Fools rush in where planners failed to go

Get a contracting plan in place early

For all the debate about the effectiveness of government contracting, the success or failure of programs involving government contracting is actually determined very early, often unfortunately before the contracting officer’s involvement—that is, during acquisition planning.

FAR’s Part 7 acquisition planning guidance provides a great roadmap to all the many considerations necessary before satisfying a government need via contract. The program office must take non-delegable responsibility to figure out what, why, when, where, and how they will obtain acquired resources to support their goals. This shouldn’t be another paperwork drill, completed by support contractors or the contracting officer and subsequently filed away.

Defending the FAR isn’t always popular, but it does provide clear, understandable guidance on what to consider in an AP, who to include, when key milestones should occur, and how to get there. Just about anything significant and reasonable should be considered and addressed during acquisition planning, along with any alternatives, well before requesting a contractor’s proposal. Later surprises should be few if the homework was completed beforehand. This homework includes open communication with industry to better understand the market, business trends, financing, and available technology; seeking out required expertise within the acquisition team; analyzing affected internal business processes or regulatory/policy mandates; collaborating closely with the requirements community; etc. The FAR even recommends periodically updating the AP to account for inevitable program changes.

So is acquisition planning one of those unnecessary, self-serving, bureaucratic, and burdensome requirements that slows the process and leads to poor outcomes?

The integrity, responsibility, quality, and length of acquisition planning must be part of any discussion to improve acquisition outcomes. Contracting solicitation and award processes (like most business) can go smoothly if planned well. But acquisition planning that only completes the file or occurs after the fact will result in less optimal program results. Good contracting managers are instrumental and must be included in this process, but ultimate responsibility lies with the agency, company executive, or program manager. Let’s develop the game plan before we take the field!

Far Part 7, Outline

7.000 Scope of part.
Subpart 7.1—Acquisition Plans
  7.101 Definitions.
  7.102 Policy.
  7.103 Agency-head responsibilities.
  7.104 General procedures.
  7.105 Contents of written acquisition plans.
  7.106 Additional requirements for major systems.
  7.107 Additional requirements for acquisitions involving bundling.
  7.108 Additional requirements for telecommuting.

Subpart 7.2—Planning for the Purchase of Supplies in Economic Quantities
  7.200 Scope of subpart.
  7.202 Policy.
  7.203 Solicitation provision.
  7.204 Responsibilities of contracting officers.

Subpart 7.3—Contractor Versus Government Performance
   7.301 Definitions.
  7.302 Policy.
  7.305 Solicitation provisions and contract clause.

Subpart 7.4—Equipment Lease or Purchase
  7.400 Scope of subpart.
  7.401 Acquisition considerations.
  7.402 Acquisition methods.
  7.403 General Services Administration assistance.
  7.404 Contract clause.

Subpart 7.5—Inherently Governmental Functions
  7.500 Scope of subpart.
  7.502 Applicability.
  7.503 Policy.

Excerpts:

  7.101 (a) Agencies shall perform acquisition planning and conduct market research (see Part 10) for all acquisitions in order to promote and provide for—
    (1) Acquisition of commercial items or, to the extent that commercial items suitable to meet the agency’s needs are not available, nondevelopmental items, to the maximum extent practicable ; and
    (2) Full and open competition or, when full and open competition is not required, to obtain competition to the maximum extent practicable, with due regard to the nature of the supplies or services to be acquired.

  7.103 The agency head or a designee shall prescribe procedures for—
  (b) Encouraging offerors to supply commercial items, or to the extent that commercial items suitable to meet the agency needs are not available, nondevelopmental items in response to agency solicitations; and
  (c) Ensuring that acquisition planners address the requirement to specify needs, develop specifications, and to solicit offers in such a manner to promote and provide for full and open competition with due regard to the nature of the supplies and services to be acquired.
  (d) Establishing criteria and thresholds at which increasingly greater detail and formality in the planning process is required as the acquisition becomes more complex and costly.
  (f) Ensuring that the principles of this subpart are used, as appropriate, for those acquisitions that do not require a written plan as well as for those that do.
  (l) Assuring that the contracting officer, prior to contracting, reviews:
    (1) The acquisition history of the supplies and services; and
    (2) A description of the supplies, including, when necessary for adequate description, a picture, drawing, diagram, or other graphic representation.
  (r) Ensuring that knowledge gained from prior acquisitions is used to further refine requirements and acquisition strategies. For services, greater use of performance-based acquisition methods should occur for follow-on acquisitions.
  (s) Ensuring that acquisition planners, to the maximum extent practicable—
    (1) Structure contract requirements to facilitate competition by and among small business concerns; and
    (2) Avoid unnecessary and unjustified bundling that precludes small business participation as contractors.

  7.104 (a) Acquisition planning should begin as soon as the agency need is identified, preferably well in advance of the fiscal year in which contract award or order placement is necessary. In developing the plan, the planner shall form a team consisting of all those who will be responsible for significant aspects of the acquisition, such as contracting, fiscal, legal, and technical personnel. If contract performance is to be in a designated operational area or supporting a diplomatic or consular mission, the planner shall also consider inclusion of the combatant commander or chief of mission, as appropriate. The planner should review previous plans for similar acquisitions and discuss them with the key personnel involved in those acquisitions. At key dates specified in the plan or whenever significant changes occur, and no less often than annually, the planner shall review the plan and, if appropriate, revise it.
   (b) Requirements and logistics personnel should avoid issuing requirements on an urgent basis or with unrealistic delivery or performance schedules, since it generally restricts competition and increases prices. Early in the planning process, the planner should consult with requirements and logistics personnel who determine type, quality, quantity, and delivery requirements.

India tells prospective contractors, "Let's Talk"

Govt bodies to give reasons for rejecting procurement tenders

The government awards public contracts worth lakhs of crores each year, but the process is fraught with delays as losing bidders often seek to stall their execution by filing vigilance complaints and mounting multiple legal challenges. Congress president Sonia Gandhi has identified public procurement as the biggest source of corruption along with the allocation of natural resources.

Finance Minister P Chidambaram had told Parliament in 2011 that even buying a pencil is a painstaking process in government. "Every time you go for procurement, on the day you are going to place the order, you will have a complaint on your table," he had said in his earlier avatar as home minister.

"It has been observed that there are many instances of a tender being rejected or tender documents not being issued and when the party enquires reasons, the same are not communicated," the procurement division in the expenditure department has said in a memo sent to government departments last month. "In such cases, the first round of litigation is to find out the reasons and the second round is to challenge the reasons," it noted.

The finance ministry has asked all government bodies to disclose the reasons for rejecting or excluding bidders from contracts awarded by them in order to bring more transparency into public procurement and avoid litigations from losing bidders.

Procurements made by the central government are currently regulated by the General Financial Rules of 2005, which only have the status of a subordinate legislation and are generic guidelines on government expenditure. Violations of these rules seldom attract penalties, noted a recent report on probity in India's public procurement by the United Nations Office on Drugs and Crime. The finance ministry has, however, pointed out that the rules clearly require that "every authority delegated with the financial powers of procuring goods in public interest" shall be responsible for bringing transparency in such procurements and ensuring "fair and equitable treatment of suppliers and promotion of competition." The rules also stipulate that suitable provisions be made in the bidding document "to enable a bidder to question the bidding conditions, process and/or rejection" of its bid. "The reasons for rejecting a tender or non-issuing a tender document to a prospective bidder must be disclosed where enquiries are made by the bidder," the finance ministry has said.

