A Federal Business Opportunity too good to pass up

Although it may be changing to a new replacement, the FedBizOpps gateway to contracting opportunities has served as the official go-to cite for registry of opportunities and opportunists in US government contracting.

There's a short description of its utility here. It is meant to help generate competition for government business by focusing market information both to and from potential suppliers. Such competition is the economic driver of procurement.

Obviously, the cite gathers and disseminates a lot of content and time sensitive information.

So what might happen if the gatekeeper is outsourced? Might the gatekeeper use the keys to the city for personal gain?

FedBizOpps.gov contractor under FBI investigation

The federal contractor running three governmentwide websites, including FedBizOpps.gov, is under investigation by the FBI for allegedly trying to access without permission websites of their competitors in the education sector.

The Eastern District Court of Virginia in Alexandria issued a search warrant March 5 to the FBI. The FBI conducted the search before March 19 of Symplicity Corporation's offices in Arlington, Va.

The FBI stated in its request to the judge for the search warrant that a witness alleges Symplicity tried on several occasions since 2009 to access the networks of its competitors, Maxient LLC of Charlottesville, Va., and Pave Systems of Richardson, Texas. Both Maxient and Pave Systems offer software to colleges and universities, and neither have done any federal business in fiscal 2012, according to USASpending.gov.

"On Nov. 4, 2011, a cooperating witness who formerly had been employed by Symplicity for approximately five years provided information to the FBI concerning the conduct of Ariel Friedler, the Chief Executive Officer of Symplicity. According to the [witness], Ariel Friedler showed the [witness] how to connect to Maxient's website and to look for specific customers by putting in Maxient's main URL, , followed by a question mark and a school abbreviation," the search warrant obtained by Federal News Radio stated. "Friedler told the [witness] that this was how Friedler checked for new customers on Maxient's website. The [witness] stated that every time Friedler found a new customer on Maxient's website, Friedler would send an instant message or email to the [witness] about it. The [witness] also stated that Friedler discussed using anonymizers and The Onion Router to hide Friedler's activity when Friedler was looking at competitor's networks and that Friedler was very interested in using these technologies."

The Onion Router Project is intended to enable online anonymity on the Internet.

Symplicity, which is in the Small Business Administration's 8(a) program, won more than $30 million in contracts so far in 2012 from a variety of agencies, according to USASpending.gov. More than half of their contracts and dollars came from the General Services Administration for providing services and running FedBizOpps.gov, the Electronic Subcontracting Reporting System and the Catalog of Federal Domestic Assistance. It also won $4.4 million in contracts from the Executive Office of the President and $3.2 million from the Veterans Affairs Department.

n the search warrant, the FBI alleges someone using IP addresses assigned to Symplicity tried to access Maxient's client log-in pages in May 2009. In 2010, Maxient's audit logs showed someone using a Symplicity IP address again tried several times to log-in to their client pages, the bureau stated.

The search warrant also alleges several other attempts from IP addresses that either belonged to Symplicity or employees of Symplicity.

The FBI also alleges Symplicity used Structured Query Language (SQL) Injection attacks to get inside Maxient's network.

"Based on my training and experience, I know that attempting to repeatedly submit malformed queries like the ones submitted to Maxient's website from the Symplicity IP address is a method often used by hackers to attempt to gain unauthorized access to websites," wrote Michael French, a FBI special agent who is in charge of the investigation.

The FBI also stated Friedler called the owner of Pave Systems, Ghasson Nino in 2010 with an offer to buy the company's student conduct business. During the call, the search warrant stated, Nino said Friedler mentioned several clients by name even though such a list is confidential and not publicly available.

Friedler vehemently denies the allegations.

"Over the past few months, information has been made public by some of our competitors, which deals with a preliminary investigation related to the higher education sector. We believe the legal process should be allowed to run its course, and in deference to the authorities, we cannot comment on the details of the investigation at this time," Friedler said in a statement. "We understand that a copy of an affidavit related to the investigation has been circulated. It is important to understand that no one at Symplicity has been charged with any crime. The affidavit is nothing more than the government's one-sided justification for conducting an investigation. It is not evidence of any wrongdoing nor is it admissible in court for that purpose. It would be unfair to draw any conclusions based upon the highly selective content of such an affidavit. We are fully cooperating with the authorities to help them find the answers necessary to resolve this issue as quickly as possible."

Read more at the article link above.

Native Canadian Tribe preference imitates Native Alaskan Tribe problems?

Inuit business owners slam policy meant to help them

Nunavut’s policy to give Inuit-owned and northern businesses an advantage came under fire this week, with business people calling it confusing and ineffective.

The policy, called Nunavummi Nangminiqaqtunik Ikajuuti (NNI), is designed to give these businesses a leg up when bidding for government contracts. The policy was made by the Nunavut government and the Nunavut land claims organization, Nunavut Tunngavik Incorporated (NTI).

It’s largely meant to encourage Inuit participation in government contracts to reflect the population of the territory.

But at a meeting in Iqaluit this week, many of those who are supposed to benefit from the program criticized it as confusing and ineffective.

One of the criticisms of the program is that it’s often not clear if a company is Inuit-owned or not.

Louis Bruce, who owns Sudliq Developments in Coral Harbour, recently lost a fuel contract in the community. He said he wants NTI to review the registry of Inuit firms to see if there are non-Inuit or non-northern people and companies taking advantage of the policy.

New guy on the block in White House Office of Federal Procurement Policy

Procurement chief seeks sharing of contract pricing data, star recruits

His three top priorities are buying smarter, creating effective relationships with government suppliers and developing the acquisition workforce.

By stressing transparency, agencies and contractors can be assured that contract awards are made on “real facts and decision criteria” while curbing waste, fraud and abuse.

“There’s also an oversight component,” he added, describing “timely enforcement against the few bad actors” by making it clear enough cops are on the beat. “Suspension and debarment should not mean flaying in the public square, but should be a deterrent that prevents” bad behavior from the outset, Jordan said.

Equally important is “getting data and aligning incentives” so that agency contracting officers don’t feel they’re being punished when they’re asked for data about whether they got the best price, he said.

His third priority, developing the acquisition workforce, means planning beyond the 36,000 contracting officers (two-thirds of them at the Pentagon) to the broader population of program managers and post-award contract officer representatives. At the White House, “we make it clear that acquisition is not an ancillary function but a core of what we do. People perk up when they see we’re talking about real money,” Jordan added.

Buying smarter means “instead of operating as 130 mid-size entities engaging vendors and one-off awards, we should amp up strategic sourcing in a thoughtful and strategic way that leverages buying power and achieve other goals such as reducing high-risk contracting,” Jordan said. The best model is the General Services Administration’s OS2 Strategic Sourcing vehicle for office supplies, which steers 76 percent of contract dollars to small businesses and is on pace to save $250 million by end of 2013, he said.

Some agencies have so little understanding of what their “sister agencies pay for commodities, it’s shocking,” said Joe Jordan, newly installed administrator of the White House Office of Federal Procurement Policy. The “paucity of pricing data” in one case involving bulk purchases of BlackBerry mobile devices meant a price variance of 100 percent, he said

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Florida Sunshine on Contracts

Fla. state contracts to become public with new website

Florida Chief Financial Officer Jeff Atwater launched the tool, which is called the Florida Accountability Contract Tracking System, or FACTS.

The new FACTS tool, available on CFO Atwater’s Transparency Florida website, makes state contracting processes transparent through a centralized, statewide contract reporting system.

CFO Atwater said, “through FACTS, Floridians can now see at the click of a mouse how their government is deploying their tax dollars. Nearly $50 billion, or approximately 56 percent of the state budget, is spent on contracts and agreements for goods and services. This system will ensure higher levels of efficiency and accountability from our government and elected leaders.”

The tool is not simply historical data placed online; it includes contract information that is regularly updated and audited. Through the new system, users are able to search for state contracts by state agency, vendor, dollar amount, date and commodity or service type provided. Search results are available in a downloadable format as well as in a detailed information page which also lists contract deliverables.

The system already includes contract images from DFS and in the next month will include the five highest dollar amount contracts from each state agency. All state agency contract images will be available online later this year. Additionally, DFS will audit and publish its findings of contract performance to the FACTS system for Floridians to determine how well state government establishes and manages contracts.

A contract becomes available to the public as soon as a state agency contract manager loads the contract information into the online system. Florida law requires state agencies to input contracts to FACTS within 30 days of execution.

See it here.

Diet tip: Only bite off what you can chew and swallow

One way to make procurement more efficient, from the perspective of contract management structure, is to put everything under one contractor. One way to keep costs down and deliverables more effective is to bite off only what you can chew.

