Procurement: Which method to use?

For decades, the federal government did a poor job of buying information technology. The General Services Administration was essentially a monopoly provider, resented for its slowness and ineptitude.All of that changed when Congress decided to allow competition into the procurement system. With passage of the Clinger-Cohen Act in 1996, the Office of Management and Budget could allow other federal agencies to sell IT under a mechanism called governmentwide acquisition contracts, or GWACs for short. Today, GSA, NASA, the Commerce Department and the National Institutes of Health all manage active GWACs.Era-defining changes are best seen in retrospect, but the federal acquisition community knew even then that a transformation had occurred. More than a decade later, however, people are unsure where the procurement revolution is headed. Backlash against GWACs has built up within agencies that were once wildly excited about them. A series of revelations of misuse by agencies that were encouraged to place orders first and ask questions later has led to new regulations, more time-consuming oversight and a general weariness.The Defense and Homeland Security departments, in particular, now want their contracting officers to look inward for their procurement needs and use recently developed internal contract vehicles. The number of those internal vehicles has risen significantly, in roughly inverse proportion to GWACs’ popularity.GWACs are one of three contract types that dominate today’s IT procurement landscape. The other two are GSA schedule contracts and multi-agency contracts (MACs). All three offer convenience and a way to foster competition while also keeping it limited.Their popularity shows in the numbers: Agency task- or delivery-order expenditures grew from about 14 percent of total dollars spent in fiscal 1990 to about 52 percent of total dollars in fiscal 2005, according to an OMB analysis of Federal Procurement Data System records.Task-order growth shows no sign of slowing down. Remarkably, however, interagency contracting dollars have declined. In the past, the number of federal task orders generally correlated with the use of interagency contracting, whether with the GSA schedules or GWACs. Now, that connection appears less clear.OMB estimates that about 250 MACs exist, some 200 of them exclusively for agencies’ internal use. That means the number of task orders is indicative not only of interagency contracting but also intra-agency contracting.Many experts are displeased by the growth of MACs. GWACs were designed to introduce competition into government procurement, but they did so in a highly regulated manner, with OMB vetting each proposed GWAC. MACs do not undergo such scrutiny.“We are concerned about the number,” said Rob Burton, deputy administrator of OMB’s Office of Federal Procurement Policy. “There may be too many of them.”Critics contend that many MACs overlap, which dilutes the spending power of the government. Having too many MACs also makes products and services more expensive because vendors pass their bid costs to customers. Critics also contend that having many MACs makes it harder for the government to contract with small businesses because smaller companies can’t afford to bid on every contract vehicle. That is especially true because a schedule, GWAC or MAC usually doesn’t guarantee vendors business; it just promises that the government might do business with them.“It seemed that at certain points there were large numbers of [MACs] that seemed to have the same contractors on them, that seemed to be essentially for the same items and services,” said Thomas Luedtke, a member of the Services Acquisition Reform Act panel and associate administrator of NASA’s Office of Institutions and Management. “Competition is good…but do you need 10 or 12 [contracts]? I think not.”The panel recommended that OMB develop guidance and procedures for agencies deciding whether to create or continue with existing interagency and enterprisewide contract vehicles. Burton said OMB is considering forming a board with governmentwide representation that would approve the creation of MACs.Some lawmakers agree with critics’ analysis. In February, Sen. Susan Collins (R-Maine) introduced legislation that would require OMB to evaluate all interagency indefinite-delivery, indefinite-quantity contracts and require agency executives to do the same for internal MACs.Staff members of the Senate Homeland Security and Governmental Affairs Committee, of which Collins is the ranking member, wouldn’t say whether they expect such reviews to result in fewer MACs. But they said they wouldn’t be happy if the reviews affirmed the status quo.“As a result of those reviews, there will be some changes, or there should be some changes,” said a staff member who spoke on condition of anonymity because of committee policy.Five other committee members have co-sponsored the Accountability in Government Contracting Act of 2007, but it has yet to reach the Senate floor.In the meantime, procurement experts are not unanimous in condemning the growth of MACs.