4 tips for sequestration savings

At least one procurement expert thinks agencies could save money under sequestration, especially if they avoid the rush to award task orders at the end of the fiscal year.

"It would be perverse if agencies, constrained by sequestration, furloughed their federal employees in March and April, only to spend some or all of the savings on the usual last-minute, capricious and nonessential task orders in July and August," wrote Charles Tiefer, a law professor at the University of Baltimore, in guidance provided to the American Federation of Government Employees. AFGE released the report Feb. 11.

Those indefinite-delivery, indefinite-quantity contracts are particularly popular for buying services and IT. But Tiefer said that instead, "agencies should plan right now to generate significant savings in their spending on service contracting through pausing or even eliminating task orders."

In addition, Tiefer recommended three other ways agencies could comply with cutbacks caused by sequestration, all by changing their approach to service contracts, where the Defense Department spent nearly $200 billion in fiscal 2011 and civilian agencies spent roughly $100 billion.

Consider partially terminating contracts and asking the contractors for ideas on how to perform the remaining work. "Managers, who might find it difficult to unilaterally devise new contract terms, could find it easier to simply revise schemes supplied by service contractors," he wrote.

Although companies will not want to see their contracts terminated in whole or in part, Tiefer wrote, they might appreciate the opportunity to provide input on how those contracts are handled.

Use deductive change orders to create more flexibility and protect agencies from lawsuits. A deductive change is used to modify certain specifications or end minor parts of a contract. It's less sweeping than a partial termination for convenience, which deletes major portions of the work and is more ripe for litigation.

Tiefer wrote that case law suggests reducing work by 10 percent may be considered a deductive change. "An agency which uses change orders to reduce work in a particular category of contracts by 10 percent would likely find its characterization of its reduction as a deductive change would be largely immune to service contractors’ litigation," Tiefer wrote.

Opt for bilateral modifications, which is when the agency and the contractor each agree to changes.

"Contracting officers and program managers have far more power than they realize," Tiefer wrote. "Most service contractors would voluntarily consent to bilateral modifications for reductions, particularly if they can help to plan new arrangements for performance of their service contracts."

The Professional Services Council, however, said Tiefer's report overlooks what is happening in the business community. Contractors are already losing revenue and laying off employees, not just furloughing them, said Alan Chvotkin, PSC’s executive vice president and counsel.

"While Mr. Tiefer laments the 'bad news' that service contractors, like any other business — or federal employee unions speaking out on behalf of their members, for that matter — are not eager to voluntarily give up revenue, he ignores the reality that significant reductions have already occurred in the federal services market," he said.

Chvotkin agreed that agencies and contractors need to communicate well to find ways to save money. But agency officials must first identify the core work they need to accomplish. When they understand the essentials, then they can determine how to save money.

In the meantime, Chvotkin said, federal employees and service contractors are crucial to the nation’s operations. Therefore, the government should not seek to put the financial burden on only one group. "This petty 'us versus them' debate must end," he said.