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Friday, October 2, 2015

Steve Kelman opens the floor for discussion of contract administration

As I have previously pointed out (e.g., here and here and at the tag "contract administration"), procurement is not just the solicitation phase. It fits a tractor/trailer analogy, where the solicitation phase simply gets the thing rolling, but the contract administration stage is what carries the load. Having one or the other, or a good tractor but rickety trailer, will not get the job done.

Steve Kelman blogs on the FCW website, which primarily focuses on IT procurement, but not exclusively; many of the principles discussed on the site have application more broadly. Concluding the article below, he writes:
I suspect the government's expertise in areas relevant to contract management varies widely; my intuition is that DOD weapons systems offices have relatively more expertise, as do those in GSA managing construction contracts, while in IT the picture is very mixed at best.

However, I am more and more feeling that we really need to get a discussion going in this important area. So with this blog I am announcing that I plan to stick with this issue, unless and until somebody persuades me my concerns are mistaken. And I would really like to ask blog readers, particularly those on the frontlines of the system who actually have to deal with mods and with judging contractor deliverables, to submit comments for publication in the blog's Reader Comments section with your views of the issue I am raising.
What an excellent idea, and I encourage my reader to do likewise, by joining his discussion via the link to his article presented below.  (Usual caveats, about how I tend to slice and dice articles presented, apply.)

To contract better, does government need more in-house experts?
For any major contract, contract modifications, known colloquially as "change orders" or "mods" are a way of life, and a staple of contract management. For longer-term contracts, the modified contract often ends up bearing only a small relationship to what originally was signed.

And the content of those modifications has a huge influence on a contract's success. For example, does the mod water down the original terms of the contract due to the contractor contending performance was impossible? How is the modification priced? (There is a widespread view, captured in the phrase "buy in and get well," that aggressive pricing during source selection is often counteracted by generously priced mods.)

A key competency of government procurement contracting officials should be proficiency in evaluating the product or service the contractor submits -- since problems in that area can often lead to major modifications. The procurement system's general bias toward the front end of the process -- source selection and (to an extent) acquisition strategy -- at the expense of back-end contract management, ties into the cultural predisposition to emphasize getting funds "out the door," compared to paying attention to what happens afterwards.

Recently many industrial companies have started buying major subsystems, or even finished manufactured products (especially IT hardware) from contractors. An IT hardware company buying subsystems, or a financial services company buying IT services, would never think of entrusting management of the relationship with their vendors to employees who were not subject-matter experts on what was being bought.

It is my impression that very little attention in writing or training about procurement is devoted to managing contract mods. What little there is, I would guess, centers on the bureaucratic and legal procedures for mods presented in Part 43 of the Federal Acquisition Regulation. And unlike, say Part 15 on source selection, Part 43 provides no specifics for how government folks should make decisions about the change order requests that contractors submit.

If government is going to do a good job contracting, it needs to move enough work in-house so that agency employees can develop sufficient subject-matter expertise. How could an IT hardware firm dealing with contract manufacturers designing and producing major subsystems get a good deal if their own in-house folks didn't have the knowledge to make good judgments about whether production delays were justified or not, whether specs needed to be loosened, or whether prices proposed by the vendor for changes the customer wanted were reasonable?

Yet my strong suspicion is that government officials dealing with contractors frequently lack these kinds of expertise. If true, it's a recipe for disaster. Successfully managing change orders (and evaluating the quality of contractor deliverables) may require some in-house "doer" work to get government folks sufficiently expert to manage.

I could be wrong and please correct me if I err, as I would love to know I'm mistaken on this.
It will be interesting to see how this unfolds.

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