“I yield to no one in my support for the idea of leveraging the government’s buying power,” said Steve Kelman, a professor of public management at Harvard University’s Kennedy School of Government, former OFPP administrator and a Federal Computer Week columnist.“The argument for MACs is not that they provide competition, because within an agency they actually reduce competition,” Kelman said. “The argument for MACs is a mixture of buying power and the ability to tailor to an individual agency’s needs.”Some people in government cling to an outdated mentality, he added. “The simple fact that there are these things going on that some central planner does not know about is by itself bad or negative is a questionable view — particularly in a society where we purport to believe that competition and the ability of people to make decentralized decisions is a good thing,” he said.The number of contract vehicles might grow today or shrink tomorrow, but some agencies actually must write a contract now. Given the number of procurement vehicles out there, how do you choose?“I’m not going to tell you that you look at every single of them,” said Deidre Lee, deputy director of operations at the Federal Emergency Management Agency. Because of the sheer volume involved, “you’re going to miss one or two of them.”Still, DHS component agencies know where they must start, at least for IT acquisitions: the Enterprise Acquisition Gateway for Leading Edge Solutions MAC for IT services and the First Source MAC for commodities. Both vehicles are mandatory for consideration. And DHS officials are not alone. Their colleagues at DOD have a plethora of mandatory-for-consideration MACs.In addition, Army buyers of desktop and laptop PCs must check with the Army Small Computer Program. DOD buyers can make use of outside procurement vehicles, but they must write a justification. In the face of heavy encouragement to keep procurement dollars within the department, some contracting officers have become jumpy about deviating from internal vehicles.But the question remains: How do buyers make an intelligent decision? It’s tempting to generalize about the capabilities of one vehicle relative to another. But relying on generalities about contracting is dangerous, said Steve Charles, founder and executive vice president of immixGroup.The first step in making an intelligent decision is fully understanding your requirements. Different requirements might lend themselves to different types of contracts. For example, a time-and-materials line item might fit well with a new help-desk project, said Jim Ghiloni, director of GWAC programs at GSA.“But after you’ve done it for a year, you could convert it to a firm-fixed price” contract because you have knowledge about the volume of calls and costs, he added. Some GWACs allow for both cost methodologies.Also, an agency in the market for a financial management system might want to hire the labor on a cost-plus-incentive basis while using a cost-reimbursable approach for equipment, Ghiloni said.A project likely to involve many products from multiple vendors might not be a good candidate for the schedules, said Katherine Valltos, an acquisition management division chief in the Interior Department’s GovWorks program. It’s possible to cobble together such an acquisition, but it requires a lot of double-checking.“It may be cleaner to go to a GWAC that allows for the total array of hardware [and] software and not have to do as much on both sides - the government checking to make sure in fact everything is under the schedule and for the contractor to run around to make sure their teaming partner has everything on the schedule,” she said.Furthermore, new technologies don’t always appear on a schedule in a timely manner, although “GSA has gotten much better in the modification process. You’re seeing mods for new hardware [and] new software happening much quicker,” Valltos added.Cost is a factor, too. GSA charges a 0.75 percent fee for schedule orders; the fee is included in the listed price. GWACs generally charge a fee on top of the listed price, and they can be more expensive than schedules. The Commerce Department’s Commerce IT Solutions NexGen GWAC charges 1.75 percent for new task orders and 1.25 percent for modifications. NASA’s Solutions for Enterprisewide Procurement IV GWAC charges a 0.6 percent fee and caps it at $10,000.“I’m biased, but I think that SEWP is very economical,” Luedtke said.In a May 31 memo, OFPP Administrator Paul Denett expressed concern that task and delivery orders are often made without adequate competition. The schedules program requires a minimum of three quotes, whereas a GWAC task order is allowed to have only one quote, provided all participating vendors were notified.For all of GWACs’ and MACs’ strengths, schedules remain the cornerstone of federal procurement. In the past fiscal year, government agencies bought $17.25 billion worth of products and services through Schedule 70. “We look to schedules first and then we look to the rest of the GWACs,” Valltos said.