There are many goals and ideals used to describe "effective" procurement, but they involve trade-offs. That is one of the most aggravating things about implementing a procurement regime for the ages. And why it hasn't happened yet.

Contracting Guidance to Support Modular Development, Office of Management and Budget Report

This guidance presents a variety of factors that contracting officers, in support of IT managers, will need to consider as they plan for modular development efforts, such as whether to award to a single vendor or multiple vendors; how to ensure that there is appropriate competition at various stages in the process; how broad or specific the statements of work should be; when to use fixed-price contracts or rely on other pricing arrangements; and how to promote opportunities for small business

It is primarily focused on outlining acquisition guidance to support modular development approaches.

Federal agencies have traditionally taken a multi-year “grand design” approach for developing, modernizing, and enhancing investments in IT. This approach is grounded in the common notion that responsible development necessitates a full detailing of requirements before work can start.

Although a seemingly reasonable assumption, practical evidence and private sector experience has shown that large and complex IT implementations often encounter cost and schedule overruns, as the painstaking process of requirements gathering too frequently takes years to complete. Subsequently, agencies lose visibility into the performance of these multi-year IT development investments which affects their ability to implement corrective actions that reduce risk or mitigate financial exposure.

The Government increases investment risk in these situations because: (1) the IT solutions that had once addressed agency requirements may no longer be pertinent or a priority; (2) substantial funds are allocated towards outdated solutions without any returns on the investments; or (3) agencies encounter budgetary constraints before substantive work is completed.

To help resolve these issues, modular approaches should be used in the development of IT investments, allowing agencies to implement significant capabilities for investments through the use of modular solutions that can be defined, developed, and deployed within months instead of several years.

Modular approaches involve dividing investments into smaller parts in order to reduce investment risk, deliver capabilities more rapidly, and permit easier adoption of newer and emerging technologies. Section 5202 of the Clinger-Cohen Act of 1996 and section 39.103 of the Federal Acquisition Regulations (FAR) each recognize these potential benefits of modular contracting and state that agencies ͞should, to the maximum extent practicable, use modular contracting for an acquisition of a major system of information technology.

Furthermore, OMB Circulars A-130 and A-11, as well as the Capital Programming Guide, include modular development and contracting approaches for capital asset acquisitions in general, which also readily apply to acquiring and developing investments in IT.

By following a modular approach, agencies can recognize the following benefits:

-- Delivery of usable capabilities that provide value to customers more rapidly as agency missions and priorities mature and evolve;

-- Increased flexibility to adopt emerging technologies incrementally, reducing the risk of technological obsolescence;

-- Decreased overall investment risk as agencies plan for smaller projects and increments versus “grand design” (each project has a greater overall likelihood of achieving cost, schedule, and performance goals than a larger, all-inclusive development effort);

--Creation of new opportunities for small businesses to compete for the work;

-- Greater visibility into contractor performance. Tying award of contracts for subsequent Task Orders to the acceptable delivery of prior projects provides agencies better visibility into contractor performance and allows a greater opportunity to implement corrective actions without sacrificing an entire investment;

-- An investment can be terminated with fewer sunk costs, capping the risk exposure to the agency when priorities change, a technology decision doesn’t work or the contractor’s performance doesn’t deliver results.

Read more at the link above.

Government IT Projects Pushed To Use Modular Contracting

The goals of the updated policies include breaking down contracts into more manageable pieces and turning projects around more quickly. VanRoekel and Jordan said the new policies will increase contractors' accountability by requiring more frequent deliverables that meet agencies' requirements. They also will encourage increased competition by putting more projects within reach of small businesses.

Protests: Good, bad or simply ugly?

Bid Protests Put $2.5M in DOE's ARRA Funding in Jeopardy

Guam - The Department of Education has until September 30th to finalize contracts for more than $50 Million dollars in projects because the funding expires. While the Department has already secured contracts for a number of the projects, bid protests could cause the Department to loose $2.5 Million of the funds.

$50 million in federal funding for Mid-Continent Airport at risk in dispute, Wichita officials say

Wichita city officials say $50 million in federal funding for a new airport terminal could be lost due to a growing dispute between the two lowest bidders hoping to build the project. Some city officials fear that even a rebid could cause the FAA to pull its funding.

I don't know about the airport situation, but I do know that, in Guam's case, local agencies were by and large sitting in neutral to apply for ARRA let alone mobile procurements to tap into that cash gusher out of Washington. The Department of Education was particularly slow off the mark.

When you plan for a government acquisition, you should plan for known contingencies, such as known weather obstacles, funding cycles, and the like. You know, for instance, that if you need something specially manufactured or delivered from far away that you cannot expect to get it immediately. You plan for the extra time required. Start earlier if you must, to avoid running stop signs.

So it is with protests. You know there is a possibility of protests, so you build into your planning a time contingency for that. And if you have a particularly poor record of being able to put out protest-proof bid documents, especially specifications (which should be a slam dunk if you're only acquiring standard commercial items and routine construction and maintenance that make up the bulk of government purchases), you build in more time. It is a fact of your life that those things will hinder progress.

But it's so much easier to blame the protester than the procurer. And the effect on that blame game: cut down on protests. Make it harder to protest, make 'em pay to protest, create more difficult technical hurdles and time lines to protest.

Is that a good result?

Bid protesting system helps agencies police themselves

Each year, contractors sue the government more than 2,000 times. It's nothing personal, but bid protests are one way of keeping the federal procurement system honest.

"In general, the system serves a very good purpose of helping the government actually police itself," said Steven Maser, a professor of public policy and administration at Willamette University.

Congress and the Government Accountability Office have been encouraging greater transparency in contracting. One way of doing that is giving the unsuccessful bidder the opportunity for a debriefing, in which the contracting agency describes how the bidder failed to secure the contract and how they could be more successful in the future.

"But, you get a wide variety of behaviors across agencies in those debriefings, although the Office of the Secretary of Defense has been taking steps to make that more uniform and encourage more disclosure," Maser said. "What the agencies have some fear of is the more they disclose, the more a company or an attorney for that company will find a basis for a bid protest."

According to Maser, if agencies were more open at the beginning of the bidding process, the likelihood of a bid protest could be reduced. "But again, there's some risk that's inherent in this that they'll never be completely eliminated," he said.

Maser's study revealed that the number of bid protests was increasing, with 2,300 in fiscal year 2011.

That may seem like a lot, but that number should be put into perspective.

"When there's a bid protest, most of them are not sustained," Maser said. "Of those that are sustained, in the great majority of the cases, most of the vendors who originally won will still win." He added that it was rare for the bid protester to be the winner in the end.

Still, Maser said the small number of bid protests that are won, provide good lessons for the acquisition community at large.

"All of the subsequent contracts fall within the shadow of those bid protest results that are sustained," Maser said. "So, when GAO sustains a protest and everybody else pays attention and says 'Oh, I'd better do it that way,' that's some of the good that comes out of the bid protest system."

No model of government contracting that I am aware of (but I make no claim to broad knowledge of such things) has an effective or intended policing mechanism built in to head off defective procurement in real time.

At best, there are audits done down the road and some auditor may, or may not, notice the defect, and may, or may not, say something about it. And if something is said it may, but likely will not, be drawn to administrative attention. And if it is drawn to administrative attention, you can be certain the stink will be shoveled over, no one will be brought to account, and nothing will change to prevent a repeat.

Bid protests are the pills you take every day to prevent disease. Once the system gets systemically diseased, it tends to require major surgery to cut out. Bid protests are, in the big picture, minor inconveniences to avoid larger consequences. As they say in the day trading circles, learn to love your losses.

Patronage procurement: Two items

Government procurement agencies need cleansing – Mukanga Zambia

ALL government agencies and ministries dealing in procurement processes need cleansing to achieve efficiency and rid them of corruption, says works and supply minister Yamfwa Mukanga.

“There seems to be a lot of foot dragging going on inside these institutions and I think they need cleansing,” said Vice-President Scott. “They need panel beating because the money is there…we don’t want to open the door to corruption…to single-sourcing but at the same time we want to make the system work, that’s the challenge that we have.”

Reinforcing Vice-President Scott’s concerns, Mukanga said there was need for government procurement agencies to work freely and transparently to be accountable to the nation.

“It is not only these institutions that require cleansing. I would like to extend this to all government agencies and ministries dealing in procurement processes,” Mukanga said yesterday when he officiated at the RDA-organised “Roads Indaba” at Intercontinental Hotel in Lusaka yesterday.

Mukanga said it was time for all officers involved in procurement procedures to start declaring their interests in companies they own.

