Air Force's PC buying strategy on target

The blanket purchase agreements for PC hardware, software and peripherals that the Air Force's Standard Systems Group (SSG) recently negotiated as successors to the Desktop V contract will provide Air Force customers access to up-to-date, quickly refreshable information technology.

The amazingly competitive prices on this contract provide discounts off General Services Administration schedules of 30 percent to 38 percent for desktop PCs and 20 percent to 42 percent for servers. These discounts will save the Air Force hundreds of millions of dollars a year off GSA onesie prices. And the entire acquisition development was accomplished in a few months. To anyone familiar with government IT buys before procurement reform - when agencies took ages to get on contract to buy out-of-date, difficult-to-refresh, poorly priced gear - this should seem like an incredible success story.

Yet SSG is under attack for this procurement. SSG's use of a past-performance survey conducted by FCW Media Group Inc., the parent company of Federal Computer Week, has been criticized. In an editorial March 22, FCW expressed concern that SSG's procurement using a BPA rather than a full-and-open competition has favored well-known brands but kept out little-known firms, threatening future innovations from smaller businesses.

These charges are bum raps.

Let's start with the worry about small business and innovation. The basic argument is that the government once was more open to unknown companies able to write good proposals and win contracts in competitions open to all. And the small, unknown company of today frequently is the source of innovation and, hence, is the big firm of tomorrow.

The BPA competition rules allowed the Air Force to pick a modest number of firms to invite to bid. These firms included direct sellers and resellers of well-known IT brands. This practice may be fine now, the critics state, but where will the brand names of tomorrow come from if competitions are limited to the brand names of today?

This argument seems to make little sense for the off-the-shelf hardware and software the Air Force is buying. The federal government is only a tiny portion of the marketplace for such products. If new, innovative companies develop better mousetraps that have appeal to the commercial marketplace, they will succeed even if the government is not the first to use them. If these products do not appeal to the commercial world, they will not end up succeeding even if they sell well in the government.

Even if the government could, through its purchases, launch cutting-edge, off-the-shelf technology before the commercial marketplace developed an interest, it is unlikely this would be in the public interest. Off-the-shelf IT is not where the government should be on the bleeding edge. Agencies are unlikely to make or execute good decisions about what bleeding-edge gear to buy.

To be sure, even if the argument does not apply convincingly to off-the-shelf IT, surely there are areas where the government does want an influx of innovative new firms. And it is true that small-business procurement numbers, which had been at historic highs, are under pressure. If one believed that the effect of procurement reform would be to decimate the small business presence in the federal marketplace, it would indeed be a legitimate source of concern. The problem is alarmists' suggestion that "if present trends continue," the small business share of federal procurement is headed toward zero. That's an exaggeration. Small business retains the vast majority of its market share.

If one is worried about the impact of procurement reform on innovation, one must ask what kinds of small firms have lost business? Nobody knows the answer to this for sure, but we can venture an intelligent guess.

Everybody familiar with pre-reform procurement knows that small businesses dealing with the government were nimble, innovative, low-overhead niche firms and a number of bottom-feeders who exploited small-business set-asides. It was a low-bid, low-quality environment that often rewarded bidding ability over the ability to perform and included a propensity to use litigation to win business.

Procurement reform has given government customers more freedom to choose with whom they do business. I suspect most innovative small businesses who build a better mousetrap will continue to do well.

Finally, a word about SSG's use of an FCW Media Group survey of anonymous government customers about the past performance of firms. The survey has been criticized because it is anonymous and not related to a specific contract (and, hence, not necessarily relevant to the Air Force's needs). If the survey had been used to make final source-selection decisions, the worry would be justified. But it was used only as an initial screening device to guide SSG's choice of which schedule holders it invited to bid.

This approach was, therefore, a more disciplined methodology than many agencies use to determine BPA bidders. For the purposes for which it was used, it is a good survey. The language in the Federal Acquisition Regulation giving vendors opportunity to answer criticisms when past-performance information is used to make final source selections reflects legitimate due process concerns. But that policy comes at some cost to candor in responses - which is why we use secret ballots in elections. When used for SSG's limited purposes, it is justified to make a different trade-off between due process and candor than that made in regulations governing final source selection. We should be celebrating SSG's successes, not bad-mouthing them.

--Kelman was the administrator of the Office of Federal Procurement Policy from 1993 to 1997. He is now Weatherhead Professor of Public Management at Harvard's Kennedy School of Government.