The ministry has pointed departments to a recent order on the issue by the Delhi High Court and said that importance of complying with it 'in letter and spirit cannot be over-emphasised.' Adjudging a case filed by a contractor who was not being issued tender documents by a government department, the court had said: "We have repeatedly emphasised in various orders that whenever a tender is rejected or tender documents are not issued and a party enquires reasons, it is necessary that the reasons be communicated to avoid unnecessary litigation...Despite this, the authorities persist in keeping silent over such representations, which we strongly deprecate."

In the US federal government contracting system, this is called "debriefing". It is a process that has been adopted in the last decade or so.

Contract Debriefings

Debriefings instill confidence in the contracting process by affirming that proposals were treated fairly. Statutory and regulatory changes to the debriefing rules better establish the debriefing as an offeror right that can reduce the number of protest filings, and strengthens the Government’s relationship with industry.

Debriefing means informing unsuccessful offerors of the basis of the selection decision and contract award. This information includes the Government’s evaluation of the significant weaknesses or deficiencies in the offeror’s proposal. Debriefings provide offerors to a competitive solicitation with an explanation of the evaluation process, an assessment of their proposal in relation to the evaluation criteria, a general understanding of the basis of the award decision, and the rationale for their exclusion from the competition.

Debriefings are different than notifications to unsuccessful offerors. The contracting officer must notify the offerors promptly in writing when their proposals are excluded from the competitive range or otherwise eliminated from the competition. See FAR 15.503for detailed coverage of notifications.

Legal and Practical Aspects of Debriefings: Adding Value to the Procurement Process (You may have to "trust" the site and click through a series of alerts. I do.)

Properly conducted, debriefings can greatly aid offerors, who can obtain insights for improving their proposals in future procurements. A skillfully performed debriefing also can ward off a potential protest by an unsuccessful offeror to the agency, the General Accounting Office (GAO), or the United States Court of Federal Claims whereby the agency allays the debriefed offeror’s concerns about possible prejudicial error in the evaluation or selection decision.

Poorly conducted, debriefings can decrease an offeror’s confidence in the agency’s evaluation practices, and can discourage that offeror from pursuing future business with that agency, thereby decreasing competition. A confusing or poorly executed debriefing also can spark a protest when the offeror was not otherwise so inclined. Most protests consume extensive agency resources in defending the procurement before the protest decision maker.5

In a debriefing, which can occur before or after contract award, agency representatives inform the offeror, commonly face to face, of the proposal’s weaknesses and deficiencies. The procuring agency in a postaward debriefing will further disclose limited information relating to the awardee’s proposal, such as the awardee’s overall evaluated cost or price, and the rationale for the source selection. The debriefed offeror either before or after award is entitled to receive certain other information, such as whether the agency followed the applicable source selection procedures. Debriefings are closely regulated by statute3 and the FAR,4 which identify appropriate topics for further discussion in this article.

Of course, the legal eagles do not warm easily to commercial realism, because they know how to make the worm turn.

Should government attorneys attend debriefings?

At the Nash & Cibinic Roundtable this past December 2 and 3 in Washington, DC, an issue came up that has bothered me for many years. The issue is the role of the government contract lawyer in the contracting process. Specifically, what role does the government contract lawyer play in debriefings of unsuccessful offerors? During a discussion of debriefings, one of the attendees identified herself as a government attorney and said that she always made a point of attending debriefings given by the contracting officers of her agency. I don't remember the entire comment, but the impression that I got was that she did so in order to ensure that all went well.

The comment made my contracting officer blood boil. I oppose the practice of having government lawyers attend debriefings. The main reason is that it sends the wrong signal to the company that is being debriefed. If I go to a meeting with someone who is unhappy with me and bring my lawyer, it sends a signal (whether accurate or not) that I expect trouble and feel the need to have a counselor present. Another reason is that I don't want any interruptions, interjections, note passing, whispering in my ear, or requests to caucus. Those things look bad. A debriefing is not supposed to be an interrogation, a negotiation, a debate, or an adversarial proceeding.

Of course, I am assuming that the CO is competent, that he or she understands the rules of the source selection process, understands how the source selection in question was conducted, knows the facts of the evaluation of the proposal in question, can explain the findings and conclusions of the evaluation team, and understands the basis for the source selection decision. If that is not the case, it raises the question of whether the CO should provide a face-to-face or telephonic debriefing. If the person responsible for the debriefing, the CO, cannot be trusted to do a good job, then perhaps a written debriefing, prepared or reviewed by an attorney, is the thing to do. But to send an incompetent CO into a debriefing armed with his or her lawyer does not strike me as a particularly intelligent course of action.

At one point during the Roundtable discussion, someone in the audience shouted out, "What if the offeror brings an attorney?" So what? As a CO, I asked offerors on more than one occasion if they had an attorney and, if so, would they please bring him or her to the debriefing. Why? I respect attorneys for their ability to think clearly and be dispassionate. An attorney is likely to recognize and acknowledge that a source selection was conducted properly even when their client is climbing the walls. If we did a good job and if I could explain the job that we did, then there was nothing to worry about. In my last source selection as a government CO, the loser filed a protest with the GAO right away. I called the protester, asked them to attend a debriefing, and asked them to bring their lawyer. They brought Professor Gilbert J. Ginsburg of The George Washington University Law School, a renowned government contracts expert. At the debriefing I handed them a copy of our request for proposals, a copy of their proposal, our complete source selection file for their proposal, including the write-ups by the individual evaluators and the scores, and told them to go through the material and to ask any questions they had. I left them in the conference room. They called me about an hour later, thanked me, and said goodbye. The next day I received a copy of their communication with the GAO withdrawing their protest.

Would I meet with my attorney before a debriefing? Not unless I had a legal question. As a CO, I would not need advice about what to say and what not to say. I believe in full disclosure debriefings. I believe in giving the loser everything. If a protest is filed, the protester?s lawyer is going to get everything anyway, including the proposals of the other offerors, so why withhold? While as a CO I cannot release the proposals of the other offerors, I see no reason to withhold anything else. if we made a mistake I would rather be told and be given a chance to take corrective action before a protest is filed. Full disclosure shows no fear.

Don't take this as dislike of attorneys. I work with them all the time and both like and admire most of the ones I meet. I have deep respect for the profession, which I consider to be admirable. But as I see it they and the CO have different roles to play in acquisition. If the attorney reviewed the source selection decision and found it to be legally sufficient, then he or she has played their part. Debriefing the losers is the CO?s role. If the CO is competent, then he or she will not need an attorney's services during the debriefings. If the CO is not competent, then a face-to-face or telephonic debriefing should be avoided at all costs. Having an attorney present will not make things go better.

U. of I.'s C. of I.

When it comes down to conflicts of interests, in regimes with fairly effective enforcement regimes, the most critical element is the appearance of impropriety. To avoid the build up of distrust in the integrity of the system, not only must actual conflict be dealt with, but as important, the appearance of favoritism.

'Conflicted' contract may be rebid

Under pressure from state authorities, the University of Illinois plans to rebid a multimillion-dollar contract with BLDD Architects of Champaign because of concerns about a potential conflict of interest, Chancellor Phyllis Wise said Monday. "I don't think there was a conflict of interest," Wise told The News-Gazette on Monday.

But she added, "We will rebid it (the contract). And it will cause a significant delay in the renovation of the Natural History Building, but it probably is wise to rebid it."

At issue: Jill Maxey, UI associate director of planning in Facilities and Services, who supervises some aspects of campus construction projects, is married to Bruce Maxey, who works at BLDD and owns a 8.9 percent share of the firm. Jill Maxey is also a former BLDD employee.

The Natural History Building was initially scheduled to reopen by fall 2015, but that's already been pushed back to winter break of 2015, and any further delays mean the building wouldn't be available until the summer of 2016. The total cost of a 12-month delay would top $1.1 million, the university said.

