Defense bill dilutes agencies' business judgment, experts say

As separate versions of the fiscal 2013 National Defense Authorization Act wind through Congress, experts say provisions will further complicate the already rigid procurement process, even pulling back officials’ authority to make key decisions.

The government has invested money in training and rebuilding an acquisition workforce that has strong business prowess. Federal officials now want the acquisition workforce to use its business-smarts to get the best value for each tax dollar spent.

However, increasingly strict procurement rules can disempower the business people inside departments’ contract offices, Stan Soloway, president of the Professional Services Council (PSC), said June 14 during a discussion on the proposed defense bills.

“You can only have so many rules to try to guide such a rigid process and, as we all learned over the last 25 years, the more rigid the process, the more likely it is to be suboptimal, not optimal,” he said.

On May 18, the House passed its version of the authorization bill, which includes 48 procurement-related provisions. Half of them relate to small-business contracting, such as new set-aside rules and an increased annual contracting goal. The Senate Armed Services Committee approved its version of the legislation June 4. It currently has 28 provisions with significant effects on acquisition policies. The full Senate has to vote on the bill still.

In the House bill, agency officials would not be allowed to insource work from a small business unless they have publicly released  the procedures and methods for making the decision. The bill also lays out more rules and a broader definition on bundled contracts. A bundled contract is several smaller procurements tied into one larger contract.

Officials and experts have raised concerns that small businesses lose out on work when bundling contracts. Meanwhile, agencies can get work awarded faster. In reaction to the legislation, the Obama administration in May said the bundling provision makes the procurement process more complex. It could lead to litigation, and constrain agencies’ decision-making on when it’s best to bundle.

For the small-business contracting goal, the House wants it to increase from 23 percent to 25 percent. The administration said the goal is “laudable but overly ambitious.” In large part, it takes away the government’s ability to focus its efforts where it sees best.

Among other provisions in the Senate bill, defense officials could not enter a noncompetitive services contract without a firm, fixed price unless the prime contractor agrees to do at least half of the work. The provision relates to pass-through costs. In addition, the bill would require defense officials to conduct a complete risk assessment of contractors handling critical functions in contingency operations.  After assessing risk, officials then would have to develop a mitigation plan in case an issue arises. Critical functions are jobs that agency employees should really be handling.

The bills still have a long road before arriving at a final version and then going to the White House for a signature. If it ends up with a number of these provisions in it, federal acquisition officials will have their work cut out for them.

“As a federal executive, you’ve got to be worried about the greater complexity in the system and the lack of ability to make business judgments," said Alan Chvotkin, executive vice president and counsel for PSC.