“Even as RDA, declare your interest in the companies you own so that we know that you own a company; you own this and you own that company so that when time comes for giving out contracts, it will be done transparently and it will be better because we will see a situation where people will definitely become almost corrupt-free,” he said.

“That is the cleansing we are talking about. This perhaps will help us to work transparently and free; and corrupt-free in the issuance of contracts. It will definitely reduce the corrupt tendencies that people have been talking about. We need to point figures, not at others, but ourselves and see how best we can contribute to the change of the environment.”

Mukanga said the government would not tolerate sub-standard performance among contractors in the road sector.

“Government will not sit back and see its coffers being depleted without corresponding progress in infrastructure development,” said Mukanga. “Government is ready to reward quality delivered projects and will deal swiftly and decisively with poor performers. It cannot be business as usual, we are in a hurry to see that there is progress.”

But sources say RDA does not have the capacity to effectively procure road works worth K4.2 trillion planned for this year following the dismissal of the entire procurement team last year in November by executive director Dr Michael Mulenga.

And sources within ministry of works and supply said RDA currently had “serious procurement bottlenecks”.

“The guys who knew and understood how to draw tender documents have all been fired and right now, RDA has a backlog of works that need to be procured but the questions is ‘who is going to draw up the tender documents?’ I wonder how the government is going to expend K4.2 trillion planned for this year,” said the sources.

In November 2011, Dr Mulenga fired more than 15 senior and junior officers in the procurement department without giving any reason for the massive terminations. / Post Zambia

DuPage Airport commended for procurement process Chicago, USA

"The DuPage Airport Authority has an open, documented procurement process that is readily available to the public," said ACC award selection committee chair Tom Butcher. "They also have a unique approach to forming their selection committees, including involving another airport representative. This is a critical component of an effective procurement system."

ACC President Paula Hochstetler noted that the airport was cited last year by U.S. Transportation Secretary Ray LaHood as a model for the nation and added that having a good transparent procurement process in place ensures that qualified firms are able to complete in a fair and open manner.

The previous patronage operation procurement process changed under the leadership of DuPage Airport Authority Chairman Dan Goodwin and Executive Director David Bird. They removed the airport from local politics to assure transparency in the competitive bidding process. As a result, the airport now produces a $2 million profit and is debt free after losing $2 million a year less than a decade ago.

"The board of commissioners and staff has spent the last eight years working tirelessly to implement management policies and procedures that reflect fiscal responsibility, openness and transparency, and to have our efforts recognized by the ACC is truly gratifying," said Bird.

Recent history of US Federal Procurement

Federal News Radio has put together a short timeline of events in the recent evolution of the US Federal Government's acquisition system. It's a great service to the procurement community, and I recommend all students and practitioners to have a look at it. Here are some quick highlights, as a teaser not a comprehensive canvas.

Timeline: Congress crafts acquisition policy

Competition in Contracting Act (1984)

"You can look at the Competition in Contracting Act as the Constitution of federal procurement," said Roger Waldron, president of The Coaltion for Government Procurement. "It laid the foundational rules with regard to how the federal procurement system was going to operate with a focus on a full and open competition to the maximum extent practicle. … It is the landmark legislation in enshrining competition in the statutes."

Federal Acquisition Streamlining Act (1994)

FASA sought to improve acquisition in three broad areas, according to Tim DiNapoli, acting director at GAO's acquisition and sourcing management office. First, it aimed to reduce unique purchasing requirements. Second, it sought to increase the use of simplified acquisition procedures for low-income procurement. Third, it sought to obtain goods and services faster in order to reduce the in- house cost of doing business.

Rather than the federal agencies describing in specific detail what they needed, the drafters of the act sought to encourage the agencies to focus instead on what their outcomes were. "Use a more performance-based contracting as opposed to the use of a specific requirement," DiNapoli said.

To facilitate this, Congress raised the threshold from $25,000 to $100,000, so that procurements under $100,000 could be acquired more simply, with fewer rules and regulations.

"They also authorized the use of a government purchase card for very small-dollar procurement," DiNapoli said. "If they're under $2,500, for example, federal agencies could use the purchase card to acquire that. It makes for much more of a commercial approach."

FASA also established a preference for multiple-award contracting.

Clinger-Cohen Act (1996)

the Clinger-Cohen Act eliminated the exclusive authority of the General Services Administration to acquire technology and allowed individual federal agencies to assume that role.

"The big change that Clinger-Cohen made to the acquisition system was getting rid of the GSA Board of Contract Appeal."

That board was a special bid protest body that had been set up originally in the Brooks Act to hear complaints from disappointed bidders on contracts, specifically in the IT area.

"It was very, let's call it, 'pro-protester and anti-government decision,'" Kelman said. "It second-guessed government decisions a lot and almost all major IT contracts were protested through that GSA Board of Contract Appeal and they had a much more lenient standard for upholding a protest than the GAO does."

Clinger-Cohen introduced the use of Governmentwide Acquisition Contracts, which allow agencies, once they have specific needs, to place orders against those contracts to streamline the process.

Federal Acquisition and Reform (1996)

One of the key elements of FARA regarded the competitive range determination, which allowed contracting officers to limit the number of bids they were going to actively evaluate. Contracting officers could then focus on the bids that had a chance of winning the contract as opposed to considering each and every bid that might be submitted.

HUBZone Empowerment Act (1998)

"The procurement system over many, many years — not just the mid-'90s, but well prior to that and since — has vacillated back and forth between a number of competing themes," said William Woods, director of acquisition and sourcing management at the Government Accountability Office. "One theme is efficiency, that we need to do things to get the best value for the taxpayer and do it quickly. But another theme is fairness, that Congress believes that we ought to use the procurement system to promote certain socio-economic goals."

Congress passed the HUBZone Empowerment Act in order to give a boost to small business located in Historically Underutilized Business Zones in bidding on contracts.

Services Acquisition Reform Act (2003)

"The GSA Schedules, probably in the early '90s, maybe 60 or 70 percent, maybe even a little bit higher, were product-based acquisitions," Walrdon said. Waldron said 55 to 65 percent of acquisitions are services today.

"Services, I think, are a bit harder to acquire. It's harder to write requirements around them. It's harder to evaluate them, what access to the commercial market, so I think the Services Acquistion Reform Act was an effort to address that in part," he said.

First, it created a civilian acquisition officer in each agency to oversee the procurement process. Second, it encouraged incentives for using performance-based contracts for services.

"It also helped agencies to establish a more capable workforce with regards to establishing a workforce training fund, with some of the intent being to improve how contracting officers could improve their skills and capabilities in buying goods and services," DiNapoli said.

SARA also established the Acquistion Advisory Panel, made up of 13 people from the government and private sector, who reported to Congress and the Office of Management and Budget on the procurement system.

Weapons System Acquisition Reform Act (2009)

This came about because the Government Accountability Office had found many of the major weapons systems DoD had contracted for had come in over cost and behind schedule and were not performing as promised.

"It focused on some upfront cost assessments and made sure there was a framework in place at the Department of Defense to honest and reliable cost estimates before the department committed to specific program," said William Woods, director of acquisition and sourcing management at the Government Accountability Office.

"Before the department and Congress committed significant funds to major systems, we had to be sure that the technology was mature and reliable," Woods said. "We're no longer relying on just contractor estimates."

Federal News Radio provides another great short overview of US Federal acquisition in its series, Inside the World's Biggest Buyer

One of the items in this series that resonates with me is this one:

Acquisition workforce strategy is the answer to DoD's problems

Of the eight findings, three of them concern the acquisition workforce, a large group of dedicated public servants who work diligently, but ultimately struggle within a broken system that is focused on avoiding mistakes rather than producing more, in less time, at less cost.

Our task force found that the skills of the acquisition work force, as a whole, have atrophied and that DoD needs to significantly reinvest in human capital. This reinvestment should be directed at three specific problems:

First, the military acquisition workforce, through no fault of their own, has become detached from the operating forces and lacks key perspective and experience. Second, acquisition workforce management practices, in part causing the aforementioned problem, also contribute to military members being put at a disadvantage with their peers in the operating forces. Third, the department lacks sufficient systems engineering capability that is necessary for inherently governmental functions necessary for timely decisions and tradeoff relative to technical feasibility and cost.

DoD recognizes the need to reinvest in human capital, improving the quality and training of the workforce. One of the major problems is that acquisition personnel do not have an appropriate understanding of operational needs. The acquisition system is so complex that its specialists usually work exclusively within that field. Mid-career military officers attend schools that train them to become acquisition specialists and once they gain the additional occupational training, they stay within the acquisition system for the remainder of their careers. Civilian employees in acquisition do not have sufficient access to the education and assignments that would prepare them for increased responsibilities.