BLDD disclosed the relationship, as required under state law. And the state's chief procurement officer for higher education, Ben Bagby, last month refused to void the contract, saying he found no evidence that the potential conflict resulted in any improper actions, documents show.

A state law that took effect in July 2010 requires that when a potential conflict of interest is identified or "reasonably suspected," the state chief procurement officer must send the contract to the Procurement Policy Board. The board then recommends whether to allow or void the contract or bid offer, "weighing the best interest of the state of Illinois."

UI officials made a determination in 2010 that notification wasn't required under its interpretation of the new law, according to testimony from a hearing in May prompted by the procurement board's vote.

Assistant Vice President Maxine Sandretto, the UI's state purchasing officer, saw the potential conflict as a "serious concern given the close relationship involved," emails show. But she consulted with the UI's legal department, which advised that the statute didn't apply to Maxey because she did not meet the salary threshold in the state procurement code.

The UI also argued that it had an internal procedure in place to prevent a conflict, as Facilities and Services had set up an informal "firewall" to remove Maxey from the decision-making process if BLDD bid on a project. Therefore, they argued, no potential conflict existed.

But the procurement board said documents and testimony from the hearing revealed several "breaches" in that firewall. Maxey recused herself once BLDD bid on the Natural History project but was later copied on several emails about the scope of the project, before a firm had been chosen.

Also, the employee that Maxey assigned the project to, Anthony Battaglia, testified that he had connections to the firm, playing in a band with some BLDD employees. His wife's brother-in-law works at the firm, documents show. Battaglia testified that he removed himself from the process after the four finalists were chosen.

Bagby conceded in his decision that the university's efforts at the firewall were "weak," adding, "The process was simply lacking." And he said the UI should have submitted the contract for review before it was signed.

Panel again votes to void U. of I. contract over conflict of interest

The two firms that had the second- and third-highest scores during the selection process both agreed to continue what BLDD started with little or no delays, records show.

An official with the firm that came in second place, Chicago-based BauerLatoza, said Tuesday she is glad the contract is getting another look. The firm fell a fraction of a percentage point below BLDD when 34 companies submitted bids in 2010. It told the procurement board that it would take two weeks and no additional costs to get caught up to speed with BLDD's design plans.

"I would like to think we could do something with those two firms that were so closely ranked that would avoid a complete and total rebid," said procurement board member Bill Black, a former Republican state representative from Danville. "I don't want to see this project delayed nine, 10 months, and I don't think we have to."

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.

Scoring integrity

Prefacing the following article by Honolulu Civil Beat, I'd note that Guam is not mentioned in the study by State Integrity org, nor any US Territory, which is a frightful shame. We'd all be interested, and we're all part of the US communal body.

Is the Public Procurement Process in Hawaii Effective?

The state got a B+, or 88 percent score for Procurement. Hawaii tied for 12th place with four other states: Rhode Island, California, Indiana and Tennessee. Iowa came in first while Maryland was last.

Hawaii scored a 100 percents for having laws addressing conflict of interest and competitive bidding. But Hawaii got a 0 percent for not having any prohibitions against sole sourcing or no-bid contracts.

Overall, the State Integrity Investigation ranked Hawaii 10th after Civil Beat reporters researched 330 “Corruption Risk Indicators” across 14 categories of government. (Click here to learn more about the methodology used for the project.)

Bottom line: This is another area in state government where what's written in the law doesn't always match what happens in reality on the ground. Every "in practice" score in this category scored a 50 percent or less.

The rest of the story, in great detail you will have to read, answers, or at least addresses the question, Is the Public Procurement Process Effective? It is full of useful tips for evaluating your own jurisdiction's procurement "integrity". Indeed, the State Integrity website contains a clickable page to look at the 50 states.

The Honolulu Civil Beat says it intends to print a different question each day, and the criteria used to come up with a score for each question. I hope I can remember to follow along. And I hope you follow again as well.

Antidote to impulse shopping

We have all been impulsive shoppers. You are bombarded every day every where to increase your reflexivity to impulsive shopping ads and opportunities. The reflex is so often repeated that it becomes habit. Impulsive shopping is habit forming. And the marketing people with a bunch of stuff to move know that and love you for it.

If there is an opposite word for "impulsive shopping", it is procurement. If you engaged in procurement rather than impulsive shopping, your retirement stash would be a whole lot bigger than it is. And if governments diligently, objectively, fairly, transparently and professionally paid heed, our taxes would go a long way further. And, perhaps even, decrease the rot of influence that corrupts governance, if that's not too much to hope for.

Procurement is a process, not a whim, an antidote to impulse shopping disease.

That is my take-away from reading an excellent skeletal outline of the procurement process. Note that this article discusses US federal procurement, so specifics will vary with jurisdictions. But it illustrates the essential road markers.

The article is actually a blog post by Lindley Ashline, and one of many similar posts shes done: lindleyashline's blog. I've provided the skeleton. Click the link and read her post for the meat.

Note, this article is about the "source selection" process. That is, it is focused on the buying process. One thing impulse buying marketers do is rush you past the antecedent decision making process: do I really need this? What exactly do I need? Given multiple and alternative needs, what priority do I give this with respect to other demands for my money (and time)?

A hallmark of impulsive buying is the untested assumption you have a need, and more to the point, a need for this particular item, right now, above all others. Before you ever even begin to consider the "how" question, engage in a rigorous discussion with yourself about "why" and "what" and "when" questions.

First Year in Contracting: The Procurement Process

1. Determine the Required Resources.
2. Assign a Program Manager and Contracting Officer.
3. Develop an Acquisition Strategy.
4. Develop an Acquisition Plan.
5. Develop a Plan of Action and Milestones.
6. Obtain Approval and Funding.
7. Establish the Source Selection Authority.
8. Develop the Final Statement of Work.
9. Conduct Market Research.
10. Finalize the RFP.
11. Send Out Draft Documents.
12. Conduct Bidders' Conference.
13. Review Requested SOW Changes.
14. Review and Approve Final RFP
15. Release RFP
16. Finalize the Source Selection Plan.
17. Answer Contractor Questions.
18. Finalize Source Selection Approach.
19. Receive Company Proposals and Begin Evaluation.
20. Receive Company Responses to Clarifications and Deficiencies.
21. Evaluate Companies’ Price Proposals.
22. Initiate Audits.
23. Make Competitive Range Determination.
24. Conduct Live Test Demonstrations.
26. Prepare for Discussions with Companies.
27. Call for Best and Final Offers.
28. Negotiate Final Contract.
29. Make Contract Award.
30. Ramp up Contract.
31. Perform Contract.
32. Close out Contract.

Can you cut corners, you ask, or make exceptions?

Sure, unless someone has a gun to your head.

