VA pushes relationship repair with industry suppliers

When Maurice Stewart arrived at the Veterans Affairs Department a few years ago, he joined a procurement office that was in extreme distress.

VA faced the prospect of running 20 percent over its budget for commodities and IT services in fiscal 2010 due to costly redundancies and other chronic dysfunctions.

The odds that procurement officials and industry leaders could join forces to tackle any of the problems seemed slim given the dwindling interaction — and trust — between the two sides.

The department’s contracting officers were notorious for not returning phone calls. Contracts routinely went out the door late. And vendors had no insight into a contract’s requirements until the official request for proposals hit the street, which limited their ability to propose alternative or more creative solutions.

All that chaos had a direct impact on the agency’s mission. “If we can’t put good requirements out on the street, we can’t serve the veteran,” said Stewart, VA’s associate deputy assistant secretary for logistics policy and supply chain management.

VA officials now believe they have begun to put those problems behind them, thanks to a three-year-old initiative that Stewart leads called the Supplier Relationship Transformation (SRT) program. It is based on the premise that, as Stewart said, “improving dialogue is essential to the health of government procurement.”

VA officials began by surveying vendors and holding industry forums around the country last year. Armed with the feedback they received — much of it brutally honest — they are now developing targeted, multipronged plans to address the biggest problems.

VA is hardly alone in this battle. Procurement offices across government struggle with strained relationships and poor communication with suppliers. Government procurement and industry executives say the problem, at least in part, is an unintended consequence of President Barack Obama’s efforts to tighten ethics rules in contracting.

The message that many procurement officials heard was that they could only stay out of trouble by playing it safe, and that meant avoiding contact with vendors unless absolutely necessary.

Now, officials are trying to reverse that trend through efforts such as VA’s SRT program, the General Services Administration’s supplier relationship management initiative and the Office of Federal Procurement Policy’s myth-busters campaign.

Getting feedback from industry and internal agency customers is an important first step. Translating that knowledge into policy and managerial guidance that can change attitudes and behaviors is a bit trickier, but it’s a challenge that officials say they must embrace.

No pain, no gain

VA procurement officials realized that if they wanted to improve, they would need to understand where they were falling short, and that meant listening to some harsh criticism.

SRT is VA’s first enterprisewide effort to gather quantitative data and qualitative insight into what’s wrong with the agency’s acquisition processes. The program includes semi-annual supplier perception surveys, quarterly internal customer perception surveys, annual webinars and supplier outreach forums. This year, officials have already held forums in Denver and Atlanta, with plans to do the same in Boston, Seattle, Chicago and Washington, D.C.

The feedback gathered so far has been frank — often painfully so. “Suppliers gave them an earful,” said Doug Black, a director at the Ambit Group, which has worked with VA on the SRT program since the beginning.

Several key problem areas have been identified, including:

• Inadequate communications. Transparency in the acquisition process needs to be improved and should include ways for vendors to offer feedback on requirements for specific contracts and the overall process.
• Poor customer service. Contractors would like to see improvements in the level and quality of acquisition support they receive, such as having phone calls returned and contract modifications addressed in a timely manner.
• Unclear roles. Companies struggle to understand the differing roles and responsibilities of contracting officers, contracting officer’s representatives and program managers.
• A closed contracting process. Companies would like to provide input on the contract type and definition of requirements early in the process so they can offer VA the best prices and delivery timelines in their proposals.

In general, company leaders told VA officials they didn’t think the department cared about their profitability or adequately shared the risks that come with contracting. Therefore, contractors had no choice but to reflect that risk in the form of higher prices.

On the road to recovery

The grievances were no surprise to Jaime Gracia, president and CEO of Seville Government Consulting, an acquisition and program management consulting firm. For example, he said that many companies in the service-disabled veteran-owned small-business community, of which his firm is a part, are frustrated with VA’s certification process. VA officials say it should take three months for the agency to certify a company as eligible to compete for special contracts set aside for that community.

“I’ve not met anyone who got through it in three months,” Gracia said. “It may happen, but I’ve never heard of it.”

He said some companies are choosing to avoid that bureaucratic process and are looking elsewhere for business. He sees the SRT program as a positive sign.

“The VA is far from stellar, but they recognize it and are going in the right direction,” he said.

The feedback has been hard for some VA managers to take. “Initially, some folks were reluctant to read what was reported on the surveys,” Stewart said.

But only by identifying and understanding the problems can officials begin to craft plans to solve them. Fortunately, those efforts are already under way.

For example, last year the VA acquisition office formed an industry advisory group of 24 companies of varying sizes. The group meets quarterly to share best practices and provide targeted suggestions to help VA improve relationships with vendors.

VA also established a governance council of acquisition leaders, which is led by the chief acquisition officer and the senior procurement executive and includes policy experts and the small-business procurement director. The council’s purpose is to develop specific action plans for improvement.