Acquisition personnel have not been served well by existing management practices, particularly the military members. Civilians dominate the acquisition workforce, unlike the services or the combatant commands. There are 136,000 civilians and 16,000 military. The civilians manage uniformed members who work within the acquisition system, not the parent armed service. This puts military personnel at a disadvantage compared to their counterparts for career opportunities and promotions.

The current approach does not provide military officers with the requisite experience, skills, and qualifications needed for positions of increasing responsibility in the acquisition field. The Service Chiefs, in collaboration with senior acquisition leaders, should be accountable for the career path management, training, education and particularly promotions and equal promotion rates of military acquisition personnel.

The department also lacks the organic system engineering capability that is essential to the inherently governmental evaluation and decisions. The shortfall in system engineering hinders the department's ability to assess technical, cost, schedule and viable alternatives.

DoD needs to establish a human capital strategy for developing qualified system engineers capable of effective oversight and decision-making, prioritize near term needs and reassign system engineers to meet them, and increase the quality and capability of military and civilian engineers in the acquisition process and increase the sharing of resources across commands.

I think that is all a bit paradoxical in the actions of the recent era to outsource more and more of the back-office work of government, procurement and other government functions, to more civilian contractors.

The advantage of short timeline studies such as this is that it isolates the milestones against the noise of the issues of the day, and the outcomes which describe the milestones give a better perspective on which elements in the debate prevailed. In other words, which political philosophies or interest groups got their way.

The real work of procurement is always going to be political at some level, and the more that process intercedes, the less effective procurement will ultimately become regardless of which high mount it started from. Meddling begets more of the same. Things not broken get fixed, things broken get put into operation. It is not a dispassionate business.

One last golden service provided by Federal Radio News proves the point:

Acquisition bill tracker

Go there and see what I mean.

Is past performance a guaranty of future profit?

The financial industry is infamous for massaging past profit-making performance to sell new investment products, or often the same old ones, with the implication that profit is a repeatable routine regardless of other changes in the market mix. So much so that they must, in effect, offer the chant "past performance is no guaranty of future success" as a legal spell against misrepresentation charges.

But in procurement, in order to get government contracting work, past performance is often held out as the key. But is it a key to something else, maybe, like the old boys network executive washroom?

When past performance includes failure, even epic failure, shouldn't that be taken as a guaranty of future failure? If so, why are so many failed government contractors still in that game?

WellCare Health Plans pays $137.5 million to settle fraud allegations April 3, 2012

U.S. Attorney for Connecticut announced Tuesday WellCare Health Plans Inc. will pay $137.5 million to the federal government and nine states to resolve four lawsuits alleging violations of the False Claims Act. WellCare, based in Tampa, Fla., provides managed health care services for approximately 2.6 million Medicare and Medicaid beneficiaries nationwide.

The lawsuits alleged a number of schemes to submit false claims to Medicare and various Medicaid programs, including allegations that WellCare falsely inflated the amount it claimed to be spending on medical care in order to avoid returning money to Medicaid and other programs in various states, including the Florida Medicaid and Florida Healthy Kids programs; knowingly retained overpayments it had received from Florida Medicaid for infant care; and falsified data that misrepresented the medical conditions of patients and the treatments they received.

Additionally, it was alleged that WellCare engaged in certain marketing abuses, including the “cherrypicking” of healthy patients in order to avoid future costs; manipulated “grades of service” or other performance metrics regarding its call center; and operated a sham special investigations unit.

The settlement requires that Wellcare pay the United States and nine states – Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Missouri, New York and Ohio – a total of $137.5 million. WellCare may also be required to pay an additional $35 million in the event that the company is sold or experiences a change in control within three years of this agreement.

“Government health plans increasingly rely on managed care organizations to provide patient care. This case illustrates our commitment to ensure that government funds are in fact used to render care and not to line the pockets of those more concerned with the bottom line,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.

This is the second monetary settlement reached with WellCare since the government initiated a criminal and civil investigation of WellCare in 2006. On May 5, 2009, in order to resolve potential criminal charges related to losses by the Florida Medicaid and Healthy Kids programs, WellCare entered a Deferred Prosecution Agreement (DPA) with the U.S. Attorney in the Middle District of Florida, under which WellCare paid $40 million in restitution and forfeited an additional $40 million. The U.S. Attorney’s office also has pursued criminal charges against several former Wellcare employees. One former WellCare analyst, Gregory West, entered into a plea agreement and pleaded guilty to a conspiracy charge shortly after execution of a search warrant on WellCare’s corporate headquarters in Tampa; he is currently awaiting sentencing. Five former executives – including former CEO Todd Farha, former CFO Paul Behrens and former general counsel Thaddeus Bereday – were indicted in March 2011 and are currently awaiting trial, which is presently scheduled for January 2013. Additionally, Wellcare previously executed a Corporate Integrity Agreement (CIA) with the Office of Inspector General of the U.S. Department of Health and Human Services (HHS-OIG) that imposes compliance obligations on the company for a period of five years.

The resolution of the civil suits announced today brings the total recoveries from WellCare to $217.5 million, a number that will rise to over a quarter billion ($252.5 million) if the contingency payment provision is triggered.

In the article below, it is reported,

"Five former executives — including CEO Todd Farha, CFO Paul Behrens and general counsel Thaddeus Bereday — were indicted in March 2011, and are awaiting trial.

Evidence against them includes taped conversations between executives discussing how they could duplicate their bills to the state. The executives also discussed plans to save money by terminating coverage for neonatal babies and terminally ill patients, and throwing parties to reward employees who ousted expensive enrollees, according to whistle-blower documents.

Fast forward a mere few months since the ink almost dried on the settlement.

Saying it's changed, WellCare wants in on state Medicaid contracts

WellCare's decision to bid, though not unexpected, has sparked an outcry from critics who say they wonder how badly a company must act before it is banned from government contracts — and from serving the state’s most vulnerable residents.

WellCare officials maintain that the company has changed in the two years since it agreed to pay a $137.5 million fraud settlement amid accusations the company bilked the state’s Medicaid and Healthy Kids programs and that it systematically dumped patients with expensive health needs.

“I think we have a highly competent and ethical group now running the company,” said former U.S. Sen. Bob Graham, a paid director on the company’s board and chairman of a committee to ensure the company acts ethically and complies with regulations. “Our service will be our best evidence of our corporate integrity.”

Our service will be our best evidence of corporate integrity? Fool me once...

Let them serve time outside the system a while before deciding performance is evidence of that. That's what the inquiry into responsibility is meant to look at: past performance. For goodness sake, we require doctors to wash their hands, and even cafe cooks, before they return to their next job.

If all a failed contractor has done is rearrange his or her deckchairs, it will sink again. And where you have the same board, the same owners, replacing a few executive operators is simply that.

And the settlement payments? Just the cost of doing business any way it can. Like hiring actors for shills.

The only time the government should give a contractor the benefit of doubt to allow future service covenants to indicate responsibility is when it does not have a past record of poor, or fraudulent, behaviour.

WellCare Settles Massive Healthcare fraud

The settlement allows the company to continue providing services under the Medicare and Medicaid programs.

Like most major health care fraud cases, the WellCare cases were successful because concerned employees and insiders came forward. The allegations against the company not only impacted on taxpayers (Medicare is a federally funded program) but involved patient health and safety as well.

When corners are cut, even for great reasons (e.g., war), the way is opened for fraud

Procurement is intended to slow down the spending of money, to make it more accountable and transparent. Integrity comes from the steady drip, drip, drip of the process.

But in times of great need, such as natural disasters, emergencies, war and the like, you need a firehose of spending, and the drip, drip, drip just won't do. That's when dishonesty strikes. It preys on such weaknesses in the system, profits from calamity.

Former Utahn at center of alleged DOD contracting scheme

Harris, a longtime Army reservist who served in Iraq with a Special Forces unit before becoming an independent contractor, allegedly conspired with others to defraud the government of at least $15 million through rigged contracts. Those contracts eventually totaled nearly $53 million for work during the transfer of security operations in Afghanistan, according to documents filed as part of a civil forfeiture complaint initiated by the government in Utah’s federal court.

The government alleges Harris used ill-gotten funds to buy and renovate homes in Lake Havasu City, Ariz., and in St. George, Utah; he also purchased a lot in St. George, prosecutors say. He bought a Ford Taurus, a 2010 Harley-Davidson motorcycle, a Dodge Ram truck, and Cessna — he later sold for $582,625 — and seafloat airplanes. Harris also loaded up on silver bars, spending about $30,000 on 37 silver bars in varying weights.