But let me ask, at what point did your last diet fail?

~~~~~~~~~~~~
And now, something new for this blog, and likely not to be repeated. Bound to offend someone, probably someone who hates a bad joke, but others as well, maybe. I was led to this by an odd "search" result on my blog that searched for "procurement act jokes". I tried the search myself, not expecting much there, and found exactly that.

But, in the spirit of the (intended) message this post, I did find the following procurement joke(s) here:

4. Why is it better to have a woman as the buyer? Because a male buyer will pay $2 for a $1 item he needs.

5. Why is it better to have a man as the buyer? Because a female buyer will pay $1 for a $2 item she doesn’t need but is on sale.

"A case of no one asking the question of where the money went"

From Singapore:

How did 9 men con $1.2m despite rules and safeguards?

Finance Minister Tharman Shanmugaratnam told Parliament in November last year that the root cause was human error and not the public sector procurement guidelines and rules, which were fundamentally sound, reported The Business Times. "There was human failure first in supervision, and second in audit," Mr Tharman had said.

And good supervision requires not just knowing the rules and procedures, but also continual vigilance.

Nine men, one government agency and a cool $12.2 million.

At the centre of it all were Koh Seah Wee, 41, and Lim Chai Meng, 38, who ran rings around the rules meant to safeguard the IT procurement system at the Singapore Land Authority (SLA).

an SLA spokesman said detection was difficult as the fraudulent transactions were supported by "invoices" from "vendors" who were conspiring business entities, and approvals were given by Koh, the authorised officer in line with approved procurement procedures then. In all, 282 contracts were awarded to 11 "vendors", which were shell companies operated by their accomplices.

Such scams can be difficult to ferret out, said Associate Professor Mak Yuen Teen, a corporate governance expert at the National University of Singapore (NUS) Business School. "When there is collusion, it is a bit more difficult to uncover such fraud," he told The New Paper.

He said that although this case involved significant IT software-related procurement, "which is more difficult to verify receipt of goods compared to physical equipment, I think this is a case of no one asking the question of where the money went to".

In passing sentence, Justice Tay Yong Kwang said that organisations may put in place the best systems. But if those entrusted with operating the systems, especially those at the higher levels, choose to be dishonest, fraud can still happen.

Since the offences were uncovered, measures have been taken to strengthen internal controls, systems and offences, an Intellectual Property of Singapore (Ipos) spokesman told The New Paper yesterday.

"These (measures) include strengthening internal audit structures and processes, centralising the procurement process, and ensuring that the purchasing officer and the receiving officer (who verifies the receipt of goods and services) are different individuals," said the spokesman.

Procurement controversies -- Cayman Islands

Miller asks AG for names

The former chair of PAC said he is concerned that without a Public Accounts Committee in place the recent damning report by the auditor general will not get the attention it deserves.

That "damning report", from the Office of the Auditor General of the Cayman Islands, is here. It is, by its own admission, quite general in a top down sort of way, but promises more detail subsequently. A few excerpts arbitrarily chosen follow:

Management of Government Procurement 5 July 2011

Procurement is a key administrative function in a typical public sector organization that is as important in how it is managed as, for example, the finance, personnel and information technology functions. Procurement is normally carried out by officers who are highly trained individuals that have qualifications and specialized experience in the field of procurement.

The Financial Regulations were amended in 2007 so that the procurement regulations extended to all government entities including statutory authorities and government companies.

Procurement is not a clearly identifiable function in the Government. We were not able to find any individual at the centre of government or in the entities we visited during our audit that was responsible for managing the procurement function. Some senior managers claimed responsibility for managing certain aspects of the procurement process, but no one we interviewed felt it was their responsibility to establish and implement procurement policies and procedures for use throughout the Government or even in their entity and various departments.

As there is no individual or group responsible for government procurement, no assurance is being provided to the Legislative Assembly that the laws and regulations pertaining to procurement are being followed. In the absence of such an individual or group, Legislators must rely on all entities to not only individually develop, implement and operate good procurement principles and practices in
their respective organizations, but also rely on the individuals involved in the performance of the procurement functions to abide by these practices.

Recommendation #1: The Government should appoint someone as a Chief Procurement Officer who would be accountable for the overall development, management and reporting on the Government’s procurement activities. The reporting relationships for this individual would depend on the organization chosen by the Government to implement this crucial function.

Recommendation #2: The Government should develop policies, procedures and practices for procurement of supplies, services and assets that would ensure clear direction to officials.

We found that the Government does not have good information about its procurement activities. For example, we found that there is no information about how much business is done with one vendor across the Government. We would expect the Government to have good procurement information as part of a management framework for this function. Government entities are effectively working in silos with little or no information sharing between organizations which can potentially lead to a lack of information on supplier capability and availability.

Centralized and up-to-date source lists of individuals and firms, local and overseas, that do business with the Government do not exist and need to be developed and maintained to ensure consistency, economy, effectiveness and fairness in procuring best value.

For example, a construction company that was unsuccessful on one of the Government’s largest recent building projects when it had been found to be unqualified ended up as the contractor for another significant project without management knowing what had previously happened. Unfortunately, the contractor ended up being terminated before the project was complete which resulted in several million dollars in extra costs.

We found that procurement throughout the Government is generally being carried out by officials with little or no expertise to conduct the work required of them, or with little available advice on how to perform their day to day procurement management activities. Notwithstanding the expertise currently available in entities where there is significant procurement activity, such as Public Works, our interviews with several entities indicated that most individuals involved in purchasing supplies and services for their organizations do not possess the level of expertise one should expect to find in public sector procurement groups. As a result, it is not possible for these organizations to realize the benefits of procurement efficiency and effectiveness that would be associated with having highly skilled and knowledgeable procurement staff.

We were informed that approximately three years ago, there was a conference held by the Government to discuss good procurement practices and that it was attended by a number of senior government officials. Out of that conference, we were told that the Government implemented a formal training program at UCCI for the development of procurement officers in the Government. However we were informed that the program has had little take up and is not coordinated with any plan to develop additional procurement capability in the Government.

Recommendation #4: The Government should develop and implement a plan to develop the
expertise necessary for an effective procurement function both centrally and in the entities.

The Cayman Islands Government does not have fundamental principles for its management of procurement that would form the basis for the development of a management framework. These would, for example, include:
• value-for-money;
• open and effective competition;
• probity and ethical behaviour
Principles become the basis for the development of directives and guidance for how public servants should act and conduct their business. Without this kind of guidance, more direction cannot be developed.

We found no evidence of policies that covered all aspects of the procurement process. Other than a broad set of rules established in the Financial Regulations regarding preference to local suppliers and tendering for requirements over $50,000 and CTC guidelines for tenders over $250,000, the Government’s laws, regulations and policies are insufficiently detailed to provide the necessary guidance for how procurement should be conducted.

The development and use of standard procurement documents also plays a significant role in providing transparency and efficiency in the procurement process. Standard procurement forms ensure that the language used is simple and consistent; they eliminate redundancies and contradictions; and they present a common look and feel for suppliers doing business with Government. While they may not be appropriate for complex, one-time or innovative requirements which may need considerable research and drafting of specific terms and conditions, clauses or schedules, they are an important in ensuring efficient and effective procurement.

Standard form contracts are useful for the consistency, predictability and efficiency of contract development as well as other aspects of contracting such as finalizing the contract and its later management. There are benefits for staff that become familiar with their content and the way they operate and/or undertake training in regard to the use of the standard form. It is good practice to have standard form contracts when entities have common, ongoing contracting requirements.