That group came up with the idea of having VA's Technology Acquisition Center conduct advanced planning briefings for industry. Contracting officers and program managers can now bring companies in to talk about upcoming procurements so they have an opportunity to provide feedback and suggestions early in the process.

Such programs are still fairly new, but as more suppliers are getting involved and seeing that VA officials are committed to improvement, negative attitudes are beginning to change, Stewart said.

Based on the responses to the supplier perception surveys, VA is making measurable progress. Vendors are asked to use a five-point scale to rate VA’s performance in specific areas. When the first survey was conducted in October 2010, the agency scored 3.5 or higher in only two areas. In the second and third semi-annual follow-up surveys, companies gave VA a rating of 3.5 or higher in four areas.

In addition, 17 areas received ratings below 3.0 in the first survey. In the second survey, 12 areas scored below 3.0, and VA only had five areas rated below 3.0 in the third survey.

Turning the tide

The need to strengthen relationships with industry is pervasive throughout government. An independent survey of contractors released in February reported a worsening relationship between government contracting officers and industry representatives.

Ten percent of respondents in Grant Thornton’s 17th annual Government Contractor Industry Survey said the relationship with contracting officers was “fair or poor,” double the percentage who gave that rating in the previous year’s survey. Moreover, only 22 percent of the more than 100 companies surveyed said they believe the government resolves contract issues efficiently, a drop from 26 percent in the previous year.

The Obama administration has been trying to improve relationships with industry suppliers. For example, the Office of Federal Procurement Policy released its myth-busters memo in February 2011 to encourage agency officials to increase their communication with industry. The memo emphasized that it is not against the rules to discuss upcoming contracts and procurements before bid proposals are formally solicited. In fact, those discussions are necessary.

“If OFPP had to issue that memo, it indicates there’s a serious problem,” said Robert Burton, former deputy administrator at OFPP and now a partner at Venable law firm.

Only after Burton left government for the private sector did he realize how closed off most of the government acquisition workforce is from industry, he said. Stewart said he had a similar reaction during his time in the private sector.

The General Services Administration, which handles $50 billion in business volume annually, is also working on ways to improve relationships and communication with vendors, said Steve Kempf, commissioner of GSA’s Federal Acquisition Service (FAS).

GSA officials are planning to launch a supplier relationship management initiative, and like their counterparts at VA, they are starting with an assessment of the current state of relationships.

The agency recently surveyed 50,000 contractors to see how they perceived FAS as a business partner. Officials planned to share the results among GSA procurement managers in April. Kemp said the results will contribute to the development of specific action plans.

In addition, GSA has been making an effort to incorporate companies’ input earlier in the contract development process. For example, GSA’s Interact website hosts a community for industry members who are interested in providing input as GSA develops a new professional services contract called One Acquisition Solution for Integrated Services (formerly Integrations).

Keeping the momentum going

The key to all those efforts is follow-through and continuing engagement, Stewart and other executives say.

As part of VA’s SRT program, Stewart hosts an end-of-year webinar for vendors, a sort of State of the Union address for VA’s acquisition community.

At the third such update, held last month, all of VA’s senior acquisition leaders shared the improvements their offices have made in the past year based on vendors’ feedback.

“What we try to do is show them we’ve made changes and show them improvements,” Stewart said. “If you don’t keep them engaged, they’re going to feel, ‘Why should I invest my time and resources?’ Without their investment, you have nothing.”

Tips for better conversations

Agencies can build a more competitive pool of bidders by reaching out to the vendor community early in the procurement process and asking company leaders to share their ideas and expertise. But participants on both sides fear running afoul of acquisition regulations and jeopardizing contracts, which has kept many of them from pursuing greater engagement.

Last year, the Office of Federal Procurement Policy launched a campaign to dispel common misconceptions about such interactions and encourage responsible and constructive exchanges.

Among other guidance, the myth-busters campaign advises government procurement employees to:

• Communicate with vendors early, frequently and constructively.
• Talk to various categories of small businesses.
• Talk to vendors you have not worked with in the past.
• Protect private information, including vendors’ confidential information and details on the agency’s source-selection process.

Source: Office of Federal Procurement Policy

Soliciting honest feedback

Officials might have to suffer some bruising criticism if they want to improve their procurement performance and relationships with industry.

To see what their contractors think of the job they are doing, Veterans Affairs Department officials conduct semi-annual surveys that ask contractors to assess the agency’s performance.

Topics include:

• The company’s commitment to VA for a long-term business relationship.
• VA’s effectiveness in sharing risk and reducing the company’s need to build risk into its pricing.
• The extent to which VA makes it easy for companies to succeed and effectively provide goods and services.
• The overall quality of the working relationship between VA and the company.

— Matthew Weigelt