The Defense Criminal Investigative Service and Homeland Security Investigations began looking at Harris after being tipped off that he had withdrawn $238,400 from two different bank accounts between April 2009 and October 2010, all in $9,000 increments. That investigation showed Harris made about $24 million in transactions and account transfers over an approximately three-year period.

Eventually, the investigation uncovered an alleged scheme that began in 2007 with a bid on a six-month contract to manage equipment for Afghan National Army Special Forces commando teams and train them on how to do their maintenance work themselves. Key players in the alleged scheme: Harris and his long-time military buddy David Young. The two became acquainted in the 1980s while Former Utahn at center of alleged DOD contracting scheme $15M through rigged contracts.

The St. George bank teller had a simple question for Christopher Harris: Why did he consistently withdraw $9,000 at a time, over and over and over?

Harris had an equally simple answer. He told the clerk he didn’t want to go over the $10,000 mark, which would attract government attention — scrutiny he apparently wanted to avoid for good reason.

Harris, a longtime Army reservist who served in Iraq with a Special Forces unit before becoming an independent contractor, allegedly conspired with others to defraud the government of at least $15 million through rigged contracts. Those contracts eventually totaled nearly $53 million for work during the transfer of security operations in Afghanistan, according to documents filed as part of a civil forfeiture complaint initiated by the government in Utah’s federal court.

No criminal charges have been filed against Harris or other alleged co-conspirators in the scheme, although the U.S. Attorney’s Office says its investigation is ongoing. But in the forfeiture action, filed last fall under seal, the government laid claim to money and assets Harris and others held in 13 different bank accounts; retirement and college saving funds; 20 different properties, including homes in Utah, Arizona, Florida and New Hampshire; vehicles and airplanes; silver bars and gold coins; and a half dozen firearms.

"The claim in this case was not against Mr. Harris [or other individuals], but against the proceeds and the assets the complaint alleges were purchased from the proceeds of the alleged conduct," said Melodie Rydalch, spokeswoman for the U.S. Attorney’s Office in Utah.

The government alleges Harris used ill-gotten funds to buy and renovate homes in Lake Havasu City, Ariz., and in St. George, Utah; he also purchased a lot in St. George, prosecutors say. He bought a Ford Taurus, a 2010 Harley-Davidson motorcycle, a Dodge Ram truck, and Cessna — he later sold for $582,625 — and seafloat airplanes. Harris also loaded up on silver bars, spending about $30,000 on 37 silver bars in varying weights.

The contracts » The Defense Criminal Investigative Service and Homeland Security Investigations began looking at Harris after being tipped off that he had withdrawn $238,400 from two different bank accounts between April 2009 and October 2010, all in $9,000 increments. That investigation showed Harris made about $24 million in transactions and account transfers over an approximately three-year period.

Eventually, the investigation uncovered an alleged scheme that began in 2007 with a bid on a six-month contract to manage equipment for Afghan National Army Special Forces commando teams and train them on how to do their maintenance work themselves. Key players in the alleged scheme: Harris and his long-time military buddy David Young. The two became acquainted in the 1980s while serving in the U.S. Army and also served in a Special Forces Unit in Iraq between November 2002 and June 2003.

As part of the scheme, prosecutors say Young worked with Maj. Todd Cox, then deputy commander for the Combined Security Transition Command in Afghanistan, to grossly inflate the official cost estimate of providing the equipment, maintenance and training services. Cox estimated the project at $875,000 plus "a little more" for being "close to the fight" and living conditions, court documents state.

Cox listed it as an urgent, limited-bid contract, thus exempting it from an open bid process. He gave a contract supervisor eight companies capable of performing the work, including AISC. In the end, it was one of two companies that bid on the contract.

AISC bid $899,782, while the other company bid $382,590 — a variance prosecutors said in court documents was "indicative of the inflated contract price estimate provided by Young, Cox and their co-conspirators."

Prosecutors allege AISC failed to staff the project as required in the various contracts, but still billed the government for services. Tory Milos, a captain in the New York Air National Guard and one-time girlfriend of Young, was tasked with approving invoices for work performed by contractors for the Army; she verified that AISC was "fully performing" and authorized payments to the company, according to the complaint.

By Aug. 8, 2009, the original contract had been extended and modified nine times, and AISC had received payments of slightly more than $26 million. And after the initial contract expired in August 2009, AISC was awarded four new sole-source consecutive contracts through Dec. 15, 2010.

In the end, the total payments AISC received through the five Department of Defense contracts, a "portion" of which it used to cover project-related expenses, amounted to nearly $54 million. About one-third of those government payments eventually flowed to Harris. In 2010 alone, he received more than $5.7 million.

There is an awful lot more to this story, so please read the link at the article title above. Audacity has no bounds. If we can't learn from our mistakes, ....

Where procurement is an essential feature of governance, it's in the constitution

The articles below are posts in the World Bank blog.

Morocco: When Governance, Transparency, Integrity, Accountability, & Public Procurement Entered the Constitution by Laurence Folliot Lalliot

Morocco has joined the very small list of countries (i.e., South Africa and the Philippines) to grant a constitutional status to this rather technical field, the impact of which will be progressively felt in the world (even outside the small world of procurement lawyers), as it affects how government money is converted into goods and works like roads, schools, vaccines, etc.

Proclaimed by the Preamble and woven throughout its articles, Governance and governance topics including access to information, transparency, integrity, anti-corruption, accountability, and social participation (notably through a right to petition), are paid an unprecedented tribute in the new Constitution. Such topics, which are considered recent features of good governance, are usually prescribed at the lower level of ordinary laws or regulations. However, with their inclusion in the Constitution of Morocco, they now enjoy a preeminent status that supersedes any potential contradictory law or regulation. Beyond being a symbolic gesture with potential profound legal implications, this will change the dimensions of the debate on Governance by expanding opportunities for improvement (e.g., facilitating a dialogue on social accountability with the Government).

The new provisions such as the one promoting access to information will mirror international best practices in procurement laws which require the publication of all procurement documents on a free website. The procurement process will be impacted by the provision granting the right to challenge any administrative decisions before the Administrative Courts. Another provision addressing the principle of free competition could help ensure all bidders are allowed to compete without discrimination. And on the topic of integrity of public management, public procurement and the administration of public contracts were considered important enough to earn their own article (article 36):

“Offenses relating to conflicts of interest, insider trading,and all offenses of financial nature are sanctioned by law. Public authorities are obliged to prevent and punish according to law, all forms of delinquency related to the activities of government and public bodies, to the use of funds they manage,to the award and administration of public procurement contracts. Trafficking of influence and privilege, abuse of dominant position and monopoly,and all other practices contrary to the principles of free and fair competition in economic relations are sanctioned by law. There shall be installed a National Integrity and Anti-Corruption Agency.” (Free translation from Lalliot.)

Considering the demands for transparency, integrity and accountability which helped serve as the foundation of the “Arab Spring,” we may assume the practice of including Governance topics and public procurement in the Constitution may be expanded outside the Moroccan borders and considered by other Constitutional Assemblies in Tunisia, Egypt or Libya. This would not be surprising given the growing consensus that transcends political affiliations to install ethical and accountable public functions under the scrutiny of the civil society. Perhaps as we look back at this time in the years to come, the inscription of government spending and purchases on the frontispiece of a country’s primary legal document shall become an emblematic testimony of this new era.

Would you agree with one comment that this is mere window dressing? If so, you have no hope, and are probably wasting your time reading blogs such as this.

Procurement Monitoring by Citizens: Is it Effective? by Sabina Panth

According to the International Budget Partnership, developing countries spend $820 billion a year on procurement-related transactions. These expenditures are critical for the delivery of goods and services but they are also extremely vulnerable to corruption. Transparency International estimates that $400 Billion is lost to bribery and corruption in public procurement internationally (2006). Procurement monitoring is an emerging area, where citizens’ involvement has been experimented to address the impending waste and corruption in public procurement.

The procurement process typically consists of identifying what is needed; determining who the best person or organization to supply this need is; and ensuring what is needed is delivered to the right place at the right time and for the best price and quality. Some loop holes that offer room for manipulation and fraud in procurement consist of:

Planning stage: Absence of clear criteria for project selection; stimulating demand for personal benefits; short cutting bidding process by misrepresenting urgency
Preparation Stage: Weak technical specifications leading to favored bidders; lack of public participation in project design/bidding specifications, tailor fitting favored bidders
Advertisement Stage: Limited/insufficient advertising; published in paper with limited circulation
Pre-qualifications: Bias requirement to a favored bidder or contractor, lengthy process leading to opportunities for bribe solicitation, contract sharing among the bribing companies

Integrity Pacts and Public Hearings are some tools that have been used to engage civil society in procurement monitoring. In a public hearing, the responsible authority convenes a meeting with citizens and subject experts to discuss the planned terms of a contract and citizens in turn express their objections and suggestions for improvements. In Integrity Pact, the responsible authority and business agencies competing in the bidding share a contract of reciprocal control to prevent the payment of bribes between the bidders and the authorities. This allows control mechanisms for the citizens and also the losing bidders to monitor how the winning bidder addresses the terms of the contract. Citizens are also able to make use of the grievance redress provision in the contract to report cases of complaints and dissatisfaction during the implementation phase.