There are no procedures in place to ensure that contracts are legal. We have found that in the absence of contract policies and procedures and without the benefit of using standard contract forms, there is no assurance that contracts contain the necessary clauses and conditions one would expect to find in legally binding contracts. This is particularly important in high value, high risk contracts to ensure the Government’s interests are protected and that there is compliance with Cayman Island laws and policies. Legal advice should be sought early in the planning stage of the procurement process, particularly for the high risk, complex, or strategic procurements. Specific documentation may need to be developed, including a draft contract if necessary, to accompany procurement documents. Legal advisors should be involved in developing standard contract templates and also be consulted, when necessary, on development of business cases for particular procurements.

There are no procedures in place to ensure due diligence is undertaken of potential suppliers, either at the tendering or contracting stages. Suppliers must be held accountable for representations submitted in their offers and proposals in response to requests for tenders or quotes. Appropriate wording should be used in contracts to ensure that these assertions are formally acknowledged by the supplier and represent accurate and truthful statements. Project authorities, or their authorized representatives, in entities must be thorough in ensuring that deliverables of supplies or services are in strict accordance with contract terms and conditions. Contractors should be officially notified without delay in situations where there are concerns that contract expectations have not been met.

There is no formally documented appeal process for bidders to the tendering process and suppliers providing supplies and services to the Government. Arrangements should be in place that describe to whom and where a complaint should be addressed as well as the entity’s procedures for responding to the complaints. In cases where the supplier is not satisfied with an entity’s official response, it may be appropriate for an independent review to be conducted. All entities should have a process in place to deal with these situations to avoid the perception of unethical and nontransparent behaviour in the procurement process by suppliers and the general public.

While internal audit has done some limited work on procurement activities in the past, they have no intention at this time to audit these activities in the near future. Reporting to senior management on the effectiveness of its operations is a key component of the accountability framework to ensure the economy, efficiency and effectiveness of government programs or, in other words, due regard for value-for-money. there is no government-wide regularized internal audit program for procurement activities.

Recommendation #10: Because of the significant risks and lack of controls identified with the management of the procurement function in the Government, we strongly urge that a compliance audit regime be implemented to conduct a rigorous review of government procurement.

There is much more. As I said, this is an arbitrary selection of excerpts, but I imagine they would be salient issues for anyone anywhere reviewing their own procurement regimes.

Guam scores relatively well on the factors mentioned, but could use some refresher courses, too.

Kenya cites need for procurement training

Train staff on procurement

The revelation that many government officials are ignorant of laws that govern public procurement is a matter of grave concern. Over 70 per cent of the government recurrent budget is spent on procurement, so it is worrying how such personnel will be of help to our usually cash-strapped ministries and agencies.

This situation calls for measures to ensure senior government officials are schooled on the correct procedures of purchasing goods and services. The taxpayers want to see goods delivered, health services provided, classrooms built, water reliably availed and within budget and in required quantities and quality.

It is important that staff tasked to oversee public procurement cultivate the culture of honesty and avoid conflicts of interest. We expect them to refrain from using their positions for their own gain or that of their associates.

Short of that, we have cases where procurement officers inflate prices of goods and services, which is the same thing as robbing the government or indeed, the taxpayer.

Procurement provides ethical challenges because decisions and choices that the relevant officers make affect the entire public sector. In public procurement, the value for money entails more than just getting the best price – ethics are of great importance as well.

Reports that there is little understanding of procurement procedures among many of our public officials should be addressed as a matter of utmost urgency.

European review of procurement

Public Procurement: Quo vadis?

The Academy of European Law’s Annual Conference on European Public Procurement Law cast a glance at the latest developments in the field.

Keynote speaker Savvas Papasavvas, Judge at the General Court of the European Union, addressed European public procurement rules from the Court’s perspective. He pointed out that due to the number and complexity of cases the average duration a public procurement case at the Court was 33 months. He emphasized the Court’s concern with public procurement and its attempt to handle cases in the most efficient way.

The current law and future challenges in e-procurement, which will also be addressed by the Commission in a green paper in the coming weeks, was highlighted by Michael Varney, Deputy Director of the Institute of European Public Law at the University of Hull.

Hinting at the benefits of public procurement, Mr. Varney said that e-procurement offered the potential to integrate the whole procurement process – from initial notices to electronic payments – electronically. E-procurement not only offers the potential to access a wider range of bidders throughout the EU, he said, but it also reduces transaction and research costs.

Furthermore, said Mr Varney, the benefit of time savings should not be underestimated.

The challenge for wider implementation of e-procurement, however, will be the use of standardized non-discriminatory and interoperable technology.

Why not run government like business?

What if we ran our governments like businesses? You know, user pays, profit value above social value. Economy of scaling out over scaling in.

Well, there are limits to that idea, obviously. It would be like applying the rules of business to art. The business bottom line is not society's bottom line. At some point quantity and quality diverge, and that is for the people to decide, in a democracy.

So far, anyway, we tend to strive for a democratic form of capitalism, where public matters are decided on a principle of one person, one vote; not one dollar one vote.

But in the UK, the government hired a very successful business person to have a look at how government conducts its business. And I think it is a very good idea to see how the other half does things where that can lead to improvements. But not all efficiencies are necessarily improvements, in different contexts. Which is not to say that inefficiency is a valuable goal of either government or business.

See, Is the economy of scale tipped against policy of competition?

And, government and big business are different contexts, let us not forget.

Philip Green: Govt procurement 'wasteful'

Sir Philip Green, the billionaire owner of Topshop and other clothing chains, was commissioned by prime minister David Cameron to carry out a review of spending to establish how better value for money can be obtained for taxpayers.

In his report, he claims that the government is not making the most of its size and credit rating to get the best deals from suppliers.

"The conclusion of this review is clear - credit rating and scale in virtually every department has not been used to make government spending efficient.

"There is no reason why government should not be as efficient as any good business."

Piles of waste in the minefield of public procurement

The UK has a tradition of doing everything strictly by the EU’s rules which means that the time from announcing a tender to awarding the contract can be rather long. It can also lead to complaints from those bidding for government work. They say there’s been a trend to “salami slicing” the contracts into far too small and thus wasteful portions.

As evidence of the government’s poor procurement, the document claims to have found an unnamed IT contract which still has six years left to run with no option to amend or end it. In Green’s eyes, the whole method of buying both hardware and software is of poor quality “with no provision in the contract to reduce the annual amount payable should the work not be required”.

Certainly, the figures Sir Philip found make interesting reading. His report points out that taxpayers paid out £38 million for a remarkable 400,000 hotel nights in London last year. He suggests that Government departments look at video conferencing instead, at least for some of their work.

He also says it’s been hard to get basic information. He says he was first told that transport cost £2 billion. When he queried this, a second estimate put it at £500 million and then a third came out at £768 million. The actual figure was £551 million.

He’s questioned the government’s management of property, currently costing £25 billion a year. The report describes how one agency had located from London to the Midlands. The agency has now been abolished but the contract left the state with a decades-long financial legacy. It had agreed a 20-year lease guaranteed for 15 years, leaving £18 million to pay in rent with no opt-out clause.

There are also clear signs of uncoordinated spending. Printing costs for instance varied wildly, with one department spending £1.31 a leaflet, compared with a market price of 26p. He found examples of departments paying anything between £8 and £73 for a box of paper and between £86 and £396 for printer cartridges. The prices paid for laptops varied from £353 to £2,000.

So he wants to see a centralised body to take responsibility for procurement of all kinds. He particularly wants much better control over the more expensive contracts, recommending an audit of everything with more than £100m of remaining value.

His report says that inefficiencies within government are there because “there is no process for setting and challenging detailed departmental budgets.” adding that: “Government acts as a series of independent departments rather than as one organisation.”

