Army gives more resources to contracts

The Army is bolstering its resources devoted to overseeing services contracts and developing better ways to manage those contracts, an Army officer has told a House panel.

Jeffery Parsons, executive director of the year-old U.S. Army Contracting Command, said April 23 that the Army has improved its program to train contracting officer representatives, who oversee a contract once a contracting officer awards it. The Army also plans to increase the number of personnel in contract administration and the acquisition process, he told the House Armed Services Committee’s Defense Acquisition Reform Panel.

“The Army has increased the rigor of its acquisition processes to focus on obtaining better values from the services contracts it awards,” he said.

The Army is requiring high-ranking officials, including its deputy assistant secretary for procurement, to approve acquisition plans for contracts greater than $500 million, he said. Other senior expert officials in the acquisition’s technical areas, contracting, finance and law will also assess the strategy. Recommendations from the Government Accountability Office and other experts emphasized to the Army the need for greater oversight and a more deliberative planning process for major procurements, Parsons said.

GAO officials said a review last year found incomplete contract files at some Army contracting offices that hindered good contracting administration and full assessments of contractors’ work. Without a complete picture of the contract, GAO said officers can’t make informed decisions regarding the contract or contractor’s award fees based on their performance, which can run into the millions of dollars.

In fiscal 2008, the Defense Department obligated more than $200 billion on contracts for services, which accounted for more than half of its total contract obligations, according to GAO.

In testimony, GAO officials said DOD has failed to manage contracts well by sometimes allowing contractors to begin work before reaching a final agreement with the company on a contract’s basics, such as price. GAO also said that in fiscal 2005, DOD spent nearly $10 billion for professional and administrative services under time-and-materials contracts, whereby a contractor is paid by the hour and reimbursed for what they buy.

Many experts say agencies and companies can hammer out a set price for this type of work, and many contractors say they prefer fixed-price contracts when it suits the situation.

The time-and-materials type of contract is risky for the government because it provides no incentive for the contractor to control costs. President Barack Obama and administration officials are intent on moving departments away from these riskier contracts and signing contracts with fixed prices, which give contractors incentives to control costs.

The House panel questioned Parsons and GAO defense acquisition experts on how the Army and DOD as a whole can measure the value of services contracts while understanding their risks. The full committee expects recommendations from this panel may be included in the fiscal 2010 defense authorization legislation.