For meaningful participation of citizens in procurement monitoring, it is important to first identify key stages of procurement where civil society and government can collaborate. Equally important is to make information on procurement processes accessible to the general public. This will help avoid hand-picking of individuals and organizations in the formation of monitoring committees or participation in public hearings. Also, civil society needs proper incentives, including trained manpower and sufficient budget to participate in procurement monitoring. Given the entrenched corruption in procurement handling and the association among stakeholders involved in the process, civilians are not always in a position to resist threats and manipulation. However, there are some cases, where civil societies have cultivated home-grown solutions to effectively engage in procurement monitoring and influence policy changes.

I'm not sure how far the concept of citizen participation can effectively go. To the extent it allows citizens to see the guts of procurement and the way the procurement sausage is made, I'd agree. And, from the discussion in the article, it is this monitoring that is emphasized.

But if extended to citizen participation in selection of projects and contractors, procurement could end up being no different than corrupt procurement, which is discriminatory procurement for the benefit of some, even if a majority, at the cost of the society as a whole.

When people criticize democracy as a model of governance, they exaggerate or see only the majority rule aspect (which is fundamentally mob rule), and disregard entirely the equally essential minority rights aspect (that is, government by consent). As the first article alluded to, good procurement is good governance, and good governance requires good procurement. A failure of one is always reflected in a failure of the other.

Read more of each article featured at the article title link.

Feel free to comment, but please keep comments civil. (Since there's only ever been one comment, that has not been a problem in this blog.)

Procurement controversies series -- Quebec

Lax rules let Quebec politicians funnel contracts to pals, Chabonneau commission told

A retired senior Quebec bureaucrat kicked off the Charbonneau Commission hearings Friday by recounting a history of secretive, lax and often corrupt procurement practices that allowed politicians to funnel contracts to party loyalists and rubber-stamp huge cost overruns that essentially plundered the public purse.

Lafrance took the stand at 9:30 a.m. and over the course of the day walked the commissioners through more than 50 years of history that reflected a constant struggle to reign in corrupt practices.

He said that it wasn’t until the Quiet Revolution in the early 1960s that the government began the process of cleansing the system; a process that continues to this day.

What became apparent from Lafrance’s historical recounting was that despite the many changes to the contracting laws, the same problems of corruption, collusion and favouritism still exist in 2012.

Lafrance said that during the Maurice Duplessis era, the so-called Department of Colonization controlled all procurement, secretly distributing contracts to loyalists of Duplessis’s Union Nationale.

He noted that a government study of the contracting system in 1960 concluded that the system was “immoral, scandalous, humiliating and disquieting for the public” because it essentially allowed cabinet to hand out contracts to the supporters of the governing party.

In the 1960s, systems were put into place to create lists of “qualified” contractors with various expertise and to improve transparency. But even then, Lafrance said that officials often had no idea whether contractors on the lists even existed or were in fact qualified to do the job.

One major problem, he said, was a lack of control over cost overruns.

He said they were the result of bad project management on the work site, but the government simply paid out the additional funds without verifying the demanded amounts.

Responding to mounting public complaints, the province began a gradual process of modifying its contracting regulations to meet national and international standards of transparency and competition.

This included publishing all tenders on an international publicly-accessible computer network that manages the bidding process.

Lafrance concluded his testimony by saying that no matter what legislation is adopted or policies put into place, stamping out corruption depends on “the ethics” of the people involved.

Read more at the link above

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Procurement as Career Choice

Becoming a Procurement Person – Ellen Davis explains her move from HR

Davis was originally an HR manager in the MOD and moved to the UKHO 13 years ago. She worked on career development issues, and she says that she felt “I should think about my own career in the same way that I was advising others to do!”

Then, in around 2008, she saw a piece written by Amyas Morse in an MOD staff publication – Morse, who now heads up the National Audit Office, was then Commercial Director for the MOD. He explained that procurement in the MOD needed more “managers not technicians”, and outlined what a great career and profession one might have in MOD commercial / procurement. He must have been very persuasive, because Davis decided to make that move. She signed up for the MCIPS programme in 2009, paying for the first year of education herself, and before she actually had a job in the function – very brave!

Move on three years, and not only has she passed all her exams first time on her path to MCIPS, but she is now Head of Procurement in UKHO. She worked with an interim head for a year, an experienced procurement professional who acted as a mentor, and now heads a transformed procurement team and has recently also taken ownership of delivering an on demand digital print capability for her business.

“We’re becoming less transactional – we’ve introduced category management, nearly all of the team are now CIPS qualified, and we want to be seen as leaders in the public sector”, she explains.

The function achieved a 7% saving last year across the total organisational third party spend, and some of the savings have been invested in new projects.

“But I have found the public sector procurement constraints frustrating at times”, Davis says. “We can’t just ‘do deals’ even where we see real opportunities; we have to stick with the processes”. (Welcome to the world of public procurement, Ellen!)

Wrongful claim of social preference

Boise construction company sentenced for defrauding the government

Construction Service Corporation, Inc. was awarded a $275,000 contract for work on a government facility in Corvallis, Oregon by saying they were an eligible HUBZone entity, when in fact, they were not.

At the sentencing, the judge stated that “this is a serious matter. The programs were intended to promote economic activity in disadvantaged areas. The crime undermines confidence in these important public programs.”

Construction Service Corporation, Inc. has been sentenced to three years probation, and fined $65,000, for fraud.

Minimum needs and the 70% solution

You can't always get what you want
But if you try sometimes, well you might find
You get what you need
-- From the Rolling Stones song, You Can't Always Get What You Want

Good specification writing comes from a talent more born of the art of interpretation than the science of description. That is because the basis of the specification is not the thing, it is the need. We get so often wrapped up in what we want that we lose sight of what we need.

Guam's laws on specifications, taken from the ABA Model Procurement Code, read more like principles than grammar and engineering. One fundamental such law is

"Specifications shall not include requirements, such as but not limited to restrictive dimensions, weights or materials, which unnecessarily restrict competition, and shall include only the essential physical characteristics and functions required to meet the Territory’s minimum needs."

It is the functional equivalent to the "70% Solution" mentioned in the following article.

Second Best Makes A Comeback

Established in 2002, RFI (Rapid Fielding Initiative) recognized that the American army did not always have the best weapons and equipment available. RFI was intended to do something about that and do it quickly. During the next nine years, the army approved the purchase of 409 items immediately, which is what RFI was all about.

Traditional weapons and equipment developers did not like RFI. Procurement bureaucrats like to take their time, even when there's a war going on. This is mainly to cover everyone's ass and try to placate all the big shots and constituencies demanding certain features.

The engineers often point out that they can deliver much more quickly if they are allowed to use the old "70 percent solution" rule. This bit of engineering wisdom is based on the fact that some capabilities of a weapon or other item are not essential but take an inordinate amount of effort to create.

Thus a "good enough" item can be produced very quickly, if you are willing to sacrifice 30 percent of the capabilities you thought you needed (but probably don't). Despite official opposition, the 70 percent solution has become all the rage over the last decade.

The age of change began with the troops who, thanks to the Internet and a flood of new civilian technology, got into the habit of just buying new stuff and using it in combat. If the army had developed a lot of this gear it would have more features, be more rugged, and taken a lot longer to arrive, if it ever did at all. But for the troops, the off-the-shelf gear filled important needs, even if it was a 70 percent solution.

You could see RFI coming. There were three existing trends pushing it. First, there was a lot more new technology coming on the market that troops could use. Some of it came from the companies that created equipment for the hiking and camping market (boots, rucksacks, all manner of outdoor clothing). Other stuff came from hunting and police suppliers (new gun sights and other accessories). There was a flood of new electronic gear, like lighter and more reliable GPS receivers and computer gear, plus new kinds of flashlights and, eventually, smart phones.

The second trend was that the troops were all on the Internet and like never before were in touch with each other via military related message boards, listservs, Facebook pages, and chat rooms. Troops have always been coming up with new ideas about how to use civilian gear for military purposes. But before the Internet each soldier's discovery spread slowly. Now, information about new discoveries gets spread army-wide, and world-wide, within hours.