Telecommunications come in for particular criticism. He says that departments purchase telecoms separately from a range of different suppliers. A recent estimate claims that total government spending on phones is more than £2bn per annum, a figures he says “could be 30-40 percent cheaper” if the government bought its own capacity.

The report suggests that there is no standard specification across departments, adding that the government does not “leverage its buying power, nor does it follow best practices”. Amongst his recommendations include setting up a team of three to four individuals with financial and commercial expertise to review departmental spending “with an emphasis on efficiency and accountability”.

Personally, I think most of the observations made are quite valid issues, deserving of betterment. I simply caution against a blinkered profit motive business model for the delivery of government services. Democracy is a cumbersome process, and democratic capitalism an expensive one. It is a question of balance and fine tuning to get the proportions about right.

One of the debates that is consistent with and reflective of this concern is the one concerning which functions of the government are "core" or "inherent" or "governmental", as often discussed in this blawg. (See/click the Label, "governmental function".)

So government contracts underwrite wage and safety violations?

The United States Government Accountability Office has some evidence suggesting that's quite likely the case in many contracts.

What GAO Found

The federal government awarded contracts to companies that previously had been cited for violating wage regulations enforced by WHD and health and safety regulations enforced by OSHA.

GAO investigated 15 federal contractors cited for violating federal labor laws enforced by WHD, OSHA, and NLRB. The federal government awarded these 15 federal contractors over $6 billion in government contract obligations during fiscal year 2009. Several of these companies also had other types of violations, such as hiring undocumented workers, violating environmental standards, and fraudulently billing Medicare and Medicaid.

GAO did not evaluate whether federal agencies considered or should have considered these violations in the awarding of federal contracts, thus no conclusions on that topic can be drawn from this analysis.

Of the 50 largest WHD wage assessments during fiscal years 2005 through 2009, 25 wage assessments were made against 20 companies that received federal contracts in fiscal year 2009. From GAO’s analysis of OSHA data, GAO also found that 8 of the 50 largest workplace health and safety penalties assessed during the same time frame of fiscal years 2005 through 2009 were assessed against 7 other companies that received federal contracts in fiscal year 2009.

Because OSHA and WHD databases do not contain Data Universal Numbering System numbers, GAO’s analysis was limited to the 50 largest WHD assessments and OSHA penalties, which GAO manually searched. Because of this, the full extent of the federal government’s contracts awarded to companies cited for labor violations is not known.

Failing to Protect Your Employees? Here’s Your Federal Contract.

A new GAO report shows that the government awarded contracts to firms after they were cited for violations or fined by the Occupational Safety and Health Administration (OSHA) and the Wage and Hour Division (WHD), the federal agency responsible for worker rights issues like back wages and child labor.

Some of the contractors GAO reviewed are receiving the big bucks. In FY 2009 alone, the USDA, Pentagon, and Department of Justice awarded about $500 million to a food supplier that had been cited by OSHA more than 100 times since 2005. WHD and a federal jury found that the same supplier had failed to properly pay its workers.

The report reveals the perils of poor information sharing within government. You have some labor law violation data over here and contractor award data over there, but agencies are not making the proper connections – and that leaves, in this case, workers at risk. (The GAO report also showed that some of the scofflaw contractors violated other laws, including environmental laws.) Nor can the public use available data to link contractors to their labor or environmental records.

Even GAO, the government’s official auditor, ran into trouble: “GAO’s analysis was limited to the 50 largest [Wage and Hour Division] assessments and OSHA penalties, which GAO manually searched. Because of this, the full extent of the federal government’s contracts awarded to companies cited for labor violations is not known.”

The White House is aware that unscrupulous employers are making off with mountains of taxpayer dollars, and Vice President Biden appears to be developing a so-called High Road contracting policy. Thus far, the White House has focused its ire on employers who don’t pay fair wages and don’t provide adequate benefits.

But, as the Center for American Progress and others have argued, a High Road contracting policy also ought to limit, or even ban, contracting dollars for occupational safety and health violators, polluters in violation of environmental laws, food facilities or product manufacturers that put consumers at risk, and tax cheats. Bottom line: Taxpayer dollars shouldn’t be used to subsidize illegal behavior, especially behavior that puts those same taxpayers in harm’s way.

Pakistan promotes procurement principles

Relaxation in bidding rules for power plants disallowed The government on Thursday refused to allow the water and power ministry to violate the public procurement and transparency rules in the name of setting up fast-track power plants, plugging in any possible avenue of kickbacks in establishing these projects.

The Economic Coordination Committee (ECC) of the cabinet approved only in principle the idea of setting up fast-track power plants to generate 5,000 megawatts of electricity during 2011-12. In a welcome move, it linked the proposal with a broader policy framework that puts emphasis on transparency and adherence to public procurement rules.

“Transparency will be ensured at all costs,” Finance Secretary Salman Siddique told reporters in a briefing on the ECC meeting, which was chaired by Finance Minister Dr Hafeez Shaikh.

“The principle of propriety and the parameters laid down in the General Finance Rules and Public Procurement Rules such as transparency, competitiveness, most economical and cost-effective would be met before setting up any plant,” he added.

The ministry wanted the ECC to relax the international competitive bidding procedure so that it could negotiate “deals” with investors on its own terms and conditions. The ECC’s decision would compel the ministry to adhere to transparency.

The virtues of protest actions

The virtues of protest actions

I AM concerned to read the speculation that legislation is being considered which would exempt the finance portion of a finance/design/build/operate RFP or bid from any protest.

The article titled “Bond snag stalls JFK project,” published in the July 13 issue of Marianas Variety quotes an unidentified source as saying once an award is made, the winner’s “books are open,” and other bidders “can go in and inspect all the documents.” Evidently the aim is to prevent any such scrutiny by exempting any protest over the financing aspects of the award process.

Exemption is absolutely the worst way to maintain the integrity of the procurement system. And, for some reason, it seems to always be the knee- jerk first choice. But there would seem to be a better method to deal with the current perceived problem that does not undermine the integrity of the procurement process.

The protest procedure is there to scrutinize the procurement process, to make sure it functions according to law, not to hide it from view. Exemptions allow, indeed encourage, dirt to be swept under the rug.

Official commentary in ABA Model Procurement Code § 9-101 notes, “It is essential that bidders, offerors and contractors have confidence in the procedures for soliciting and awarding contracts. This can best be assured by allowing an aggrieved person to protest the solicitation, award, or related decision."

Exemptions that deny protests fail at this essential requirement.

The textbook, “Service Contracting, A Local Government Guide,” published by the International City/County Management Association, says, "Protests are the safety valve of public procurement.... Failure to address seriously every protest received can damage the integrity of the local government's bidding process.”

The Asian Development Bank, in its 2006 Guide, Curbing Corruption in Public Procurement in Asia and the Pacific, also emphasizes the critical role of an adequate review process: “Sound procedures and honest staff, while essential, are not sufficient to contain corruption in public procurement. Effective and swift review of major procurement decisions in response to complaints from aggrieved bidders is just as important in a procurement system that is well protected against corruption.”

The ADB report continues, “Complaint and review mechanisms fulfill two functions in curbing corruption. They allow involved bidders and the public to verify the conformity of individual decisions with the established rules and bolster trust in the fairness of the procedures. Sound verification procedures also have an important preventive role: the possibility that decisions can be overturned renders corrupt practices more difficult and therefore constitutes, together with credible sanctions, a strong incentive to respect the procedures.

All of these authorities are uniform in their insistence on availability of procedures to scrutinize the bid process. You do not improve the procurement system by creating exemptions to protest mechanisms.

The idea behind the apparent new legislative proposal seems to be that the only way to get an unqualified bond opinion is to make sure that there is no protest overhang when the award winner goes to market for the financing.

This can be assured, however, without throwing a cloak of secrecy over the bid process. Indeed, it would require the opposite. It would shine a light on the process before the award is made to smoke out any protestable issues before the award is finalized.

Under the RFP procurement process which was used for the JFK project, the information in a proposal cannot be disclosed until after the award is made. But everyone knows that the award is intended to be made to a particular offeror. This is where the problem lies, and this is where the solution should be sought.

