing can
make better use of unique
government and private
sector capabilities.

As recent successes attest,
government can provide efficiency
on par with the private
sector. Perhaps that's
why federal agencies as
a whole awarded
almost 90 percent of
their competitions in
2003 to public sector

The end goal remains
the drive to
operations—balanced with a high
regard for fiduciary
responsibility and for
the public's best interest.
The government also
must adhere to a higher
standard, and not act like a
bargain shopper who's
interested in the costs

New procurement
approaches give us new
tools that will hopefully
increase effectiveness
and efficiency. Yet, the
consistent theme remains: With every

"new way," government and industry
must continue to work together to plot
the best course.


The world of government
procurement keeps
changing, and procurement
officers continue to grapple
with three main areas.

1. Performance-Based Acquisitions


Focuses more on the desired results
rather than the "hows" of a contract

Ties the job's outcome to the agency's

Writing a good performance-based
contract is no easy task

2. Share-in-Savings Strategies

Government and private industry share
in both the rewards and the risks of


Forges closer ties between
government and private industry

This approach is difficult to budget for
and measure

3. Competitive Sourcing

Evaluates whether some functions
are inherently government functions
or can be outsourced

Can offload nonessential projects to
private sector and reduce costs

Some federal agencies have had to
justify their existence, causing a big
morale hit