Finally, there was SOCOM (Special Operations Command), which had long possessed its own RFI-like powers and budget to go with it. SOCOM could buy neat new weapons, as well as equipment. SOCOM could also afford to buy expensive stuff (the first night vision gear and satellite phones). SOCOM personnel were on the Internet as well. By 2001, thousands of soldiers were speculating, via the Internet, how much more effective they could be if they had SOCOM's freedom to quickly get new stuff that allowed them to do their job better.

Pentagon realized that the army would not look too good if too many journalists interviewed too many troops who had bought civilian equipment with their own money, while the Special Forces was getting it paid for by the government. This was especially embarrassing if the new equipment, from a civilian supplier, was obviously superior to the stuff the government was handing out. With this kind of incentive the Rapid Fielding Initiative was quickly set up and became a big success.

Some generals consider the official procurement bureaucracy beyond help. It is encumbered with generations of laws and rules, which are supposed to curb fraud, enhance efficiency, or whatever, and have just contributed to the many delays that make everything take far longer than it should. You can't mess with the laws, at least not too often, and especially not in peacetime, without getting brought up short by Congress and the courts. For the politicians, the defense budget is a principal tool for getting reelected. That procurement money means jobs for American voters and the politicians representing those voters know it. Congress will not relinquish too much control over this pot of gold.

Over a decade of war has changed a lot of things in the U.S. military but none more troublesome, to the military bureaucracy, than the new attitude of "we want it now." Senior commanders took on the military procurement bureaucracy in order to get new technology to the troops sooner. It's not a new fight but having so many generals involved in trying to speed things up; that is new. And often the generals were asking for some very expensive stuff. But these officers had done their homework and it was hard to say no to officers who are under fire every day. The 70 percent solution became a legitimate tool on the battlefield. But now the procurement bureaucracy wants to go back to the bad 0ld (but safer) days of taking your time and covering your ass.

Now the army has to decide which of these RFI items to make standard equipment and which to discard. So far, 11 percent have been made standard issue, 37 percent are being discarded (some didn't work out as expected, others were replaced by better stuff) while the remaining 52 percent are still being fought over by the troops and procurement bureaucrats. The marines already went through this process, and found that 63 percent of their RFI items were worth keeping, and only 17 percent were to be discarded. The rest are still being watched, or being further developed.

A time to outsource and time to insource?

I've been a bit amused that those who rally hardest to allow government to buy its things off island to save money, turn blue in the face at the thought of importing cheaper labor, too. It's obviously not a cost-savings mantra that drives such irreconcilable positions. Procurement often lives right at the coal face of social dissonance with economics and politics.

With unemployment everywhere in the Western world, at least, in steep decline, it is not unexpected that organized labor would want its own share of the government pie, like many other contractors just barely getting by. Hard facts can make for bad law.

California government unions move to squeeze out private contractors

With California facing yet another budget crisis that threatens state jobs and pay, employee unions are moving on several fronts to push use of civil service workers instead of private contractors for state government work.

The state historically has had trouble recruiting and keeping high-skill workers in areas such as high-tech, law, science and finance, Yank said, because the state's pay and benefits are less than in local government or the private sector.

"Contracting for those jobs – it's a horrid, vicious cycle," he said. The compensation gap empties the in-house talent pool, which causes the state to spend money on contractors that could be used to make pay more competitive.

Last month, the state attorneys' union successfully contested a multimillion-dollar contract with a private law firm for legal services. Last month, the state's legal professionals' union successfully challenged a multimillion-dollar agreement for services between the California's prison department and a private law firm.

The three-year deal between the Department of Corrections and Rehabilitation and Williams & Associates started in 2009 at $1 million to defend the state against inmate lawsuits normally handled by civil service lawyers. After two revisions, it ballooned to $5 million for the three years ending June 30.

Although state law requires departments to notify the affected unions of such contracts, the attorneys' association learned of the deal after a staff researcher found it by combing through a state expenditure database.

The discovery prompted a union challenge before the State Personnel Board, a five-member panel that rules on a range of employer-employee disputes.

"Our top attorneys make $50 per hour," said CASE's Whalen, a tenth of what contract attorneys can bill. "So by definition you can't save money by hiring out because you already have some of the cheapest attorneys on the planet."

Last month the Personnel Board ruled that the corrections agency had illegally contracted for the work. To avoid harming current litigation, the board said Williams & Associates could continue handling cases until its contract expires at the end of this month.

"We've got a bunch more (cases) in the pipeline," said Patrick Whalen, general counsel for California Attorneys, Administrative Law Judges and Hearing Officers in State Employment, or CASE. "When it's crunch time, you look for every penny you can."

Pepperdine University political scientist Michael Shires said another motive is also at work: "Clearly, the unions are trying to protect their members' jobs."

Sometimes it makes good sense to contract for services, Shires said. "Once someone is a monopoly, the competitive forces of the market won't hold them accountable," Shires said, "including when government grants the monopoly to itself." The unions long have argued that keeping jobs in-house is cheaper than outsourcing. They press their case hardest during tight budget cycles.

"There are instances when jobs should stay in-house and cases when they should be contracted," said Mitch Zak, a Republican strategist whose firm, Randle Communications, works with a number of trade organizations. "But the standard should be what's best for California, not what's best for the unions or for individual businesses."

Read more at the link above.

An ounce of prevention: Pre-award audits

There's the old saying, an ounce of prevention is worth a pound of cure. So it seems to be with pre-audit oversight, accountability being an essential principle of procurement, and effective accountability being an essential part of cost-savings.

I posted earlier about the 2011-12 semi-annual OIG report to Congress. This post is about one of the highlights of that report.

Our Office of Audits has continued to focus on GSA’s Multiple Award Schedule program, with a concentration in preaward audits, as well as oversight of GSA’s American Recovery and Reinvestment Act of 2009 projects and financial reporting. Our Office of Investigations focused on major procurement fraud, construction fraud, and counterfeit product identification in the federal government’s supply line. The OIG Office of Forensic Auditing continued its proactive data analysis to uncover potentially fraudulent activity.

Chief among the OIG’s achievements this semiannual period was Oracle Corporation’s $199.5 million settlement to resolve qui tam allegations that it defrauded the United States by intentionally failing to disclose discounts available to its commercial customers.

GSA provides federal agencies with billions of dollars of products and services through various types of contracts. As of March 31, 2012, there were over 19,800 Multiple Award Schedule (MAS) contracts under GSA’s procurement program with over $20.3 billion in total sales. We oversee this program by conducting preaward, postaward, and performance audits. Historically, for every dollar invested in our preaward audits, we achieve at least $10 in lower prices, or more favorable contract terms and conditions for the benefit of the government and the taxpayer.

The pre-decisional, advisory nature of preaward audits distinguishes them from other audit products. This program provides vital and current information enabling contracting officers to significantly improve the government’s negotiating position and to realize millions of dollars in savings on negotiated contracts.

During this reporting period, the Office of Audits performed preaward audits of 26 contracts with an estimated value of almost $7 billion. Because of their pre-decisional, advisory nature, the OIG’s preaward audits play a crucial role in improving the government’s negotiating position and in realizing millions of dollars in savings on negotiated contracts. Five of our more significant audits during this period were of Multiple Award Schedule (MAS) contracts with projected government-wide sales totaling more than $5.1 billion. These audits resulted in recommendations that $222 million in funds to be put to better use.

All five of the audits showed that the Price Reductions clause was ineffective because there were either no or limited sales to the basis of award customer, the listing of proposed exclusions as provided by the vendor was so encompassing as to prevent a price reduction from being triggered, or all sales were to either GSA or other federal agencies.

In four of our audits, we determined there were overbillings for various reasons, including: failure to pass along price reductions, invoiced pricing higher than the GSA schedule price, inclusion of sales tax, and invoicing for unqualified labor or
inappropriate labor categories.

Two of the audits determined that the commercial sales practice information provided in support of the extension proposal was not current, accurate, or complete. One company failed to disclose any sales other than those to the existing basis of award customer. Examination of the non-disclosed sales showed better than offered pricing,
which could result in cost savings of approximately 19 percent of the estimated contract sales for the extension period.

Two of the audits showed that customers with less sales volume received higher discounts and better terms than GSA, and suggest that GSA should leverage its buying power to obtain similar pricing.

Audit of telecommunications payments and inventories

Audit of Management Controls Within the Network Services Division Pacific Rim Region, Federal Acquisition Service May 30, 2012 by the Office of Audits, Office of Inspector General, U.S. General Services Administration. As usual, you must go to the source for full understanding. This is just an extract.