I would propose that, in the RFP process, once the government has determined which offeror it intends to award, it must give notice of intent to award, but not actually award the contract until it has disclosed the full procurement record, including the terms of the intended proposal. The time for bringing a protest action based on the known procurement record would then begin to run.

If no protest or appeal is brought within the filing period, the award can then be made and the awarded contractor can then go to market for bonding without fear of protest based on the procurement record.

If, however, there is a protest, it can – and should – be dealt with. There should be no immunity for engaging in improper procurement actions.

COMMENT: Obviously, I'd have to wholly agree with this editorial letter. (See the linked site to understand why.)

A view of Hawaii's "procurement mess" sounds an awful lot like Guam's

I begin this post with the reminder that Guam and Hawaii have adopted the ABA Model Procurement as the framework for their respective procurement regimes. It's also useful remembering that a central purpose of this blog is to point out some almost universal issues of procurement, so none of us take this too personally.

Seriously, yes. Personally, no.

State procurement squanders cash and delays services By Dennis Hollier

One expert with strong views on Hawaii’s procurement mess is Terry Thomason, education chair of the Hawaii Procurement Institute, and an attorney specializing in public contracts at the law firm of Alston Hunt Floyd & Ing.

Thomason divides Hawaii’s procurement troubles into three categories.

There are a few “bad eggs,” he acknowledges, officials like the state’s former chief elections officer who operate in bad faith.

The second kind of procurement problem, and more common, Thomason says, is like the airport official, “kind of a slow thinker – they don’t know how to do it correctly, so they give out periodic payments. But 99 percent of these are honest mistakes.”

However, according to Thomason, the greatest cost to taxpayers is the third category: the state’s piecemeal approach to contracting. "For instance, you will see DOE projects for schools that include individual contracts for roofing, plumbing, painting, etc. Often, these requirements are at the same school or schools in the same area. All of those contracts were competed separately through the entire solicitation process."

What’s more, Hawaii’s slow, incremental approach to procurement may cost the state federal money. The state’s procurement system simply can’t get contracts out the door quickly enough.

There’s no sign, though, that the state is prepared to make changes.

To begin with, the understaffed State Procurement Office (SPO), which should be the center for innovation and reform, has a very narrow definition of procurement.

State procurement officer Aaron Fujioka likes to point out that procurement technically takes place in a very short window, usually 30 to 90 days. Strictly speaking, he says, procurement is simply the process of announcing an invitation for bids or a request for proposals, the steps used to select among bidders, and the rules for identifying winning bids.

For instance, he says, the beginning of the process – writing accurate and unambiguous requests for proposals – is outside the scope of procurement. That’s planning. Likewise, making sure contractors fulfill their obligations in a timely manner is not procurement. That’s project management.

Many experts believe the SPO should take a more expansive view of procurement. State auditor Marion Higa argues that, because of the principles involved – creating a level playing field for contractors and getting good value for the taxpayers’ dollars – procurement should extend down to the departments and agencies writing RFPs.

“He (Fujioka) is correct in that it’s not within his jurisdiction, per se; but as SPO, shouldn’t he also be promoting that the key here is how you spec out your acquisition?”

Others point out that the SPO has not done a good job conveying the importance of procurement laws to state employees.

State Rep. Blake Oshiro (also an attorney at Alston Hunt Floyd & Ing) notes that government officials continually complain that the process is difficult and cumbersome. “You have to wonder if they know what the Procurement Code is supposed to accomplish,” he says. “Fairness, openness, competition. My guess is they don’t.”

The result is widespread contempt for the norms of government procurement.

The irony is that Hawaii’s procurement law, patterned after the American Bar Association’s model code adopted by 27 states, is flexible and more than adequate.

What’s lacking is the leadership to enforce existing rules and develop new approaches. Instead, the state seems to be moving the other way.

Last year, the Legislature passed laws that limit the ability of companies to protest contract awards – a key check on procurement misbehavior.

Perhaps worse, insiders say, the SPO is circulating draft legislation designed to “simplify and streamline” the procurement process by eliminating basic safeguards, like requiring pre-bid conferences and cost analyses.

Yet, at its roots, procurement law is simply about ensuring a fair playing field and getting good value for the taxpayers’ dollar. In fact, as Terry Thomason puts it, “A dynamic procurement system is the very measure of good government.”

Mr Hollier includes in his article Seven Steps to Better Procurement, which he attributes to Danielle Conway. professor of Law at the University of Hawaii, and Director of the Hawaii Procurement Institute. Again, these appear universal.

1. Develop a fulltime, professional procurement staff in all departments: For most staff, state procurement is now an added responsibility to their usual duties.

2. Make salaries of procurement professionals competitive with private industry: You get what you pay for.

3. Recentralize supervision of procurement in the State Procurement Office: Decentralizing, which was meant to expedite the process, resulted in waste and fraud.

4. Remove exemptions from state procurement code: Far from promoting autonomy, granting exemptions from the code to certain agencies exposes them to litigation, waste and fraud.

5. Encourage, rather than discourage, reasonable protests of contract awards: A lively, expeditious protest system is our most effective way to check misconduct and inefficiency in the solicitation process.

6. Educate, educate, educate: And not only about Hawaii procurement laws, but about innovative procurement practices in the federal government and elsewhere. Remain open to novel or mainstream procurement innovations.

7. Invest time and resources in acquisition planning: Up-front planning will make for a smooth process during the formation and administration of a contract.

I might reiterate that Number 6 is what this blog is all about.

I also want to reiterate what I previously posted about the Policy in Favor of Planning, in contradistinction to Mr. Fujioka's blinkered approach -- read it here.
//

Of Gooses and Ganders

There's an old saying in culinary circles, "What's good for the goose is good for the gander". But maybe not so in the case of Hawaii's procurement administration.

The University of Hawaii houses the Hawaii Procurement Institute, in conjunction with the Hawaii State Procurement Office. The Procurement Institute describes its role and purpose this way:

The Institute operates as a "think-tank" for the development and analysis of state and local procurement policies, laws, and regulations. The Institute is a model for the United States and its Commonwealths and Territories to follow. The Institute offers conferences, programs, and courses geared to government officials, public and private legal practitioners, and students interested in keeping current in the practice and policies of government procurement. The Hawai‘i Procurement Institute is ready and willing to train public and private procurement personnel from all of these sectors about effective and appropriate procurement policies and contracting.

So, what does this model of procurement knowledge do when the procurement going gets tough? It opts out.

UH’s procurement privilege could release $337M

The University of Hawaii system will be exempt from following the state’s public procurement code, which it has largely blamed for its backlog of deferred maintenance and capital improvement projects, under a new law that takes effect July 1.

University officials say the exemption, effective for two years, will help the 10-campus system operate more efficiently and with greater flexibility in awarding contracts for goods and services, including construction work.

House Bill 347, which Gov. Linda Lingle signed into law May 6 as Act 82, allows the statewide public university system to come up with its own procurement process “in lieu of” the state procurement code.

The university system has pointed to the existing code, which requires larger contracts to be awarded through a competitive sealed bidding process, for tying up projects and increasing costs as a result.

Read more: UH’s procurement privilege could release $337M - Pacific Business News (Honolulu)

The online cite above is a good synopsis of the whole story that appears in the Pacific Business News, May 21, 2010 (Vol. 48, No. 12). The hardcopy offers more detail:

This was the sixth consecutive year that UH asked lawmakers for the exemption.

"Under this new law, the university is charged with creating a two-year pilot program to streamline the procurement process and provide us with greater flexibility", said UH system spokeswoman Jeanne Belding.

The state's procurement code stipulates how government agencies spend and receive money for contracted work for every type of purchase. For example, contracts valued at $50,000 or ore are required to go through a competitive sealed bidding process, while professional services must be procured through a process that requires the agency to develop a list of qualified individuals who then must go through a selection committee to negotiate a contract.

UH have objected to the process, saying it has increased its own administrative costs as well as costs for vendors that would do business with UH.

The State Procurement Office testified against the measure, saying that exempting UH would "not be in the best interest of government, the business community and the general public."

"The code establishes a time-tested, fair and reliable set of rules and processes for the award of contracts," said Aaron Fujioka, administrator of the State Procurement Office.

