Contracting rules at cross-purposes

Federal regulations may be the greatest barrier blocking agencies from a commercial market ripe with potential savings, experts said Oct. 23.

The government imposes a number of requirements for its suppliers, and many companies that have not invested in developing a federal market cannot adhere to them, making such firms off-limits to agencies.

“We’re seeing a trend toward compliance with a process, and compliance with a process drives a government-unique solution,” said Bill Greenwalt, vice president for acquisition at the Aerospace Industries Association,  during a webinar hosted by Deltek’s GovWin.

The federal requirements include things such as:

1. Ethics programs and ethics training standards for employees.
2. Standards for cost accounting and accounting system compliance.
3. Business system rules.
4. Size standards for small businesses, with liabilities, such as suspensions and even debarments, for misrepresentation of size.

Companies that are “federal-unique” have invested the time and money to comply with the measures, but many commercial contractors have not, Greenwalt said.

In recent years, federal officials have put more emphasis on the integrity of the government’s buying process, and that is not going to change, said Jonathan Etherton, principal at Etherton and Associates.

To tap that market, then, commercial companies would need to add more processes to their operations and capture more data to meet the government’s demands, which many are not willing to do, experts say. Complying with the requirements can be costly and time consuming. For example, companies can spend roughly 30 million hours annually on information collection requirements for acquisition regulations alone, said Trey Hodgkins, senior vice president of the Global Public Sector Team at TechAmerica. That figure comes from TechAmerica’s own research, he said.

Meanwhile, another developing trend is toward buying commoditized items, Etherton said. Purchasing commercial items can save money and provide efficiencies. The benefits are attractive enough that in some cases agencies would be willing to do without some advanced capabilities in exchange for lower cost and easier procurement.

Buying commoditized items also enables strategic sourcing, a key procurement priority for the Obama administration.

The two trends together may seem contradictory.  Greenwalt said the government wants commercial items and the savings that come with them, and also the transparency and added processes that only government contractors abide by.

In all of this, the government may be turning decades of procurement policy on its head, although the trend is subtle, Greenwalt said. The procurement landscape is reminiscent of a time when the government stood at a crossroads of major procurement reforms. The result was the Federal Acquisition Streamlining Act, which became law Oct. 13, 1994. The law eased the purchase of commercial off-the-shelf items and shifted from a lowest-bid procurement strategy to best value, among many other changes.

“We’re approaching where we were at FASA,” he said, adding that the issues need a broader debate.

The looming sequestration may be pushing agencies back into a pre-FASA purchasing approach. Beth Ferrell, partner at the McKenna Long and Aldridge law firm, said Oct. 22 agency officials are moving away from best value procurement, where they may pay a little more for better quality. Instead they are choosing the lowest priced bid that meets the minimum technical requirements. Agencies want to save money in light of sequestration’s significant budget cuts scheduled to come Jan. 2.

“You’re seeing a total reversal now” away from best value purchases, she said during a panel discussion hosted by TechAmerica on the sequestration’s impact on non-defense agencies. “Faced with a situation where they have to do bare-bones procurements, they’re going back to lowest price, technically acceptable.”