The Federal Acquisition Service’s (FAS) Network Services Division (NSD) assists customer agencies on a broad range of telecommunication solutions/services. The goal of the NSD is to obtain the lowest aggregate prices for these services through local services acquisition contracts and other acquisition vehicles. The division consists of a Director and a professional staff of 16 area telecommunication managers who are responsible for making sound procurement decisions in fulfilling customer orders. The NSD also uses contract employees to assist in initiating customer orders.

Area telecommunication managers are required to record and complete sales transactions accurately and timely using FAS’s billing system, known as Telecommunications Operating and Payment System or TOPS. NSD’s sales are primarily from monthly telecommunication services (also known as recurring services), which are designated as B13 in TOPS. In addition, area telecommunication managers are responsible for maintaining an accurate and reliable inventory of these recurring services.

WHAT WE FOUND
We identified the following during our audit:

Finding 1 – NSD lacks inventory control procedures.

The lack of control procedures over the Region’s recurring services inventory impedes NSD’s ability to effectively manage its operations. Although NSD maintains an inventory of recurring services provided to customers, it cannot demonstrate that this inventory is accurate or reliable. Nearly a third of the customer base is impacted by errors in the inventory.

Finding 2 – NSD lacks written procedures and management controls over contract administration.

This would include: (1) providing required training to NSD employees; (2) improving personnel management; and (3) improving contract order processing.

The Fair Opportunity Clause (Federal Acquisition Regulation 16.505b) requires contracting officers to take into consideration all eligible vendors when awarding a local services acquisition contract valued in excess of $3,000. While no purchases in our sample met this criterion, we noted that NSD management does not have written policies and procedures to ensure contracting officers understand and comply with this regulation.

OMB requires contracting officers’ technical representatives to complete 40 hours of continuing education every two years to maintain their certifications. However, none of NSD’s four designated contracting officers’ technical representatives met this requirement.

NSD did not clearly define the roles, responsibilities, and expectations for the newly appointed supervisors. Prior to the appointments, two area telecommunication managers (GS-13 grade level), designated as team leaders, were expected to oversee the work of their colleagues even though they had no direct supervisory authority. As such, they are limited to providing advice on best practices but cannot compel their assign staff to follow through on that advice.

We found little evidence of contract oversight despite the fact that independent contract employees initiated 35 percent of the purchases made under local services acquisition contracts during the 9-month period ended June 30, 2011. Therefore, we recommend that management develop procedures to more effectively direct the work performed by independent contract employees.

Of the 11 new customer orders placed during the 9-month period ended June 30, 2011, 10 were placed under the higher priced tariff agreements. As a result, customer agencies are most likely paying more for telecommunication services than they should.

Finding 3 – NSD management needs to establish effective criteria for evaluating staff performance.

NSD provides no differentiation in performance criteria among grade levels and job series within the NSD’s professional staff. No distinction or differentiation exists between grade levels for NSD employees with regard to evaluation criteria. Further, no methodology exists to measure employee performance concerning client satisfaction, which represents 30 percent of an employee’s performance.

WHAT WE RECOMMEND
The FAS Regional Commissioner in the Pacific Rim Region should:
1. Conduct a comprehensive inventory of recurring services (B1) to identify errors, missing transactions, and outdated or expired services.
2. Ensure accurate accounting of the recurring services inventory by developing and implementing written procedures and management controls for training NSD employees on how to update and monitor the inventory.
3. Take action to ensure contracting officers’ technical representatives receive all required acquisition training.
4. Clearly define roles, responsibilities, and expectations for the newly appointed Branch Chiefs.
5. Develop and implement written procedures in the following areas:
a. Compliance with training mandates for contracting officers’ technical representatives.
b. Management oversight of independent contract employees.
c. Compliance with Fair Opportunity requirements under local services acquisition contracts for client requested telecommunication services.
d. Justification to award telecommunication services under tariff agreements.
e. Timely completion of customer orders in TOPS.
6. Re-evaluate and revise NSD’s Associate Performance Plans to accurately reflect employees’ skill sets.
7. Develop and implement a methodology to measure customer satisfaction with employee performance; this methodology should be included in the Associate Performance Plans.

MANAGEMENT COMMENTS
The Regional Commissioner of the Pacific Rim Region concurred with the audit report findings and recommendations.

USGSA OIG's semi-annuual report to Congress 2011-12

The Office of Inspector General of the U.S. General Services Administration has published is semi-annual report to Congress for the period October 2011 to March 2012. It is online here. I will separately post about its pre-award efforts. Here are other matters discussed in the report. A more complete read of the report is necessary for context and full content.

Mandated to obligate $5.5 billion for many building projects within a 20-month period, GSA’s shortened planning and contracting phases will likely result in continual challenges as Recovery Act-funded projects move into the construction phase.

GSA systems, including its financial system of record (Pegasys), continue to have deficiencies in interoperability and interfaces. As a consequence, GSA management continues to rely heavily on manual workarounds and significant adjusting entries to prepare the financial statements and related note disclosures.

GSA is responsible for protecting the life and safety of employees and public visitors in federal buildings. The increased risks from terrorism have greatly expanded the range of vulnerabilities. A broadly integrated security program is required.

Results Attained:

Referrals for criminal prosecution, civil litigation, & administrative action 486
Indictments and informations on criminal referrals 42
Cases accepted for criminal prosecution 35
Cases accepted for civil action 5
Successful criminal prosecutions 31
Civil settlements 3
Contractors/individuals suspended and debarred 42
Employee actions taken on administrative referrals involving GSA employees 9
Civil settlements and court-ordered and investigative recoveries $218,496,507

Government Infrastructure Protection Initiative (GIPI).

The GSA’s Office of Investigations created GIPI to combat the proliferation of counterfeit information technology products in the federal supply chain by partnering with the Intellectual Property Rights Center operated by Immigration and Customs Enforcement. This semiannual period saw the sentencing of Stephanie McCloskey to 38 months of imprisonment, three years of supervised release, and the payment of $166,141.23 in restitution for selling counterfeit integrated circuits from China and Hong Kong to the U.S. Navy while she worked for VisionTech Components. A joint investigation led to a ten-count indictment for conspiracy, trafficking in counterfeit goods, and mail fraud. Agents also seized items purchased with the proceeds of the scheme, including bank account funds and luxury vehicles (page 10).

Civil Recoveries.
The GSA OIG has consolidated investigative efforts related to civil recoveries. Chief among the OIG’s civil recoveries this semiannual period was a $199.5 million payment by Oracle Corporation to settle qui tam allegations that it failed to disclose discounts offered to commercial customers when it sold software products to federal government agencies (page 10). Additionally, a federal judge entered a default judgment in the amount of over $6 million against C. Henderson Consulting, Inc., to settle allegations that the company falsely billed the government for ambulances it did not provide during the relief efforts following Hurricanes Katrina and Rita (page 11). Cable Express Technologies (CXtec) agreed to pay the United States $2 million to settle allegations that CXtec sold products to federal agencies that were manufactured in China, Taiwan, Indonesia, Malaysia or Thailand in violation of the Trade Agreements Act (page 11).

Criminal Investigations.
Darrell Hardie was found guilty of assaulting a GSA OIG federal agent after he used his vehicle to threaten the agent engaged in surveillance near Hardie’s residence (page 11). In October 2011, Eric Minor, a former GSA employee was sentenced to 30 months of incarceration and two years of supervised release, and ordered to pay $118,000 in restitution for his role in a bribery scheme involving GSA contracts that resulted in the conviction of 11 individuals. GSA OIG agents seized over $71,000 in cash from Minor’s home (page 11). Two others were indicted in a separate bribery/ kickback scheme to entice government purchase card holders to order office supplies from the defendants’ companies for greatly inflated prices (page 11). In December 2011, the former president of Red River Computer Company was sentenced to three years in federal prison and ordered to forfeit $431,949 dollars for defrauding the government (page 12). In February 2012, employees of Mid-America Payphone, Inc., pled guilty for their roles in programming pay phones to dial toll free numbers. By exploiting the Federal Communications Commission regulation that allows payphone service providers to collect $0.49 for every toll free call placed, the individuals defrauded the government, state agencies, and private businesses that owned the toll free numbers of at least $1.2 million (page 12). As a result of another such “dial-around compensation” scheme, Nicolaos Kantartzis, President of Federal Telephone Company, was ordered to pay a $20,000 fine and $2.6 million in restitution (page 12).

Suspension and Debarment.
During this reporting period, the OIG made 319 referrals for consideration of suspension or debarment to GSA, and GSA issued 142 suspension and debarment actions based on current and previous OIG referrals (page 13).