"The code should not be viewed as an obstacle to a purchasing agency's mission, but rather as the single source of public procurement policy to be applied equally and uniformly. If individual agencies are exempted and allowed to develop their own individual processes, it becomes problematic and confusing to vendors, contractors and service providers that must comply with a variety of different processes and standards.

"Fairness, open competition, a level playing field and government disclosure and transparency in the procurement and contracting process are vital to good government."

"The idea behind a uniform procurement code was that different government agencies do business a little differntly, and that can make it hard for outside businesses to know what the rules are," said Tim Lyons, president of the Subcontractors Association of Hawaii. "You need to know the rules before you put in a bid, and it's awfully hard to determine the rules, many of which have cost implications, if we're not all on the same page."

"What good is the code if only some agencies have to follow it?" he asked.

"If rule changes are needed, we should be looking at the code directly," Lyons stated. "I can't imagine that UH is encountering problems that all other government agencies aren't. They're not special."

The American Council of Engineering Companies of Hawaii also opposes the exemption for UH.

"We are, of course, generally in favor of measures that fast-track infrastructure spending. However, we remain strongly opposed to a wholesale exemption ... in the name of expedience," said National Director Janice Marsters.

"While the university may discuss a few cases involving procurement difficulties, they procure thousands of contracts each year under the current requirements, and a few difficult cases do not warrant a complete exemption."

Now here's where things get a bit interesting. Even the University of Hawaii's own Procurement Institute is on record as saying "exempting agencies from the Code will be unnecessary and, in the long run, potentially problematic for the administration."

COMMENT: Make no mistake: The nuts and bolts of procurement is hard stuff. But it should begin and end with the law, not "special" exceptions. If exceptions are necessary because, despite best efforts, the nuts won't fit the bolts, alter the whole system to improve the system as a whole, consistent with the common fundamental purposes and policies of public contracting.

Making exceptions only undermines the integrity of and confidence in the system as a whole.

I just can't get over the feeling (admittedly without knowledge of the facts of this situation) that the central issue in cases like this is a breakdown in management, particularly management planning, which is number one of the four classic pillars of management: planning, organizing, leading, controlling.

Hawaii is an ABA Model Code jurisdiction, as is Guam. One of the core policies of the code is the "Policy in Favor of Planned Procurement". Most other policies deal with competition, transparency, accountability, fairness and the like. The planning policy focuses on the nuts and bolts.

Planning policy doesn't get much practical emphasis in the Code. But that should not be the benchmark of its core importance. Although not an especially "legal" subject, it must receive at least equal importance from management, whose business and supposed expertise is to manage.

No matter how fair, transparent and accountable a system is, it is worthless if it is not effective. All of those objectives must be met, and it is a red herring to bleat on about fair, transparent and accountable if the agency is not willing to tackle and overcome the planning objectives which any good management system must have.

What's good for the goose must be good for the gander.

Distinguishing procurement systems from procurement participants

This is a case of blaming the stage rather than the actors, in this lead in to a story from The Bahamas.

'Never going to be perfect'

The Government's public procurement system is not "ever going to be perfect", a former Chamber of Commerce president told Tribune Business yesterday, arguing that the Bahamas' relatively small size and interwoven family/political relationships made it impossible to "eliminate the foolishness that goes on".

Responding to the proposed public procurement reforms, which could save the Government up to 30 per cent (close to $130 million) on its existing $400 million annual contracts budget, Dionisio D'Aguilar said that while he was wary about introducing more bureaucracy into public sector contract processes, efforts to eliminate corruption and political influences had to be made.

The two greatest problems, Mr D'Aguilar said, were "the corruption of persons in the Government having [family/personal] relationships with the [bidding] parties, and the political relationships, where the politicians influence who the Government does business with.

"Both are equally as bad, and you've got to think of a system that eliminates both."

Reforms outlines by consultants Peter Trepte and Jorge Claro at an April 26-28 conference in Nassau, in the shape of regulations, are designed to comply with the Bahamas' obligations under the Economic Partnership Agreement (EPA) and the World Trade Organisation (WTO), and introduce "international best practices" into the Bahamas.

While the award of many contracts would still be decentralised, with Procurement Units and Tenders Committees much in evidence, the consultants have recommended the creation of a Public Procurement Department, headed by a Chief Procurement Officer, which would engage in centralised procurement for goods and services used across government departments.

The recommendations also involve the creation of a Public Procurement Board, which will be formed from members appointed by the private sector and Ministry of Finance, to oversee all government procurement.

And, unlike the current structure, an Independent Procurement Review Tribunal will be created to "determine all appeals, matters and disputes" relating to government contracts that come under its jurisdiction. This will provide a formal avenue of appeal to disgruntled bidders that currently does not exist.

"There's many factors that go into the awarding of bids other than cost. If you go for the best cost, you do not necessarily get the best bid. I have people that provide services for me at Superwash that are reliable. You develop a relationship with someone in government, you deliver for them and, hopefully, deliver for the people, but it is not necessarily the best price.

"At the end of the day, you want to work with people who deliver good results. You've got to measure cost against the ability of the provider to deliver. That's the hard thing, and you will not get it right all the time. The Government is dealing with people who give the best quote, but are unable to deliver."

COMMENT: Most modern procurement regimes, and Guam's in particular, require an independent inquiry into the responsibility of bidders. They require that the bid be responsive but also that the bidder be responsible. Responsibility in this instance requires both demonstrable capability and reliability to perform.

In competitive sealed bidding, price is the third, independently critical component of an award decision. Even in negotiated contracts, responsibility is key to evaluation of qualifications, but price must independently be determined to be fair and reasonable, regardless of qualification and responsiveness.

While it is unfortunate to blame the system on the actors, it is indeed the case that a fair, transparent and accountable procurement system requires a trained, impartial and professional cadre of procurement staff. There's no point having the most advance fighter jet in the world if you put a bus driver in to pilot it.

What I do sympathize with is the chagrin felt about the inevitability of procurement controversy, even when there is no dishonesty or malfeasance. There will never be a protest-free procurement system, because there will always be disagreement over facts, disputed interpretations and actions. Procurement should not be judged by the numbers or facts or inconvenience of protests, however. Anymore than societies should be judged by the numbers of civil court actions, traffic court cases and family law actions. Society has learned to build a dispute resolution process into its social organization to deal with the human nature of its members. It is too much to expect humans will ever be free of contest and controversy, especially where, as in government contracting, so much money, political influence and other special interests are involved. That is why no procurement system will ever be complete without an effective, accessible, fair and impartial review component.

Procurement controversies -- South Carolina, USA

Should she who pays the procured piper be allowed to call the procurement tune? That's the question being asked in this bid controversy.

USC nixes bids; donor chooses architect

USC canceled all bids to hire an architect for its new $90 million Moore School of Business so a donor could pick a design firm of her own choosing.

While no state spending rules were broken, four Columbia firms and their national partners spent months of labor and an estimated $100,000 each hoping to win the project before the school abruptly canceled the bids in a two-sentence memo sent April 2.

Instead, the business school's private foundation will pay an estimated $4 million or more to a New York firm chosen by the school's benefactor, Darla Moore.

Moore, a Lake City financier for whom the school is named, sits on the foundation board. The firm chosen, Raphael Vinoly Architects, was a finalist for the contract but was not going to win it, a source close to the bidding told The State newspaper.

The architect's fee will be a gift from the foundation, which is allowed under state procurement rules, according to the S.C. Budget & Control Board.

But the head of the S.C. chapter of the American Institute of Architects called the last-minute canceling of the bids "unprecedented."

And one frequent critic of the university called it "an end run around the procurement process."

"People shouldn't deal with the university if they don't play by the rules," said Ashley Landess, president of the S.C. Policy Council.

If private money is mingled with public money, the project should have to follow public rules, Landess said.

"There will be public money involved in this project," she said. "And a lot comes from other government sources. It's a symptom of a bigger problem: the university blurring the line between private and public money."

Read more here.